re: Two Visions

I agree with Yuval. Here is what Reason magazine’s Peter Suderman wrote this morning about the panel of experts that Krugman likes so much:

Last year’s health care overhaul called for the creation of an Independent Payment Advisory Board (IPAB) for Medicare. IPAB is a 15-member panel of health care experts appointed by the president. Starting in 2014, it is tasked with recommending Medicare spending reductions each year that the program does not meet predetermined spending targets; Congress can only override its proposals with a three-fifths vote in the Senate or a package of equally large cuts. Obama’s big proposal to squeeze savings out of Medicare is to give IPAB more power and tougher targets.

But IPAB already faces two major hurdles. The first is that it’s politically unstable. The health care industry wants to see IPAB blocked. United industry opposition is a powerful political force, and the administration knows it. That’s why the White House cut deals with every major health care player before passing ObamaCare in the first place.

The industry will have an easy time selling its message to Congress. One of the major reasons IPAB was created was that lawmakers have traditionally been loath to cut Medicare. But legislators on both sides of the aisle are deeply wary of attempts to wrest power from their hands, and bills to gut the board are already in the works

The other worry is that it just might not work. IPAB’s backers hope it will wring efficiencies out of medical providers, encouraging them to find ways to do more with less. But according to both the Congressional Budget Office (CBO) and Medicare’s own chief actuary, Richard Foster, those efficiencies may not exist. In 2009, CBO director Douglas Elmendorf told Congress that “in CBO’s judgment, the probability is high that no savings would be realized…but there is also a chance that substantial savings might be realized.” At best, then, it’s a risky bet on reductions that may not be possible.

I have to say, I was so amazed by the level of political posturing in the president’s speech that I really didn’t think it was worth commenting on. The president knows that, while he can repeat as often as he wants that we aren’t going to reform Medicare, there is no other way going forward. Does anyone truly believe that we can guarantee health care for everyone forever? If the president does believe that, then he is going to have to raise taxes a lot, on everyone.

Of course, one way for the government to keep helping every senior with their health-care costs is to go the route advised by Rep. Paul Ryan. Under his plan, everyone would still get some government money; it would just be more in line with what we can afford. Unfortunately, as much as I like the Ryan plan, I fear that as long as we continue arguing that everyone deserves to be taken care of by the government simply for being American and over 65, we are unlikely to find a solution that will address our long-term budget problems.

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

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