Paul Ryan–Half Right, Half Very Wrong

House Budget Committee Chairman Paul Ryan has proposed major structural changes to Medicare and Medicaid. That’s good. Medicare in particular is one of the major drivers of increasing deficits, due to the unfunded prescription drug plan. But he only gets one of his proposals right.

Medicaid
He proposes turning Medicaid, the health care program for the poor that is jointly administered by the feds and the states, into a block grant program, similar to what was done for the TANF* (formerly AFDC**) welfare program. That change in the welfare system has been a resounding success (even through the recent recession, TANF rolls were lower than they had been under the old AFDC program, although there was increased enrollment in the Food Stamps and WIC*** food programs). The reason is not that complex. Because it’s not state money, states don’t feel the need to cut the program to the bone to balance their state budgets or avoid raising taxes or cutting programs supported by more affluent and politically influential people, but they do have an incentive to get the most bang for the buck to make constituents happy. As well, the TANF law contains specific provisions designed to limit lifetime welfare recipiency while allowing states great leeway to design programs that meet federal goals while paying attention to local conditions.

I think there’s good reason to believe that a block grant for Medicaid would work the same way, assuming it was as well-designed at the federal level as TANF is, because like TANF it’s a welfare program for the poor and many of the same conditions apply, both politically and in terms of state-by-state differences in types of problems faced. That doesn’t mean every state would do a great job–sometimes well-intentioned people make choices that don’t turn out well, and some people (on each side of the aisle) will insist on an ideological program (whether insisting that it cover all abortions or denying all medicaid to anyone who’s ever had an abortion) instead of a functional one. But we shouldn’t use an ideal system as our comparison; instead we need to compare to whether it’s likely to be an improvement on the current system, and based on comparison to TANF, there’s at least reason to be cautiously optimistic that it very well could be. There are good lessons to be learned from the AFDC to TANF transformation, but while I think the Democrats in fact recognize them, it still goes against their basic ideological approach, and I don’t think they are willing to apply them.

Medicare
The Medicare proposal is not nearly as good. Ryan proposes to directly subsidize elderly, particularly the low income elderly, persons’ purchase of private health plans, with the individual covering costs over and above the subsidy. And it’s at this point that I wonder if Republicans are even aware of their own long-standing rhetoric about government subsidies. They regularly criticize subsidies for having market-distorting effects, yet they seem either to not believe or not understand their own arguments. Subsidies are supposed to reduce the price for consumers, but they won’t do so when the producer can raise their rates to keep the consumer’s price constant and take the subsidy as rent. In a very competitive market this couldn’t happen, but a) in a competitive market the subsidy wouldn’t be necessary and b) health insurance is not (at least yet) a very competitive market. In short, the Medicare proposal would be a big gift to the insurance companies, and might do nothing to effectively help low-income retirees.

Taking the subsidy as rent could be prevented by passing regulations to ensure it doesn’t happen–and since when have Republicans wanted to pass business regulations? They are truly pro-business and not pro-market, and I think many of them would be happy enough to shift public monies to insurance companies without oversight or regulatory control.

Ryan’s Medicare proposal is worse than worthless, which is a shame because his Medicaid proposal is a good idea and Medicare desperately needs to be reformed.

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* Temporary Assistance for Needy Families
** Aid to Families with Dependent Children
*** Women, Infants and Children

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About J@m3z Aitch

J@m3z Aitch is a two-bit college professor who'd rather be canoeing.
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16 Responses to Paul Ryan–Half Right, Half Very Wrong

  1. D. C. Sessions says:

    In a very competitive market this couldn’t happen, but a) in a competitive market the subsidy wouldn’t be necessary and b) health insurance is not (at least yet) a very competitive market.

    I don’t think we’re likely to see either one. A truly competitive market in health insurance would be so far from meeting any kind of social objectives as to be unworthy of discussion — and that’s been done to death over the last few years.

