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Posted at 4:50 PM ET, 12/17/2010

Republicans embrace ObamaCare, call it Ryan-Rivlin

By Ezra Klein

ryanpointsbinders.JPG

If you're looking for a description of the Ryan/Rivlin Medicare reforms that have gained so many admirers on the right, Matt Yglesias has a good write-up of the idea. But I'd add another way of explaining the proposal: The Ryan-Rivlin plan basically turns Medicare into Obamacare. And in that context, Republicans love the idea behind ObamaCare and think it'll save lots of money.

Under the Ryan-Rivlin plan, the current Medicare program is completely dissolved and replaced by a new Medicare program that "would provide a payment – based on what the average annual per-capita expenditure is in 2021 – to purchase health insurance." You'd get the health insurance from a "Medicare Exchange", and "health plans which choose to participate in the Medicare Exchange must agree to offer insurance to all Medicare beneficiaries, thereby preventing cherry picking and ensuring that Medicare’s sickest and highest cost beneficiaries receive coverage."

Sound familiar?

As Matt says, this doesn't save money. In theory, it actually costs money, as private insurance is more expensive for Medicare -- and that's true both in the private market, and in the quasi-private Medicare Advantage market. What saves money is capping the amount paid to seniors, so they either have to pay more for their care or get less.

But that's not how it's being explained. Matt calls the privatization strategy here "an ideological tic" and says it's unrelated to the cost control, but I'd say it's more of a sleight of hand that's necessary for the cost control. The question seniors will have about this plan is "won't it mean lower benefits?" The privatization idea, by virtue of being a disruptive reform, allows you to say, "no, competition in the private market will make Medicare so much more efficient that it'll be able to deliver more for less!" Or, as Rivlin's original plan (pdf) says, "The expectation is that increased competition among plans fostered by the Medicare Exchange...will keep costs from rising."

I don't know that accusations of hypocrisy are really worth making in American politics, but consider the way this policy and its rationale interacts with the case against ObamaCare. Right now, Medicare is much cheaper than private insurance. If you think that moving Medicare to a model of private insurance sold on exchanges will make it even cheaper, what you're saying is that an ObamaCare model will not only be cheaper than the current private-insurance system, but cheaper than the even-cheaper Medicare system.

If you believe this logic, the Affordable Care Act is a great bill that will save much more money than CBO currently assumes. And yet this is the reform package that's gaining adherents among the group of people who want to repeal the Affordable Care Act and think it a monstrous and unconstitutional piece of legislation with no redeeming features worth mentioning.

Photo credit: Melina Mara/The Washington Post.

By Ezra Klein  | December 17, 2010; 4:50 PM ET
Categories:  Health Reform  
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Comments

The republicans favorite talking point right now is "This is not what the people voted for on November 2nd."

I am pretty sure this is not what the senior citizens voted for on November 2nd. Senior citizens were the biggest factor in the republican election victory. They typically do not want anyone to touch their Medicare. It will be interesting to see how they respond to this proposal.

Posted by: DeanofProgress | December 17, 2010 5:16 PM | Report abuse

I guess if you are a conservative, you could probably see a healthcare continuum with a fully privatized system on the right, Obamacare somewhere in the middle, and Medicare on the left (labeled "socialism").

So the shift from our existing privatized system to Obamacare is bad because it was a jump left, but going from Medicare to Obamacare would be good because it would constitute a rightward leap. That's not philosophically inconsistent.

In terms of real problems that conservatives have with Obamacare:

(1) Higher taxes on rich people.

(2) Increased welfare state through Medicaid.

I do agree with what might be the underlying thesis of this post; Obamacare is 90% ideas that conservatives have endorsed in the past.

On the topic of cost, the argument given by non-nuts conservatives (I think both of them have made it) is that American healthcare consumers, both among seniors and working adults, are shielded from the true costs of the care they receive, and this creates a massive upward pressure on spending.

