Entitlement Reform: What Next?
Paul Ryan’s budget proposal jump-starts the conversation on Medicare, Medicaid, and Social Security.


The Republicans have no plan to insure the uninsured. How do I know that? A New York Times editorial told me. So did Ezra Klein, writing in the Washington Post.

But wait. Didn’t John McCain have such a plan during the last presidential election?

McCain proposed replacing all existing health-care tax and spending subsidies with a universal health grant, structured like a refundable tax credit. A version of the idea has been sponsored by Sen. Tom Coburn (R., Okla.) and Rep. Paul Ryan (R., Wis.). Under their plan, the first $5,700 a family spends on health insurance is courtesy of Uncle Sam, giving everyone protection against large medical bills

Contrast that with what happens under the health-care-reform legislation passed by the Democrats one year ago. Recently, 30,000 McDonald’s workers were granted a temporary waiver so they can keep their limited-benefit “mini-med” plans — which would otherwise be wiped out by regulations imposed by the Democrats’ legislation.

If McDonald’s were to lower these employees’ wages by $5,700 and buy them $5,700 worth of health insurance, the only subsidy available today would be the one embedded in the tax law — the ability to pay premiums with dollars that escape the payroll tax. That’s worth about $872.

In addition, because as of 2014 mini-med plans won’t be compliant with Obamacare’s mandated benefit package, McDonald’s will have to pay a $2,000 fine for each employee. In short, to get the kind of insurance the McCain/Coburn/Ryan plan would give them for free, McDonald’s workers would have to pay almost all of the cost out of their own pockets and pay the government a fine to boot!

The health-care-reform law enacted last year offers no practical way to insure millions of uninsured and underinsured families. The Republican plan does.

— John C. Goodman is president, CEO, and Kellye Wright fellow at the National Center for Policy Analysis.

Will there be entitlement reform in 2011? The conventional wisdom says no. On the surface, too many of the key ingredients are missing: presidential leadership, a pro-reform majority in the Senate, and a clear objective. President Obama has been missing in action on the budget front his entire term and he mailed in a reform-free budget plan earlier this year. Senate Democrats, notably Harry Reid, have steadfastly opposed reform. And even among conservatives there remains confusion as to whether the goal is Medicare reform, Medicaid reform, Obamacare repeal, or overall spending reduction.

Yet it could still happen. It makes sense to focus in 2011 on Medicaid reform. For conservatives, that is where the bulk of the near-term savings reside. Governors have been begging for exactly the flexibility that the House plan offers, as Medicaid is already a budget problem, which Obamacare threatens to turn into a fiscal black hole. Over in the Senate, 23 Democrats are facing reelection and so are more likely to support supposedly Republican initiatives. If the strong leadership shown by the House strikes an electoral chord, Medicaid reform could be on the president’s desk this year.

Faced with this prospect — and pro-reform movements in key 2012 states, including Florida, Ohio, Pennsylvania, and others — the president could respond to Medicaid reform by following his familiar script: sign it, claim credit, and position himself for the next election.

Douglas Holtz-Eakin is president of the American Action Forum.


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