    Next up: a highly-regulated market in heath insurance, where insurers are not allowed to discriminate based on what insurers do: calculate risks based on known factors to guarantee that for every identifiable group their own risk of loss is negligible. Which is pretty much what ACA does, but that only works because Medicare and Medicaid take the groups (elderly, poor, disabled) with very high medical costs out of the “insurance” game entirely.

    Very nearly the only thing ACA leaves insurers free to distinguish rates is age — and once you feed age into the rates the market in insurance can’t cure the actuarial tables: the elderly are expensive. I really don’t want to think about what my 85yo mother would be paying for health insurance, despite the fact that she’s not spending much and already has directives in place limiting any terminal expenses (they can’t take that into account.) The elderly poor are, flat out, SOL.

    The only thing that a market-based approach to elder health can do is force the very thing that was so toxic two years ago: “death panels.” Oops — I mean, forcing people to plan in advance for terminal care. I’m 59 and have had terminal directives in place for four years (how ’bout you?) There’s a great deal of merit in stating, in advance, that Grandma’s health plan doesn’t cover keeping Grandma on a ventilator, feeding tube, etc. months after the stroke that left her completely unresponsive.

    I suppose that there’s marginal utility in offering the family an opportunity to buy coverage for that — at the least, it offers a counter to the “bureaucrats killing Grandma” rhetoric. But that’s a minor tweak to what’s already in the queue, and doesn’t really change the overall reality that a free market in health insurance (and never mind their continuing exemption from antitrust scrutiny) is not realistic or, I suspect, desirable.

  2. First off, thanks for being able to put the whole Medicare voucher issue in plain English and not in “econospeak.”

    That said, if the Ryan idea of vouchers for Medicare is a bad idea (which I’m starting to think it is), then what is an alternative idea that can keep the program sustainable?

  3. D. C. Sessions says:

    That said, if the Ryan idea of vouchers for Medicare is a bad idea (which I’m starting to think it is), then what is an alternative idea that can keep the program sustainable?

    Bending the curve. Look, practically every other country on Earth manages to get more public health per equivalent spend than we do. This is not rocket surgery. There is a very, very great deal we can learn, with the research already paid for, on how to deliver public health cost-effectively.

    The #1 (and #2, and …) reason we don’t is American exceptionalism. Something about our blood being redder than theirs or whatever.

  4. Bending the curve. Look, practically every other country on Earth manages to get more public health per equivalent spend than we do. This is not rocket surgery. There is a very, very great deal we can learn, with the research already paid for, on how to deliver public health cost-effectively.

    I’m sorry if I look like an idiot, but I don’t know what “being the curve” means.

  5. Bending the curve. Look, practically every other country on Earth manages to get more public health per equivalent spend than we do. This is not rocket surgery. There is a very, very great deal we can learn, with the research already paid for, on how to deliver public health cost-effectively.

    I’m sorry if I look like an idiot, but I don’t know what “bending the curve” means.

  6. James Hanley says:

    Dennis,

    As I understand it (although I’m no expert in this field) for most individuals the overwhelming majority of their health care expenses come in their last few months, in the costs of end-of-life care. We need to encourage death panels people to get serious about not trying to hang on for every last scrap of breath (or perhaps more accurately, not to force their parents to hang on for every last scrap of breath). Another problem seems to be that doctors are so afraid of lawsuits that they run extra tests, mostly pointless, so that if things go wrong they can stand in court and say, “we did everything we possibly could.” I never trust conservatives when they start talking about tort reform, because they always seem to mean not holding people accountable for bad actions, but something needs to be done to reduce doctors’ incentives to waste health-care money that way. I won’t pretend to have any ideas on how that’s done.

