Critical Condition

NRO’s health-care blog.

Flimflam Indeed


Megan McArdle did everyone a favor this past week by very carefully pointing out that Paul Krugman’s over-the-top attack on Congressman Paul Ryan and his “Roadmap” was based primarily on bad information that could have been easily checked and corrected with some minimal effort.

You’d think Krugman might take a look at her critique; listen to his likeminded friends (see here), who clearly think his piece went over the line; and change the subject. But you would be wrong. As McArdle notes, instead of admitting his error and moving on, Krugman plows ahead and concocts, in a follow-on to his original column, a second, alternative theory of supposed tax-estimating deception on the part of Ryan — which McArdle also points out is not true. Strike two. Of course, perhaps anticipating that his latest seat-of-the-pants explanation of why Ryan should be criticized for evading accountability won’t hold up either, Krugman also throws into his broadside that, whatever else might be said, Ryan is a good-for-nothing just for failing to admit that his proposal will “dismantle Medicare as we know it.”

Never mind that Ryan’s Medicare proposal most closely resembles the recommendations of the last Medicare Commission from the late 1990s, chaired by Democratic senator John Breaux. And never mind that a variant of it was proposed by Henry Aaron and Robert Reischauer in 1995. Neither has ever been accused of conspiring with the Right. And they weren’t accused of wanting to “dismantle” Medicare.

Let’s face it. Krugman wrote his original column in a botched attempt to take Ryan down a peg or two. He saw the New York Times and the Washington Post publish relatively balanced pieces on Ryan in recent days, as well as friendly commentary from others on the left, and he felt it was his duty as the conscience of the liberal elite to make it clear that what the moment requires is a concerted Ryan-vilification campaign, not pieces in the mainstream press that, in so many words, say Ryan is good guy with typically awful Republican ideas.

But perhaps some good can come from Krugman’s rant despite the little problem of its inaccuracy. Indeed, if a byproduct of the Krugman barrage is a broad public awakening to the very real dangers of unguarded consumption of public-policy flimflammery, then it will have served a useful purpose. Because, in truth, allowing large amounts of flimflammery to go unchallenged can cause real damage to informed discussion of the important matters of the day.

Which brings us back to Paul Krugman and his blog. Just before launching into his anti-Ryan tirade, he posted the real deal: flimflam of the highest order.

On the day the Medicare trustees issued their annual report, Krugman rushed out a post highlighting the apparent good news. The new health-care law had bent the curve after all. Medicare spending in the 2010 report would grow at a much slower pace than was projected a little more than a year ago, thanks to the effective cost-cutting measures in the new law. This, Krugman said, was the finding of the “Medicare actuaries.”

But, as it turns out, the chief actuary for Medicare, in the back of the annual report, advised the public to essentially ignore the findings of the trustees because they were based on utterly unreliable data. He pointed readers instead to an alternative projection that shows Medicare spending rising to 10.7 percent of GDP in 2080, just a hair below the 11.2 percent of GDP projected for 2080 in last year’s report. In other words, no, the curve hasn’t been bent.

Moreover, the supposed savings in Medicare that will never materialize facilitated the creation of another runaway entitlement program. It isn’t counted in the Medicare trust fund projections, but spending from it will be very real indeed, in 2080 and every other year. Altogether, it’s absolutely clear that Obamacare raised federal entitlement spending on health care well above what it would have been under prior law.

Krugman and others argue that Paul Ryan’s Medicare plan is flawed because it is a formulaic cut that would shift costs onto the nation’s seniors. But, as it turns out, that’s exactly what the actuaries say is wrong with the Obama-Krugman plan. The enlightened cost-cutting that Krugman finds so attractive in the new law turns out to be nothing more than simplistic and formulaic across-the-board payment-rate reductions for institutional providers of care. Under the new health law, these payments rates would get cut every year below the rise in the cost of doing business by a formula that the actuaries say is completely disconnected from reality. By the end of this decade, Medicare’s payment rates would fall below those of the Medicaid program, which has rates that are so low today that the network of providers willing to see Medicaid patients is very, very constrained. In time, Medicare payments would cover just one-third of the cost of care that private insurers would be paying.

But let’s give Paul Krugman credit. He was right to suggest that there was flimflam in the air. He just misidentified its source.


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