What to Do About Medicare


The biggest single long-term problem for the federal budget is the out-of-control growth of Medicare. Naturally, the Republican Pledge to America, which calls for "fiscal responsibility" and warns against "pushing off our long-term fiscal challenges," has almost nothing of substance to say about it—and certainly nothing that would count as a "solution."

But that doesn't mean that potential solutions don't exist. Indeed, one of the most promising comes from the ranking Republican on the House Budget Committee, Paul Ryan.

Historically, the problem with Medicare has been the political difficulty of cutting payments to providers. Congress passed a law to govern payment rates in 1997, but has repeatedly voted to override reimbursement cuts whenever they've been on the table. The PPACA relies similar provider rate cuts to hold spending in check. But as Cato's Michael Cannon argues in today's IBD, when those cuts come on deck, we can expect "intense lobbying by enrollees and the affected producers will thwart these measures." By contrast, Cannon writes, Paul Ryan's Roadmap proposes a system that's far more likely to keep the program in check:

They're called "incentives." And we have to "change them."

The Roadmap, in contrast, would substantially diminish each producer group's incentive to lobby for greater subsidies. The Roadmap would give enrollees a voucher with which to purchase insurance. Sicker and poorer enrollees would get larger vouchers, and the average voucher would grow more slowly than Medicare spending has grown in the past.

Larger vouchers would mean greater demand for medical care. Yet each producer group's incentive to lobby for a higher growth rate would be much less than their incentive to lobby to increase the prices Medicare pays them today.

If hospitals lobby for a higher voucher growth rate, how will they know that the added subsidies will come back to them, rather than ambulatory surgical centers? Many groups would just free-ride on the lobbying efforts of other groups.

The fact that more producer groups would care about this growth rate than about each of Medicare's current price-control schemes paradoxically means that each group would spend fewer resources on lobbying. That gives the Roadmap's spending restraints a better shot at surviving the political process than the SGR or ObamaCare's cuts.

The crucial difference here is that Ryan's plan changes the incentive structure for providers, which would hopefully reduce pressure on legislators to continually throw more money at the system. Canon's right to frame the Roadmap as having "a better shot" than other methods; Ryan's plan is more likely to be effective, but there's there's never a guarantee. Still, it strikes me as a smarter way to reform the system than to come up with a new way to call for the same sort of cuts that have frequently failed to materialize in the past.


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  1. Ryan’s plan, unfortunately, wouldn’t even garner a majority of Republicans.

    We are truly f—–.

    1. let’s wait and see what happenes with the new GOP caucus next year. The only repubs left now are the holdovers from the bush years trying to look like they are now reformed.

      But after this election, between retirements, bumping off dems and some incumbants losing in primaries, a very big chunk of the GOP caucus is going to be filled with new blood that just ran almost exclusivly on cutting spending (there will by 13-18 new GOP senators for instance). I’m hopeing that this new mix will create some change.

      1. It won’t create any change.

        Today, the party of NO is Republican.
        Tomorrow, the party of NO will be Dems.

      2. “”I’m hopeing that this new mix will create some change.””

        I’m guessing the establishment will change them, not the other way around.

      3. The catch22 of washington is we praise gridlock when it keeps liberal madness in check. but when real possibility of reform is there gridlock prevents it and we damn the lack of reform. real reform/spending reductions are thus nearly impossible, structurally.

      4. there will by 13-18 new GOP senators for instance

        Citation needed.

        1. Remember, he’s talking about new senators, not new pickups, because of the large number of retirements. So for example you’ll have Johnny Isakson win an already-Republican seat in Georgia. And plenty of these new guys, even if not perfect, have had to survive purifying immersion in boiling Tea in their primaries, and will be new to Washington..

    2. Truly fucking fucked.

      At least we can laugh and say “I told you so!” when it all comes crashing down.

  2. I like Paul Ryan, he is rare gem in Washington, an honest politician who is smart and has mostly the right ideas on policy. Too bad he is not my congressman. I am one district over and am represented by Tammy Baldwin (D). Never heard of her? Not suprised.

  3. Do any of you have any idea why the Senior Citizens and the Sick are unable (or unwilling) to purchase health insurance? It’s because it would be very very expensive.

    The PROBLEM today with Healthcare is that a THIRD PARTY PAYOR (no matter if it’s Medicare, Medicaid, the Government, OR INSURANCE) causes the Patient to not ‘give-a-shit’ about the cost and the PROVIDER charges whatever they want.

    Rand Paul’s solution is to keep insurance alive.

    So, instead of paying the controlled-cost offered by Medicare, Rand proposes that we add the 25% overhead and 3% (ha ha ha) profit to the current cost by making the Senior Citizens buy insurance.

    1. “”Rand proposes that we add the 25% overhead and 3% (ha ha ha) profit to the current cost by making the Senior Citizens buy insurance.””

      A republican that supports mandated insurance?

  4. “First you grab Medicare’s nipples, and then you give them a bit twist like this. Now Medicare is your bitch”

    1. It does look like he’s playing “Tune in, Tokyo”

  5. I was on a plane with Paul Ryan two weeks ago (yeah, he flew commercial in cattle class) and was able to catch up with him after we landed. Told him to keep up the good work and asked about his spat with David Brooks. His response: “David’s a good guy but he’s a Hamiltonian and I’m a Jeffersonian.”

    Gotta love a guy who has a BA in economics and is a self-described Jeffersonian.

  6. “We’ll keep the Medicare in a ‘lock box‘.

  7. Sorry, but Mr. TARP has no credibility with me. He still shamelessly defends that vote and will buy into the “Sky is falling” crap if another bailout is pushed thru Congress (and someday another bailout will occur).

    Who in the hell will bailout the brokeass United States?

  8. Where is this “Party of No”? I would like to register, and subscribe to their newsletter.

    In 30 years, I’ve never voted for a Democrat, because they are all categorically retarded. I have seen the error of my ways, and every vote I ever cast from here on will be calculated to promote maximum partisan bickering and obstructionism. I hope to never again in my lifetime see both houses of Congress and the White House controlled by a single party. I want there to always be one of the three with the means and inclination to thwart the schemes of the other two. I want them to do nothing, ever. I don’t even want them to be able to do things I think are good ideas.

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