    Another, and I’m lately coming to think hugely important, element is that we need to start emphasizing preventative care and lifestyle changes. Diabetes is hitting epidemic proportions in this country, and the overwhelming majority of the cases are a consequence of diet and lifestyle. Idiots like Sarah Palin want the government to be more cost effective, but when the First Lady suggests eating vegetables the Alaskan Idiot encourages kids to eat more cookies, which is effectively promoting continued increase in health care costs. A new book I’ve been reading, Getting Better: Why Global Development Is Succeeding argues persuasively that the biggest bang for the buck in health care spending comes from relatively inexpensive stuff, like ensuring universal vaccination and disseminating information about healthy behaviors. Not to bash our advanced health care technologies, which make very fruitful and productive lives possible for some who would have died early, but on a social level we seem to be deep into the territory of increasing marginal costs and decreasing marginal benefits for health care technology. I’m not advocating eliminating that technology or reducing investment in further developments, but I think in the U.S. we’ve come to rely on that as a back-end fix instead of emphasizing the cheaper, up-front, preventative fixes.

    That’s not an entire policy package, of course, but perhaps we could tie some of our public health care provision to that, putting more spending into preventative care and education, and perhaps adding “compliance testing” along with means testing as a way of determining who receives public assistance for health care. (That’s just an off-the-cuff thought, so if there are good objections to it, fire away.)

  7. D. C. Sessions says:

    Another problem seems to be that doctors are so afraid of lawsuits that they run extra tests, mostly pointless, so that if things go wrong they can stand in court and say, “we did everything we possibly could.” I never trust conservatives when they start talking about tort reform, because they always seem to mean not holding people accountable for bad actions, but something needs to be done to reduce doctors’ incentives to waste health-care money that way.

    Ummm … yeah. I’m working on one of those first-hand right now, and taking notes. If you’re interested ping me and we can discuss it off-line.

  8. Matty says:

    perhaps adding “compliance testing” along with means testing as a way of determining who receives public assistance for health care.

    If this means what I think it does then I’m very wary of it. The line between “no liver transplant if you don’t stop drinking because it would reduce the chance of success” and “no liver transplant if you don’t stop drinking because I morally disaprove of alcohol” is just too thin for me to be comfortable.

  9. D. C. Sessions says:

    The line between “no liver transplant if you don’t stop drinking because it would reduce the chance of success” and “no liver transplant if you don’t stop drinking because I morally disaprove of alcohol” is just too thin for me to be comfortable.

    We’re already ‘way past that line. Last week, while I was in Recovery waiting for a room, another bed was wheeled up by mine. I wasn’t taking notes, but I did hear two phrases: “IVDA” and “hep C.” Pretty much a death sentence. Now, IIRC it’s possible to save some hepatitis C patients with liver transplants — antivirals can lower the tissue and serum viral load enough to give the new liver a chance — but even if not work with me and assume it is.

    Who are you going to prioritize for the very limited supply of available livers? This is not some abstract exercise, it’s not something we can wash our hands over with a Scalia-type rejection of “substative due process.” The people waiting for liver transplants are, unfortunately, just full of people who have very poor prognoses even if they get the transplant. If you go for strict first-in-first-gets you’re going to bias the decision in favor of the ones in the worst shape, too.

    No cop-outs about “playing God” allowed. Whichever decision you make, someone gets a chance to live and several others die. In a particularly nasty way, BTW.

    This isn’t quite personal, but close. One of my fellow ski patrollers has been living with a donated liver for quite a few years. She was a perfect candidate: healthy, athletic, liver damage from an acute event rather than a chronic one. No reason she shouldn’t live for decades yet if she’s careful. Which she is: always first in line as a designated driver at parties, for instance.

    So I won’t pretend that if it comes to giving a liver to an IVDA — or an active alcoholic — vs. my associate, I don’t like a system that doesn’t take the abusive behavior into consideration.

  10. James Hanley says:

    Matty,

    I wholeheartedly agree that the line between “action-based” rationing and moral rationing is thin, and the former can easily be used as a cover story for the latter. Wariness is a good approach.

    That said, I think D.C. is ultimately right on this issue. I was once in an emergency room next to a 37 year old HIS positive heroin addict who looked like he was in his late 60s. I’m all for providing hospice care and drug counseling at public expense for someone in that position, but the waiting room for those trying to get into the emergency room to receive care was standing room only. He got in ahead of others for the same reason I did, we were both at death’s door. However I had an asthma attack, was pretty easily fixed, and had great prospects to go on to a reasonably healthy and productive life. Putting me ahead of others who were less critical seems to make sense (even aside from my personal feelings about it). Putting him ahead of others, possibly repeatedly? I hate to be grossly utilitarian when we’re talking about the lives of real people, but since we are talking about limited budgets and where we spend them, it’s inevitably a utilitarian debate, no matter how sincerely we might want to focus on ethics.

