The Corner

The Ryan-Rivlin Plan, in Pictures

I have a piece in the American magazine this morning looking at the plan to reform Medicare and Medicaid proposed by Rep. Paul Ryan and economist Alice Rivlin. There are several things I do not like about this plan. For instance, it continues the Washington tradition of extending open-ended entitlement promises to millions of people without paying for them.

However, this plan is important because it is a clear option for reforming the programs that are at the source of most of our financial problems. Without being radical in any way, shape, or form (I certainly wish it was more radical), the plan does solve our debt crisis by reducing spending enough that interest on our debt does not end up consuming most of our budget in the future. Also, it is evidence that there are some serious Democratic-leaning economists who are willing to talk about these reforms.

The plan has two main features:

First, people who turn 65 in 2021 or later would not enroll in existing Medicare. Instead, they would receive vouchers to purchase healthcare in the private market (the voucher amount would equal the average amount of Medicare expenditure per enrollee, growing at the same rate of growth as gross domestic product (GDP) plus 1 percentage point). These vouchers would introduce a meaningful element into the healthcare system, one currently missing from our single-payer Medicare program: price competition. By introducing competition for consumers into the insurance market, the voucher system will pressure insurers to compete on cost while maintaining a high standard of care.

Second, the Rivlin-Ryan plan would establish Medicaid block grants for states. These grants would continue providing states with federal Medicaid, but determine funding evenly by the state’s proportion of low-income residents, growing in future years at gross domestic product plus 1 percent (including adjustments for population growth). In exchange for slower growth in federal support for Medicaid, states would have a greater level of flexibility than under the current system. Overall, the plan would contain the growth of Medicare and Medicaid to the growth of GDP plus 1 percent.

Now, I wish that lawmakers on both side of the aisle would look at this plan seriously and join forces with Ryan and Rivlin to address this pressing issue. I also wished that Republicans could make up their mind about where they stand on reforming Medicare.

The whole piece is here.

By the way, e21 is organizing a discussion with Representative Paul Ryan today at the National Press Club at noon. More information about the event is here.

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

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