The Corner

To Protect Medicare, Reform It

Yuval: Thanks for your thoughtful response to my post. You asked me whether my concern with the Republican discourse on Medicare is that I don’t believe that Ryan’s Medicare reform — a premium-support option for seniors that would reduce the cost of health care through competition — will be implemented. It wasn’t my concern in this particular post — even though one of the problems with the Ryan plan as designed is that the premium-support option won’t kick in until 2023, which makes it less likely to materialize.

No, today, I am mostly concerned with the way the Medicare debate is being framed during this election. My fear is that by making the $700 billion “cuts” from Medicare the centerpiece of their attack on Obama’s health-care law, Republicans are implicitly putting Medicare out of the reach of reformers after the elections. In fact, it is hard to reconcile the words Ryan used during his speech with the Medicare-reform plans he has pushed for in the last three years. This sentence is particularly worrisome:

Medicare is a promise, and we will honor it. A Romney-Ryan administration will protect and strengthen Medicare, for my Mom’s generation, for my generation, and for my kids and yours.

“Protect” and “strengthen” Medicare could easily be interpreted as meaning that Republicans aren’t running on the Ryan plan to reform the program and instead have promised to preserve the program in its current form and even beef it up for all seniors, today and tomorrow. This is reinforced by the fact that the speech made no mention of how Ryan would like to reform the program through premium support.

Yet, the only way to protect or strengthen Medicare is to reform it.

We have long known, for instance, that sticking with the status quo guarantees the “end of Medicare as we know it.” In its current form, Medicare is unsustainable. As I explained in my Washington Examiner piece today, the program pays out more than it takes in, and cannot exist without the constant use of budget gimmicks to make it look solvent on paper. Currently, the payroll taxes, along with dedicated funding sources such as premium payments, state transfers, and taxes on benefits, pay for only half of the program’s cost. And it will get worse as the number of enrollees continues to grow and the cost per capita explodes. Last month, Nick Gillespie and I am made similar points in this piece called “Generational Warfare,” explaining the utter unfairness of the current system.

Also, the new health-care law makes things worse than they are now. According to the Trustees’s Report, the Medicare Hospital Insurance trust fund will run out of assets in 2024, sooner than projected initially. Avik Roy even makes the case that the program will be in the red starting in 2016. And as you know, my colleague Chuck Blahous has also shown that once we set the budget gimmicks aside, the law will increase the deficit by at least $340 billion over the next ten years. The now-deceased CLASS Act provides a good example of a revenue-booster policy that won’t be raising money after all. There are also many projected savings in the ACA are unlikely to materialize. For alternatives to the spending path of the program, look at the chart provided on p. 220 of the Trustees’s Report.

The only way to ensure that Medicare is there “for my generation, and for my kids and yours,” reform it. If when Representative Ryan says “protect” and “strengthen” he means “reform Medicare,” great. Reform can take many forms, obviously. But, then we can believe Ryan when he says “ladies and gentlemen, our nation needs this debate. We want this debate. We will win this debate.” 

But Republicans still need to be careful that what you yourself call a “Medicare jujitsu” doesn’t become an unmanageable slippery slope that frames the Medicare debate in a way that makes necessary reforms impossible later. There is a life after the elections.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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