I really like Paul Ryan and I think that the debate over the general principles of his plan (a sustainable entitlement system, market-oriented health care reform, a tax code with fewer tax expenditures and lower rates) will be very good for the country - if the broad center-right makes its argument competently. We are very far from the cynical and calculated domestic policy stupidity of John McCain's 2008 campaign and we largely have Paul Ryan to thank for the improvement of our public discourse. Still, I don't think that a prospective Republican presidential candidate should run on Ryan's exact proposal. Some suggestions:
1. Listen to Reihan Salam and grow the premium support in defined contribution Medicare at GDP + 1 rather than at the level of the Consumer Price Index. Salam's proposal would still slow down the rate of government-sponsored medical inflation, but without the implicit assumption that the reforms will bring medical inflation for seniors all the way down to the broader rate of growth of the Consumer Price Index.
2. Instead of just eliminating traditional Fee For Service Medicare, adopt the Capretta-Miller approach of having a reformed FFS Medicare compete with private insurance programs based on competitive bidding. The government will offer all seniors a certain level of premium support depending on the senior's income and health condition. Medicare FFS will bid against private companies for the business of those seniors. Medicare FFS will fund its benefits from the premiums of those who choose Medicare FFS. If a private plan can offer comparable benefits at a lower price, seniors can go with the private plan. This way each plan (including Medicare FFS) will have an incentive to offer the most desirable set of benefits at the lowest price - rather than the price set by bureaucrats. Medicare recipients will be more likely to get more of what they want at the price they are willing to pay rather than what some bureaucrat think that they should be allowed to have. The Capretta-Miller plan has several advantages over the current Ryan proposal. As Capretta and Miller point out, the health care market in the US is internally diverse and there are places where a defined contribution version of Medicare FFS will provide better services at a lower price in a competitive bidding environment. Maintaining Medicare FFS on a defined contribution and competitive bidding basis might also gain some support from center-left wonks. These folks command no electoral divisions, but they could influence coverage from some news outlets. I suspect it would also reassure some part of the public to know that rather than traditional Medicare going away, it was remaining as a choice, but that if there was a cheaper plan that suited them better, they could go in that direction.
3. Listen to Avik Roy. Under the current Ryan plan, if senior gets a certain amount of premium support (say, $15,000) but a private plan offers a bid for $13,000 in premiums for a desirable product, the senior has no incentive to go with the cheaper plan. They might as well go with a plan that costs $15,000 in premiums even if they don't especially want the additional medical coverage. At least the $15,000 plan gives the some extra services for the extra $2,000. This is perverse. It contributes to medical inflation while decreasing the actual value that the senior gets from the premium support. The senior should be able to pocket the difference if they pick a plan that costs less than their government premium support. If a senior wants to buy a cheaper health insurance plan that does not cover some higher cost, and lower effectiveness end-of-life procedures (if it comes to that) and instead wants to spend that money to take more weekend trips with his grandchildren, everybody is better off.
This isn't a suggestion for a policy change, but I would be remiss not to remind everybody that the debate over economic policy is necessarily comparative. Our choices are higher taxes, fewer jobs, lower growth and lower quality bureaucrat-rationed health care on one hand and a sustainable patient-centered welfare state with pro-growth and pro-jobs tax policies on the other. Obama should always be tied to higher taxes and bureaucratic rationing of health care. That is where his deficits are leading us, and he is just stalling until he is reelected and the crisis is upon us. So don't let him stall. Hit him now.
I would also add that some presidential candidates would be better positioned to sell this message than others. It would b nice if the Republican presidential nominee had demonstrated the ability to cut spending while maintain core government services and instituted a free market-oriented health care reform that saved the government money, increased worker take home pay, and maintained people's health care security.
Run Mitch Run
Michele Bachmann is not ready to endorse Paul Ryan's Path to Prosperity. That isn't necessarily a bad thing. I think of Ryan's Path to Prosperity as a framework for thinking and talking about the reforms we need. Criticism and politic... Read More