Ezra Klein Warns Against Taking Caps at Face Value

by Reihan Salam

Ezra Klein makes an excellent point:


Ryan’s budget says Medicare and Medicaid spending won’t grow any faster than inflation. That’s a very tight cap. The Simpson-Bowles plan holds Medicare to GDP+1%. That’s a somewhat looser cap. So if you just graphed their health-care savings, the Ryan plan would look really good.

But imagine that both plans fail and that, in the real world, Ryan’s plan would hold Medicare to GDP+3% while the Simpson-Bowles plan would hold it to GDP+1.5%. In that case, neither cap succeeded and none of these graphs were right. But the Simpson-Bowles plan was clearly more successful than the Ryan plan, despite the fact that it looked worse on the initial graphs.

I don’t share Ezra’s skepticism regarding the virtues of the premium support model and block grants, but this observation is an important one. Does a given reform proposal align incentives in a sensible way? That is always the more important question to answer.