Under voucher system, healthcare spending would go down, and the efficiency of that spending would go down as well (in terms of care provided per dollar). But efficiency in terms of outcomes per dollar would go up, as consumers were making money decisions about what care was worth paying for. So less care would be provided, but the care that was left would be the important stuff.

Posted by: eggnogfool | December 17, 2010 5:26 PM | Report abuse

Paul Ryan is a maniac for precisely the reason DeanofProgrss identified. Senior voters swung to the Republicans with a +22 margin (the last midterm, the parties split seniors equally). The driving factor was Medicare cuts. Why would an election winner double down on the loser's strategy?

Senior voters seemed motivated by concerns about the health care law and punished incumbent Democrats accordingly. The bill cut $500 billion from Medicare programs, a wash at best for older citizens. And Democrats largely failed to campaign successfully on aspects of the law targeted to benefit seniors, like closing the “doughnut hole” in Medicare Part D prescription drug coverage.
http://www.politico.com/news/stories/1110/44802.html

Posted by: beowulf_ | December 17, 2010 5:53 PM | Report abuse

Yglesias's post has a telling quote from the egregious David Brooks about how this is all about "modernizing" benefit programs. A favorite right-wing meme -- that we can "no longer afford" such "generous" programs. Because why? Are we a poorer country since the Depression? No. Productivity has risen, wealth has risen. But we must "modernize" so that ever more can be preempted by ever fewer. We're well our way to modernizing ourselves all the way back to the Middle Ages.

Posted by: jtmiller42 | December 17, 2010 6:07 PM | Report abuse

It looks to me that the business case for insurance companies to sign up Medicare-aged customers seems pretty thin to me, a probably money loser unless those vouchers promised by Ryan/Rivlin are sizable. This is the group with the highest risk of major treatment, the highest prescription medicine consumption, the highest risk of hospitalization. I'd imagine that the insurance industry is elated that the taxpayer-funded Medicare keeps those risks out of their risk pool.

More likely, if insurance companies could be convinced to participate, the Ryan/Rivlin plan would lead to incredibly stingy insurance ('lite' would probably be too good a word for it) that wouldn't destroy their bottom lines.

Posted by: meander510 | December 17, 2010 6:24 PM | Report abuse

If he can get out of the House, Ryan will be an awfully tough candidate for President in 2016. He's very charismatic, and has that "it" factor.

Posted by: 54465446 | December 17, 2010 6:42 PM | Report abuse

"The privatization idea ... allows you to say, 'no, competition in the private market will make Medicare so much more efficient that it'll be able to deliver more for less!' "

Answer this simple question: Why is it that — in our free-market health care market with supposedly maximum competition which lowers costs, etc. — health insurance premiums are constant going up, not down?

I pay in one month now what I paid in a year for health insurance 25 years ago. That's 12 times more, or an inflation rate of 9.94%. The Consumer Price Index inflation rate in that period is only 2.77%. Which makes private health Insurance's cost growth is over 3.5 times greater.

The only group gaining by this private system of health insurance is the one selling the insurance. No wonder they want to privatize Medicare.

Posted by: tomcammarata | December 17, 2010 7:53 PM | Report abuse

"Under voucher system, healthcare spending would go down, and the efficiency of that spending would go down as well (in terms of care provided per dollar). But efficiency in terms of outcomes per dollar would go up, as consumers were making money decisions about what care was worth paying for. So less care would be provided, but the care that was left would be the important stuff."

What will probably happen is that "the important stuff" will be a bare-bones coverage that may be all you can afford (especially if you have a preexisting condition, like diabetes), such as the McCoverage from several types of employers. But what you consider "not good stuff" (i.e., what you would sacrifice) may really cut down on the quality of life. If I couldn't afford it, I would have to cut out my allergy treatments, and deal with getting respiratory infections several times a year, which is what happened before I started treatments.

