The Magazine

Beyond Mediscare

May 30, 2011, Vol. 16, No. 35 • By YUVAL LEVIN
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Do House Republicans want to kill the elderly? If you listen to the left these days, you’d certainly think so. Last week, a liberal advocacy group called “The Agenda Project”—which claims to advance “rational, effective ideas in the public debate”—released an ad showing a look-alike of House Budget Committee chairman Paul Ryan pushing an old woman in a wheelchair off a cliff. “Is America beautiful without Medicare?” the ad inquires of viewers. “Ask Paul Ryan and his friends in Congress.”

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Nor is it only rabid interest groups that have succumbed to such appeals. Kathleen Sebelius, secretary of health and human services, said more or less the same thing earlier this month. When asked about the House Republican budget’s approach to Medicare, Sebelius said that, under the plan, “If you run out of the government voucher and then you run out of your own money, you’re left to scrape together charity care, go without care, die sooner. There really aren’t a lot of options.”

The president himself has come pretty close to this view. The Republican budget, Obama said in a speech at George Washington University last month, “says instead of guaranteed health care, you will get a voucher. And if that voucher isn’t worth enough to buy the insurance that’s available in the open marketplace, well, tough luck—you’re on your own. Put simply, it ends Medicare as we know it.”

Clearly, the GOP Medicare reform has struck a nerve. Democrats have focused on that part of the budget above all others. Aware that it would represent the most significant conservative policy innovation since the welfare reform of the mid-1990s, and persuaded that it will prove unpopular with seniors, liberals are intent on making political hay of the Medicare proposal while preventing its enactment. And yet, for all that they believe the Ryan plan is a Republican vulnerability, Democrats seem unwilling to speak about it honestly. Maybe they know that the facts do not support their case.

Let’s start with “Medicare as we know it.” According to the Congressional Budget Office and Medicare’s trustees, the program has a long-term unfunded liability of more than $30 trillion. It’s about a decade from insolvency. The trustees’ latest annual report, released on May 13, notes that the Medicare trust fund is projected to run out of money five years sooner than was projected last year. Its current trajectory would swallow up the federal budget. Taxes could not be raised high or fast enough to keep up with its growth without crushing the economy. “Medicare as we know it” is not an option. Leaving Medicare alone means it simply won’t be there for future seniors. The question is how to reform the program in order to save it.

The Democrats cannot deny the figures, but their solution is to let the crisis come. President Obama’s budget offered nothing beyond Obamacare as a solution. Of course, the effects of Obamacare are already accounted for in the latest actuarial projections, since Obamacare is current law. Indeed, in an extraordinary letter affixed to the recent trustees’ report, Medicare’s chief actuary noted that Obamacare’s approach to the program—price controls determined by a board of experts and devoid of market-based reforms that could help health care providers improve their efficiency—would actually exacerbate Medicare’s troubles.

The Republican budget offers precisely such market-based reforms. It proposes not just to reduce the growth rate of Medicare spending, but to introduce consumer pressures into the system that would create financial incentives for providers to work more efficiently and reduce the growth of the health care costs that are at the heart of the problem.

Right now, Medicare pays all providers the same price for a given service—regardless of quality, efficiency, outcome, the cost to the provider, or patient satisfaction. Medicare recipients play no part in determining who gets paid and how much, and have no sense of what their health care costs. Providers have no financial incentive to deliver better care at lower prices. And price controls that would reduce what Medicare pays per service (the Obamacare solution) would only create an incentive for providers to supply a greater volume of services to make up the difference. That is exactly what price controls have done in the past—drive efficiency down and costs up.

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