Paul Ryan and the Real Enemy of Medicare

It's easy to improve health care if cost is no object. It's easy to reduce costs if you can tolerate worse health outcomes.

If you are on a pleasant walk and someone comes out of nowhere to demand that you stop and turn around, you may regard him as an unwelcome interloper. Until, that is, you learn that he's saving you from going over a cliff. In that case, you might realize that a real friend is someone who tells you the truth even when it isn't welcome.

That's the position of Paul Ryan as he undergoes a frenzy of flagellation from Democrats outraged by his Medicare plan. President Barack Obama's campaign has a new ad accusing Ryan and Mitt Romney of a scheme "ending Medicare as we know it." But the real enemy of Medicare "as we know it" is not Ryan. It's arithmetic.

Medicare is the second biggest item in the entire federal budget and one of the fastest growing. Over the past 30 years, its cost has doubled as a share of our gross domestic product, and over the next 30, it's on track to double again.

But the revenues that pay for it are not keeping pace. The Medicare Hospital Insurance trust fund is expected to run out of money by 2024.

At the rate we're going, Medicare, Medicaid, Social Security, and interest payments will consume the entire federal budget by 2025—leaving nothing for defense, law enforcement, national parks, highways, food stamps and all the other responsibilities the government is supposed to handle. Either drastic spending cuts or staggering tax increases would be needed.

To insist that Medicare can and should remain just as it is today is either delusional or dishonest, and Obama, at least, is not delusional. His own Simpson-Bowles commission called for a variety of measures to slow its galloping growth, some of which could inconvenience seniors.

Ryan's plan, contrary to what critics like to pretend, would not mean draconian cuts for people already on Medicare or about to be. The only people subject to most of the changes are those under age 55.

His chief reform is to shift from a defined-benefit program, which obligates the government to cover all costs, to a defined-contribution approach, which commits the government to provide a fixed amount of money for each recipient. Over time, seniors would have to pay a bigger share of the expenses, but benefits would keep up with inflation.

The overhaul would not mean abandoning Grandma on an ice floe. The Ryan plan approved by the House would set up insurance exchanges where the elderly could choose among plans to suit their needs.

"Health plans that choose to participate in the Medicare exchange must agree to offer insurance to all Medicare beneficiaries, to avoid cherry-picking and ensure that Medicare's sickest and highest-cost beneficiaries receive coverage," says the committee's report.

Among those favoring such changes is Alice Rivlin of the Brookings Institution, who was President Bill Clinton's budget director. The premium support model embraced by Ryan, she testified before Congress in April, "seeks to combine the tools of market competition and cost-effective regulation in hopes of maximizing the chances of improving health care for seniors at a sustainable cost."

It's easy to improve health care if cost is no object. It's easy to reduce costs if you can tolerate worse health outcomes. The trick is to balance the two needs. The Ryan plan is a credible attempt.

Not that he has a stellar record in this or other areas of the budget. In the past, he's been the fiscal equivalent of a chicken hawk: tough until it's time to put his own survival on the line.

He voted for President George W. Bush's plan to furnish prescription drug coverage to seniors, adding $8 trillion to the government's unfunded obligations. He voted to bail out General Motors. He voted for TARP.

He did more than his share to help Bush add $5 trillion to the national debt. But if the prodigal son wants to redeem himself with a politically dangerous blueprint to make Medicare affordable, more power to him.

Democrats have a point in saying what Ryan offers is not as good as the current version of Medicare. It's also not as good as the Big Rock Candy Mountain, the pot of gold at the end of the rainbow or the valley of Shangri-La.

His option does, however, have the virtue of a connection to the real world. It's a place his critics can't avoid forever.