It sounds frivolous if it ain't you, but it's not frivolous to me. It takes a real idealogue to stop seeing people and their needs as so many eggs that need to be cracked to make a free-market omletette.

Posted by: ciocia1 | December 17, 2010 9:12 PM | Report abuse

Sorry, scotch the word "stop" from the last sentence. My bad.

Posted by: ciocia1 | December 17, 2010 9:17 PM | Report abuse

Ezra,

I don't mean to play "gotcha" with this question (I'm sincerely curious) but do you believe that the ACA could save more money than the CBO thinks? If you think that then doesn't that mean you think that privatization of Medicare could save more money too?

Posted by: JHawk2 | December 17, 2010 9:39 PM | Report abuse

Simplest is often the best. Medicare for All http://bit.ly/fVs6Ri

Posted by: emperor_bob | December 18, 2010 2:13 AM | Report abuse

Private insurance is part of the problem, not part of the solution.

The solution is a single risk pool.

The best option would be to extend Medicare for all and tell BigInsurance to find some other country to fleece.

Posted by: bakho | December 18, 2010 7:49 AM | Report abuse

"On the topic of cost, the argument given by non-nuts conservatives (I think both of them have made it) is that American healthcare consumers, both among seniors and working adults, are shielded from the true costs of the care they receive, and this creates a massive upward pressure on spending."

But that has nothing to do with who pays for your health insurance: you, your boss, or the government. The third-party-payer problem is inherent to insurance itself. It can be handled by having sufficient co-pays, in particular ones that are percent-based rather than a flat dollar fee. Many nation's with universal coverage do exactly this: fairly substantial percent-based co-pays, along with some sort of out-of-pocket maximum to ensure that no one goes broke due to a particularly bad disease.

However, the market for health insurance (not health care itself) is broken due to adverse selection and the tendancy of younger, healthier people to avoid insurance until they think it is likely that they will become ill. This market failure is highly pervasive and no one has ever found a good solution for it other than the government mandating that everyone be insured all the time, or the government insuring everyone directly.

Having multiple insurers causes more problems than it solves. "Competition" isn't going to cause innovation in actuarial tables, and the myriad of forms required if we have lots of different insurers will cause headaches for everyone.

The best system: Medicare for all, with a 30% co-payment for all services except an annual check-up, reduced to 20% for the elderly, children, and the poor. Total annual co-pays would be limited to 10% of the household AGI, beyond which the government would pick up everything. This should be combined aggressive price controls like virtually every other nation uses.

Posted by: brickcha | December 18, 2010 9:20 AM | Report abuse

The real solution is utter dissolution of Medicaid.

Posted by: krazen1211 | December 18, 2010 12:41 PM | Report abuse

    Or, as Rivlin's original plan (pdf) says, "The expectation is that
    increased competition among plans fostered by the Medicare
    Exchange...will keep costs from rising.

What bizarro world do we line in that when these claims were made with Medicare Advantage, and were proven horribly wrong, the same people make them a second time and are taken seriously?

Posted by: Daniel42 | December 18, 2010 11:01 PM | Report abuse

Clearly competition between profit seeking companies does not hold down costs when it comes to health care. I am appalled that Alice Rivlin would imply that it does. No other developed country has a for-profit free market system and they all have better outcomes for much, much less money.

For example the Swiss had a system of private insurance like ours but found costs were out of control. A few years back they switched to a non profit, government regulated system. Their system in much less expensive than our yet delivers better results.

Posted by: BernieO | December 19, 2010 8:07 AM | Report abuse

I think Ezra is hiding the real point here.

We have to cap Medicare expenditures. We are over-consuming health care products that are over-priced. To all of you claiming Medicare is cheaper, you are clearly wrong. Medicare encourages over consumption and has us paying full retail price for many prescriptions.

The fiscal conservative argument on this (and I am a Democrat who thinks this) is do you want the government deciding where to limit your costs or do you want to decide where to limit your costs? Do you want to pay for a plan that covers gastric bypass when you are capable of controlling your own food intake?

