Saturday, February 06, 2010

Paul Ryan To The Elderly: Drop Dead

Representative Paul Ryan of Wisconsin wants to cut elderly people out the size of the national deficit and debt and thinks he has found a way to do it. The ranking Republican on the House Budget Committee thereby has become a darling of the conservative GOP establishment, kind of a wonkish Scott Brown, or maybe Brown without the centerfold.

The idea is that fiscal sanity can be achieved only by curbing the growth of federal entitlements- Medicaid, Medicare, and Social Security, an idea the Washington media and political establishment embraces. For Medicare, that means vouchers which elderly people (“seniors” are what your sons and daughters will be after their junior year of high school or college) would use to pay for health care, whose costs have been rising faster than the rate of inflation.

The linchpin of Ryan's proposal is that the voucher would grow more slowly than medical costs. In scoring (PDF) this proposal, part of the euphemistically-named "Roadmap for America's Future Act of 2010," the Congressional Budget Office found it is "indexed to grow at a rate halfway between the general inflation rate, as measured by the consumer price index for all urban consumers (CPI-U), and the rate of price inflation for medical care, as measured by the consumer price index for medical care (CPI-M).” While per capita spending is expected to grow at an annual rate of nearly 5% over the next 75 years, the value of the voucher, according to the CBO, would grow at an annual rate of 2.7 percent.

Health care costs will rise, the value of the voucher not so much. Although federal spending on health care obviously would decline, the CBO notes enrollees’ spending for health care and the "uncertainty" surrounding that spending would increase. Spending would increase for two reasons noted by the CBO: Medicare’s current payment rates for providers are lower than those paid by commercial insurers, and the program’s administrative costs are lower than those for individually purchased insurance.

And for a third reason: when customers are pursuing insurance with a greater number of dollars, insurance rates likely would rise for that reason alone. Subsidies sometimes are necessary; requiring the purchase of health insurance, the Democrats' health care plan would be doomed to failure without subsidies (and is problematic with them). But they will increase the asking price of a policy.

Ryan here embraces the holy grail of conservatism, ""free-market" principles. He tells the Washington Post's Ezra Klein "This sector isn't immune from free-market principles." (Funny, isn't it- when asked about the public option, which would have offered competition to the insurance industry and thereby lowered insurance costs, Representative Ryan and his compatriots were conveniently silent about "free-market principles.")

Democrats, of course, don't have to take this lying down, though having recently seen their Senate majority shrivel to a mere 18, they may do so. But in the House, two Representatives already have introduced a resolution expressing the chamber's commitment to resist privatization of Social Security, another part of Ryan's "road map." Republicans can choose, in effect, to renounce a prominent member's plan- or go on record wanting to begin eviscerating arguably the most popular federal program ever.

The same approach could be taken to Ryan's privatization scheme for Medicare, another program that serves elderly people well, notwithstanding the efforts of the private health insurance industry to bankrupt America and take the program down with it. Under his scheme, if health care costs rise more than 2.7% per year- which they will- additional costs would not be covered.

The CBO explains it as "Beneficiaries would therefore be likely to purchase less comprehensive health plans or plans more heavily managed than traditional Medicare, resulting in some combination of less use of health care services and less use of technologically advanced treatments than under current law." Matthew Yglesias explains it as "If grandma’s got a bunch of money, then she can spend her money. If not, then the plug is pulled."

Now, that's a death panel.

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