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Obama, Ryan, and Medicare Costs
Ryan and Rivlin have a better chance of bending the cost curve.


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James C. Capretta


The Ryan-Rivlin plan is entirely different because it is based on empowering consumers to find the best value possible for their defined-contribution payment. This is the way to unleash a productivity revolution in health care. The administration says it wants everyone to have access to low-cost, high-quality models, such as the Geisinger Health Plan. The way to bring that about is with a dynamic consumer marketplace in which those kinds of plans are rewarded financially for being more efficient and of higher quality. And the way to bring that about is by giving people the control and financial incentive to become active, cost-conscious consumers both of the insurance they select and the delivery system by which they get their care. And that’s exactly what would happen under Ryan-Rivlin, which is why it would work and Obamacare wouldn’t.

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Klein and others continue to tout the supposed cost-cutting potential of the various Medicare demonstrations and pilots created in Obamacare. To assume that these are the answer to the cost problem is wishful thinking in the extreme. Medicare’s administrators have been trying for years to use the levers of payment to bring about more efficient health-care delivery. The problem is that building a high-quality, low-cost network requires making distinctions among physicians and hospitals that Medicare has never been able to do. To cut costs, the government always resorts to blunt, across-the-board payment cuts that actually induce more inefficient behavior, not less.

That’s almost certainly why Foster, recently testifying before the House Budget Committee, quite plainly disagreed with Klein’s premise. Under questioning about what would work to bend the cost curve, he was (as usual) quite cautious. Nonetheless, he made it clear that he had more confidence in Ryan-Rivlin than Obamacare to bend the cost curve, because Ryan-Rivlin has the potential to unlock productivity improvements in a way Obamacare does not. I’m with Foster.

— James C. Capretta is a fellow at the Ethics and Public Policy Center. He was an associate director of the Office of Management and Budget from 2001 to 2004.



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