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Entitlement Reform



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President Obama’s deficit commission continues to surprise. On paper, it appears to be failing—it looks increasingly likely that no proposal or idea will get enough members behind it to become an actual official recommendation of the commission. But the members’ efforts to avoid simply admitting defeat have produced some pretty interesting and valuable results. Last week, the co-chairmen released a serious (if of course far from perfect) proposal for deficit and debt reduction. Earlier this week, Illinois Rep. Jan Schakowsky (a Democrat, and one of the commission’s more liberal members) released her own plan, which mostly revealed a profound lack of seriousness among some liberal Democrats about deficit reduction.
 
Now, today, Rep. Paul Ryan (Republican of Wisconsin and soon to be chairman of the House Budget Committee) and Alice Rivlin (a Democrat, and former director of the Office of Management and Budget under Bill Clinton) released an excellent and very ambitious bipartisan plan for Medicare and Medicaid reform. The plan would not touch the Medicare benefits of people who are 55 and older today, but for anyone younger than that, the existing structure of Medicare would be transformed into a defined contribution program which, rather than directly paying for services in an open-ended way, would give each senior money toward the purchase of private health insurance. Meanwhile, the federal share of Medicaid would be transformed into a block grant to the states, which would grow only in line with the Medicaid population and with growth in GDP per capita plus one percent—rather than in the open-ended way in which such funding grows today.
 
Rep. Ryan asked the CBO to score the idea and—as you might imagine given a request from a soon-to-be chairman of the Budget Committee—they did so in record time. Here is their assessment of the plan. It would make a major dent in the deficit, and help control the growth of health-care spending, which is the essence of our health-care dilemma and which Obamacare would thoroughly fail to do.  
 
That Paul Ryan would propose such a good idea is hardly surprising. That he could get even a little support from the Democratic side of the commission is surely surprising, and a good sign.


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