[StBernard] The Pre-Emptive Progressive Attack on Entitlement Reform

[Westley Annis]

http://blogs.forbes.com/aroy/2011/04/04/the-pre-emptive-progressive-attack-o
n-entitlement-reform/?partner=daily_newsletter

The Pre-Emptive Progressive Attack on Entitlement Reform
Apr. 4 2011 - 4:06 pm | 474 views | 0 recommendations | 4 comments

It's time for conservatives to ask liberals: where's your plan?

For months and months, we've heard from progressive health policy writers
that the GOP "has no plan" for health care. But on the eve of the
presentation of House Republicans' plan for entitlement reform (which is
effectively identical to health care reform), a plan that may finally take
on the difficult steps necessary to bring America back from the brink of
bankruptcy, the preaction from many progressives appears to be reactionary
nihilism.

Our 14-digit debt, they appear to argue, isn't a problem worth urgently
solving. From people who are otherwise knowledgeable and thoughtful, this is
plainly a ridiculous position, and it needs to be called out as such. There
is no Democratic plan for balancing the budget-and so long as President
Obama is the leader of that party, it seems unlikely that we will ever see
one.

First, some background. Tomorrow, GOP House Budget Committee Chairman Paul
Ryan intends to unveil his comprehensive plan for fiscal and health care
reform. Details aren't yet available, but in an interview last Sunday, Rep.
Ryan suggested that the plan would be largely based on the one he designed
with former Clinton budget chief and CBO head Alice Rivlin, when they both
served on President Obama's Fiscal Commission. Here's the Ryan interview:



The plan would transition Medicare from a defined-benefit system, in which
the government is on the hook for whatever services seniors desire, to a
defined-contribution system, in which the government pays out a dollar
amount for health services, growing with inflation, incentivizing all
participants in the system to prioritize health spending to those services
that are most valuable. It would convert Medicaid into a block-grant system,
in a fashion similar to that of the spectacularly successful 1996 welfare
reform law, giving states the flexibility to fashion programs that fit the
needs of their residents.

Jonathan Cohn thinks it likely that the Republican plan will violate the
covenant that Lyndon Johnson made with the elderly: that "no longer will
older Americans be denied the healing miracle of modern medicine." Jonathan
is a thoughtful guy, and he knows that this rhetoric is dramatic.

First of all, no one is talking about denying anyone basic health care. The
Rivlin-Ryan plan spends more per Medicare beneficiary, by far, than any
comparable plan in the developed world. To argue otherwise is, at best, on
the verge of arguing in bad faith. You can disagree with the policy merits
of the Rivlin-Ryan approach versus the rationing approach, but once again,
there is no liberal plan on the table that rations care enough to balance
the budget. I'd love to see one.

Second of all, the Johnson "covenant" was based on wildly unrealistic
assumptions of how much Medicare would cost: $12 billion in 1990, inclusive
of inflation. (The actual figure was $107 billion. In 2010 it was $520
billion.) Johnson made a promise that future Americans would be unable to
keep: unlimited, expensive health care for everyone over 65, for essentially
nothing. If Lyndon Johnson had made a covenant with America that every
interstate highway in the country should be paved with platinum, and a
future Congress sought instead to pave them with gold, I suppose this would
be a violation of a "covenant" of some kind, but I'm not sure most people
would lose sleep over it.

Ezra Klein makes the progressive case in a different way. He repeats the
widely-held view that Medicare Advantage is more expensive than traditional
centrally-planned Medicare, and therefore that expanding Medicare Advantage
won't work. The evidence for this view is weaker than its proponents
believe, but it requires a much more detailed exposition than I can put into
this blog post. (Yes, traditional single-payer Medicare benefits from its
monopsony power to force hospitals and doctors to take less money; but its
other inefficiencies and accounting gimmicks more than make up for this.)

The key to the defined-contribution system is that it allows insurers to
design plans that cover needed benefits, instead of unnecessary ones; and
allows seniors to switch plans, if a particular plan cut benefits that they
truly want. Such a system maximizes the efficiency of insurance plan design:
something that single-payer Medicare is too bureaucratic to achieve.

Secondly, Ezra says something that gets to the heart of the problem:

Tyler Cowen has some rules for assessing proposed reforms of the Medicare
program. I have just one: Can you tell a coherent story of why these reforms
make it cheaper to treat a sick person?

Yes, Ezra, yes I can. The fundamental problem with health care today is that
it's easy to waste other people's money. As Ben Domenech once put it, it's
like the difference between a cash bar and an open bar. If you're at a cash
bar, you're likely to drink what you can afford to drink, and also in
moderation. At an open bar, you'll drink as much as you want to, and you'll
do it with top-shelf liquor. Medicare, as it's currently structured, is an
open bar.

For those who think my analogy too facile, check out the research of MIT
economist Amy Finkelstein, who has shown that half of the six-fold rise in
real per-capita health spending from 1950 to 1990 can be explained by the
introduction of Medicare. That is to say, once people had the ability to
consume health care without really paying for it, they consumed more of it.
A lot more.

Hence, the most patient-centered way to reduce health costs is to allow
seniors, rather than bureaucrats, to do the economizing. Seniors will do a
better job of it, because they are the ones most directly affected by the
trade-offs they will need to make. They just may decide that the $100,000
cancer therapy that extends their lives by two months isn't really as
important as making sure they have access, say, to implantable cardiac
defibrillators: devices whose use has been significantly resisted by
Medicare.

I enjoy the dialogue I have with my friends on the other side of the aisle.
In the spirit of friendship, I have two requests. One, please let's dispose
of the "Republicans are going to deny essential health care to the elderly"
trope. Two, if you really believe Rep. Ryan's plan is so terrible, put up
your own plan, which achieves the same reduction in the deficit, using
whatever mechanism you favor (rationing, tax increases, or both). Then, we
can have an honest debate. Until then, only one side is being serious.

UPDATE 1: More thoughts on this subject from Peter Suderman
<http://reason.com/blog/2011/04/04/democrats-warn-that-paul-ryans>, Joseph
Lawler, and Austin Frakt. Peter Suderman's distillation is money: "Democrats
are complaining, essentially, that Ryan is solving the problem he's set out
to solve."

UPDATE 2: Paul Ryan is out with op-ed in this morning's WSJ describing his
plan, called the "Path to Prosperity," in broad brush-strokes.
<http://online.wsj.com/article/SB10001424052748703806304576242612172357504.h
tml?mod=WSJ_Opinion_LEADTop>