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Paul Ryan: A ‘Time for Choosing’ on Health Care

Who is in charge: the government or the patient?

9:22 PM, Sep 27, 2011 • By JEFFREY H. ANDERSON
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During a major speech today at the Hoover Institution at Stanford University, Paul Ryan laid out his vision of health care reform, saying, “Choice and competition are critical to controlling costs…[and] improving quality….And yet, across the federal landscape, choice and competition are undermined by poorly designed programs and tax policies.” In other words, to fix our health care system, we need to undo the problems the government has created, rather than further empowering the government.

EDIT.v16-22.Feb21.Continetti.AP Photo.Ryan J Foley

AP / Ryan J. Foley

Ryan began by challenging his own party: “[W]hile Republicans have advanced many good ideas on health care, it is my candid opinion that the party as a whole has yet to coalesce around a complete reform agenda aimed at dealing with the underlying problem — which is runaway inflation in the cost of health care.” 

Still, he offered “three pieces of good news”:  

First, “The urgent need to repeal and replace the president’s health care law, coupled with the urgent need to deal with the drivers of our debt, will present us with an unavoidable time for choosing, allowing us to confront health care inflation head-on…"

Second, “[W]e know what works and what doesn’t…”

Third, “Though the political hurdles are high, we know we can win these fights.” He added, “The challenge will be to summon the courage and the ability to offer Americans a true choice of two futures,” a “defining choice:” “Who is in charge: The government or the patient?”

Ryan then explained how “[t]he health care sector lacks most of the basic building blocks of a functioning market”:

“For one thing, markets require transparent prices, so that consumers can discover value. But in health care, the ‘consumer’ is usually either a big insurance company, or the government. Health care providers have no incentive to provide transparent prices to their patients, because their patients don’t pay directly — it’s the government bureaucrat or the insurance company bureaucrat who pays the bills.

“Second, markets do not function well when consumers are insulated from marginal costs. We’re all paying more for health care, through much higher premiums and taxes. But the share we pay at the doctor’s office has plunged. The system that shields us from the cost of services, has actually left us paying much more.”

This could hardly be truer. In the private market, Americans paid for 62 percent of their health care expenditures out of pocket in 1970 (according to government figures). By 2007, that share had dropped to just 26 percent. During that time, health costs rose dramatically. Paying far less out of pocket coincided with paying far more overall.

Proponents of government-run health care like to compare the rise in private insurance costs with the rise in cost of government-run care, while completely overlooking the fact that private insurance now pays for about twice the percentage of private care that it used to (in lieu of people paying out of pocket). But if you don’t cherry pick the data, and instead compare all private costs with all public costs, the comparison is a rout: From 1970 through 2008, the per patient costs of Medicare and Medicaid rose 89 and 91 percent more than GDP, respectively — nearly doubling versus GDP — while the per patient costs of all other health care in a America rose 41 percent versus GDP

Sensibly, Ryan’s plan would make Medicare operate a lot more like private care: “Simply put, badly designed government policies are to blame for much of what is wrong with health care today, and the solution is clear: We need to transition from the open-ended, defined-benefit approach of the past…to market-oriented, defined-contribution reforms that promote choice and competition.” 

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