Thursday, August 23, 2012

President Obama and Paul Ryan are almost the same on Medicare.

Explains Matthew Yglesias:

Medicare is . . . an open-ended promise to pay the bills for most of the health care services consumed by the elderly. It’s almost as if the government had a program that just gave senior citizens free shoes in unlimited quantities. The main difference is that undergoing medical treatment is generally unpleasant and it has no real resale value, so in practice people only want to consume so much of it. . . .

Both Ryan and Obama want to put an end to this and give Medicare a finite growth target. And, indeed, they’ve both converged on the same target. Ryan put out two budget plans based on very stingy Medicare proposals: The most recent version of his idea caps Medicare growth at the underlying GDP growth rate plus 0.5 percentage points. Obama, in his remarkably little noticed Fiscal Year 2013 budget proposal, offers the very same target on Page 33. Both campaigns, in other words, propose putting Medicare on a fixed diet and they agree on the precise diet.

Where they disagree is on how to implement the cuts. Ryan’s proposal is to turn Medicare into a voucher program where seniors would get a subsidy with which to buy an insurance package, with the value of the subsidy limited by the overall growth target. Obama’s proposal is to hit the growth target the way foreign single-payer systems limit their costs, with more aggressive bureaucratic management of what Medicare is willing to pay for and how much it’s willing to pay.

The difference between outsourcing (Ryan) and centralized rationing (Obama) is an important one, but from a patient’s point of view they might end up looking pretty similar. Under Ryan’s approach, the poor will be left with bare-bones plans and more affluent seniors will either pay higher premiums to get more deluxe plans or else pay out-of-pocket for noncovered services. Under Obama’s approach, the poor will be left with bare-bones Medicare and more affluent seniors will either buy separate supplemental insurance plans or else pay out-of-pocket for noncovered services. The workability of Obama’s idea, in my view, is well-validated by international experience while the Romney/Ryan alternative amounts to taking a leap of faith in the magic of the private sector. But ironically it’s essentially the same leap of faith Obama is taking in his signature health care program for nonseniors—the view that an adequately regulated, subsidized system of private insurance plans can provide reasonable coverage at reasonable cost.