Austin Frakt is talking up the virtues of Bring Market Prices to Medicare by Robert Coulam, Roger Feldman and Bryan Dowd, a book we’ve discussed a number of times in this space. He describes it as “the most important book a health policy wonk could read today.” I would recommend a number of AEI’s other titles, including Walton Francis’s excellent Putting Medicare Consumers in Charge, a primer on the virtues of the FEHBP and also the profoundly negative consequences of the decision to extend tax preference for employee health spending to FEHBP beneficiaries.
Allow me to segue from Coulam, Feldman, and Dowd to something I’ve been meaning to discuss. Frakt writes:
So, competitive bidding is market-based, involves private plans (hence, offers choice), and protects against program over-runs, so it should attract the interest of conservatives. Yet it includes a public option and protects beneficiaries from health care cost inflation, so it should attract the interest of liberals.
This is one reason I described the proposal as a good near-term compromise in November of last year:
At the heart of the Roadmap is a plan to transform Medicare into a system of fixed contributions toward the purchase of medical insurance. Advocates of this approach, like myself, believe that it will make Medicare sustainable over the long run. Critics are convinced that it represents the gutting of a cherished social program.
It’s hard to believe that Representative Ryan will achieve his goal in one fell swoop. But there is at least a chance that he might persuade the White House of the virtues of embracing a competitive pricing system for Medicare, as advocated by the economists Robert F. Coulam, Roger Feldman and Bryan E. Dowd.
So why did Paul Ryan advance a proposal that put an even more stringent limit on growth in premium support in his House Budget than he did in the Roadmap? Wasn’t this the right time to advance a compromise proposal?
A knowledgeable friend recently shared a theory that I find convincing. I want to emphasize that the following is pure speculation.
Basically, Ryan recognized that his House Budget proposal had no chance of success. Yet he wanted to rally congressional Republicans to accomplish a number of goals:
(a) to demonstrate a new seriousness about entitlement reform;
This seemed particularly important given the high level of engagement and enthusiasm among grassroots conservatives, which was reflected in a more ideological freshman class. This is all notwithstanding the fact that most of the electorate was voting along non-ideological throw-the-bums-out lines.
Until the collective, and perhaps temporary, embrace of the Ryan plan, most congressional Republicans in the post-Gingrich era have been extremely wary of proposing specific cuts to entitlement programs, in large part due to the success of Clinton’s M2E2 campaign in 1996. Getting everyone on the same page was always going to be difficult, and this required crafting a plan that didn’t cross key conservative redlines.
For example, had Ryan proposed a plan that included any revenue increases (not increases in tax rates, but any net revenue increases tied to, say, curbing tax expenditures) may well have lost him the majority of the Republican caucus. This meant that premium support growth had to be even more tightly capped than in the Roadmap.
I’d argue that this effort was an important one. Once Ryan crafted a plan that adhered to widely held conservative principles, which are most of the time honored only in the breach, the wider conservative movement embraced a far-reaching, fairly specific plan to transform the welfare state, albeit one that was far from perfect.
(b) to pull the debate on Medicare reform rightward;
Ryan understood that his plan would represent the rightmost pole of the debate, as the major Republican presidential candidates would be keenly aware of how difficult it would be to sell the plan in a general election. Yet he also understood that it might give the Rivlin-Domenici proposal a lift. People who would have otherwise ignored or dismissed Rivlin-Domenici, which includes a Medicare public option and a premium support structure that grows at a more forgiving rate, would be inclined to see it as a more serious and sober alternative to the Ryan plan. A level playing field proposal like that offered by Coulam, Feldman, and Dowd would be somewhat more likely to be taken seriously, though it would require some people who choose Medicare FFS to top up premium support pegged to the lowest cost plan that offers the Medicare defined benefit. If the eventual compromise resembled the Rivlin-Domenici proposal more than his own, my guess is that Ryan would see that as a huge success.
The question now, however, is whether Ryan overreached. That is Ramesh Ponnuru’s view, as I understand it. I’m not willing to concede that this is true quite yet. What I will say is that the reaction to the Ryan plan from the left has been sobering. Rather than attacking it and moving on to a case for Rivlin-Domenici, Democrats see an opportunity to double down on a deus ex IPAB approach that hands over political responsibility for Medicare cuts to an appointed board with an ill-defined mandate to be formed in the future. They sense that this is a political winner, and that now is decidedly not the time for compromise.
This post is prompted in part by Joe Nocera’s mostly sensible column on RyanCare. The not-sensible part was the following:
The Ryan plan, which would give seniors a fixed amount they can use to buy health insurance, would undoubtedly shift the cost burden over time from the government to seniors themselves, making health care far less affordable for millions of people. Ryan says that “empowering” health care consumers will help control costs, but that’s absurd: Medicare itself has far more pricing power than the people who actually need treatment.
One of the ideas behind the Ryan plan is that Medicare FFS stymies beneficial provider consolidation, and that provider fragmentation and the resulting lack of business model innovation is a powerful driver of cost growth. This might be wrong, but it’s hardly absurd.
But the rest of the column makes an excellent point:
[W]hile the Democratic Party might be well served in trying to use the Ryan plan to bury their political opponents, the country itself is not. The debate we need is not about whether Medicare should be reformed, but how.
Marmor, for instance, says that the root problem is not with Medicare itself but with the larger phenomenon of rising health care costs. And he finds himself in philosophical agreement with Ryan about, as he puts it, “the need to put Medicare on a budget,” though he would approach it differently. Rivlin, along with former Senator Pete Domenici, a Republican, has come forth with a less-mean-spirited variant of Ryan’s voucher plan.
If we lived in a Nocerian universe, there’d be no question that Ryan and pro-reform moderates would have come out ahead. We instead seem to be living in an Axelrodian universe, in which political imperatives are carrying the day. We’ll see.