    D.C., I’d be happy to, but what do you mean by “ping” you?

  11. D. C. Sessions says:

    D.C., I’d be happy to, but what do you mean by “ping” you?

    I just assumed you have access to the e-mail addresses we put here, and there’s a sort of loose convention to not put personal addresses in comments. However, unlike some (no criticism intended) I actually post with my legal name and still use the address that I’ve used on UseNet for ten-plus years. Ain’t no secret:
    delta charlie sierra at lumbercartel dot com (which I own.)

  12. James Hanley says:

    Ah, forgive me for being stupid.

  13. “Ryan’s Medicare proposal is worse than worthless…”
    Ah, but now the Villagers and Beltway Pundits can “Ooo” and “Ahh” over the serious thinkers seriously thinking as Obama compromises with the Simpson-Bowles plan, where the elderly are merely tossed out on the street, instead of thrown there.

    “…which is a shame because his Medicaid proposal is a good idea…”
    But it’s not just a block conversion. It’s cuts, too, among other things.

    “…and Medicare desperately needs to be reformed.”
    Ah, but the Ryan plan (and Simpson-Bowles) fix the problem. By letting grandma fight for herself (GOP motto “We save you tax money by pitting the elderly against the slap-happy Invisible Hand of the Totally Free Free Market. And by ‘you’ we mean those well above you on the economic ladder.”). Heck, Ryan’s willing to give her a coupon that will in no way cover her steadily increasing costs! If she wants her medication, she can damn well get a job and earn it!
    What’s your solution? “Learn from other countries”? “Public healthcare”? Pah! As with the fight over DADT, American Exceptionalism® means that it’s the biggest, best and strongest, and also that any minor change will shatter the whole thing. True story. This leads to the Dems, made of mush and Mod Republicans, nibbling around the edges (plus pork and handouts) and the GOP, made of bile and resentment, simply trying to break it (plus pork and handouts).
    In any event, Ryan et al don’t have to worry. They’ve got well paying jobs, good coverage, and wingnut welfare for their well earned contribution to making the lives of the average citizen worse.

  14. DensityDuck says:

    “Subsidies are supposed to reduce the price for consumers, but they won’t do so when the producer can raise their rates to keep the consumer’s price constant and take the subsidy as rent. ”

    Considering that I pay a flat fee for just about anything, regardless of the procedure’s cost, then my health insurance plan might as well be a “subsidy”.

    And no, this is not a “ban health insurance and make everyone pay for everything” argument. It’s just explaining why it always seems like American health care costs so much (in per-capita terms) (when you pay by insurance).

    *****

    If you look at flat per-capita statistics, American healthcare looks like we’re spending a lot for bad results.

    If you eliminate end-of-life spending, the per-capita cost drops dramatically. In fact, it becomes much the same as any other first-world country.

    If you eliminate death by violence, American life expectancy goes up dramatically. In fact, it becomes much the same as any othe first-world country.

    If you use the same methodology for determining infant mortality–that is to say, hugely-premature infants and those with severe birth defects like spinal bifida are declared “nonviable” and not reported as dead babies–then American infant mortality drops dramatically. In fact, it…well, you get the picture.

    It’s all about the statistics.

    *****

    When people say “tort reform” in reference to medical malpractice, I think that they don’t actually mean what those words imply. They mean that they want the USA to use something like Mexico’s CONAMED.

  15. AMW says:

    What are the details of the subsidy exactly? By its nature insurance subsidizes the consumption of health care at the margin (i.e., at the point of care). The surest way to reign in costs is to make the subsidies lump sum rather than at the point of care.

  16. Pingback: On Ryan's Medicaid/Medicare Reforms - Big Tent Revue

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