In his latest piece for the New York Times, David Brooks writes the following about Paul Ryan’s Path to Prosperity:
It should be acknowledged that the Ryan plan has several grave weaknesses.
As presently configured, it is unacceptable to moderate voters and stands no chance of passage. Substantively, it does not address the structural problems plaguing the American economy: wage stagnation, inequality, declining growth rates. It doesn’t have an answer to rising health care costs. Nor does it leave room for future policy creativity; there’s no money to allow future generations to rise to unforeseen challenges. So, while acknowledging that Ryan has done the nation a great service by providing a starting point, we should expect his budget to evolve as the debate goes forward.
Some of these criticisms are inaccurate; some of them hold the plan to an impossibly high standard.
Brooks writes that PTP does not leave “money to allow future generations to rise to unforeseen challenges.” But how does the status quo, or anything similar, leave money for anything? Meanwhile, block-granting Medicaid to the states will enable significant policy innovation on an important health-policy question: how to sustainably provide high-quality, subsidized care to the poor.
Wage stagnation, inequality, and declining growth rates are substantially driven by the rising cost of health care. If you include the cost of health benefits into wages, the trend is made clear: we fail to consider health benefits as compensation. Brooks argues that the proposal does nothing to rein in rising costs: but indeed, reining in rising costs is at the center of the proposal. Medicare, by almost completely subsidizing elderly health spending, has massively driven up demand for health services, and thereby the price of health care. Migrating Medicare over to a defined-contribution system will fundamentally alter this calculus.
This is clearly a central debate between the Left and the Right about PTP. Progressives believe that health costs will continue to rise at historically high rates, even in a system where seniors have powerful incentives to economize, and that rationing is the only workable solution. Conservatives believe the opposite. Indeed, Brooks acknowledges this debate later on in his piece:
Third, we still need a calm discussion about controlling health care costs. Just about every expert agrees with the following proposition: We can’t afford to have Medicare pay for every new procedure that medical technologists devise. The president’s health reform plan relies on a centralized board of technocrats to restrict choices. The Ryan plan relies on a premium support model that would allow individuals to exercise greater control over what sorts of procedures they would not be covered for. As the economist Tyler Cowen writes on his Marginal Revolution blog, we probably need a mixed system that takes advantage of both the technocratic and individual rationing models.
So, it would have been fairer for Brooks to write that Ryan does address health spending, but that he does so in a way that Brooks disagrees (if, in fact, he does).
There are other aspects of the Path to Prosperity that address rising health spending, particularly its reforms of “Medigap” supplemental insurance. I’ve written about that today on the NRO main page.