Ultimately, it is the structure of the plans that will save us money. The more we have plans that allow the consumer to benefit from choosing low cost options, the more providers. When's the last time a doctor offered a coupon to attract business? They are simply not competing on the basis of price AT ALL. Disruptive innovations are shut out because we don't see the price, so we have no reason to choose the better value.

The Ryan plan (and the ACA) are wrong because they are focused on lowering the cost of existing insurance plans without changing their structure. What needs to happen is that the plans themselves give you a voucher to buy healthcare. Third party payer, whether it's Medicare or Private Insurance, is creating a distorted market that favors high costs care.

Posted by: staticvars | December 19, 2010 1:04 PM | Report abuse

The majority of Republicans in Congress are contrarians who would vote Nay on the "Anti-Puppy Killing and Babies are Cute bill" if it was supported by Obama. (Some Dems. are the same with the GOP but it is not the Dems. central political dogma).

I agree with your logic, but I am afraid logic has little to do with it.

@Chris_Gaun
christiangaun@gmail.com

Posted by: chrisgaun | December 19, 2010 5:36 PM | Report abuse

"We have to cap Medicare expenditures. We are over-consuming health care products that are over-priced. To all of you claiming Medicare is cheaper, you are clearly wrong..."

You are entitled to your own opinions, but you are not entitled to your own facts. Medicare per capita spending growth has been slower than growth in per capita private insurance premiums (per capita growth in spending for socialized VA system has been slowest of all ). The confusion stems from Medicare spending showing up on the Federal budget, while private healthcare spending does not. This leads to politicians to embrace pennywise, pound foolish cut federal spending that do nothing to reduce National Health Expenditures (NHE). If reducing NHE-- or, umm, human suffering-- was Paul Ryan's goal, what would he be proposing? To quote the Congressional Budget Office:

"(Senator Paul Wellstone’s single payer bill) would raise national health expenditures above baseline by 4.8 percent in the first year after implementation. However, in subsequent years, improved cost containment and the slower growth in spending associated with the new system would reduce the gap between expenditures in the new system and the baseline. By year five (and in subsequent years) the new system would cost less than baseline."
http://www.pnhp.org/facts/single_payer_system_cost.php

Posted by: beowulf_ | December 19, 2010 8:58 PM | Report abuse

Simply put, Collapse of America!
 
1. Auto insurance mandate !

Under historical interpretations of the Constitution, Congress can dictate the economic activity of citizens so long as that activity will have profound, large-scale effects on the national economy.

2. Simply put, Collapse of America!

** Inaction cost, $9trillion over the next decade, ((Some of CBO analysis : While the costs of the financial bailouts and economic stimulus bills are staggering, they are only a fraction of the coming costs from Social Security, Medicare, and Medicaid. Over the next decade, the Congressional Budget Office (CBO) projects that each year Medicaid will expand by 7 percent, Medicare by 6 percent, and Social Security by 5 percent. These programs face a 75-year shortfall of $43 trillion--60 times greater than the gross cost of the $700 billion TARP financial bailout)).

Among the thirty-three industrialized countries in the world, only America has no universal health care. Why do all the leading countries require participation in a universal plan? Because every other country understands that health care is not only a basic right, it is also a necessity, a sane policy protecting the country from plagues and epidemics but also from bankruptcy by providing modern and uniform health care for its people.

Posted by: hsr06011 | December 19, 2010 9:28 PM | Report abuse

@brickcha
"But that has nothing to do with who pays for your health insurance: you, your boss, or the government. The third-party-payer problem is inherent to insurance itself. It can be handled by having sufficient co-pays, in particular ones that are percent-based rather than a flat dollar fee. Many nation's with universal coverage do exactly this: fairly substantial percent-based co-pays, along with some sort of out-of-pocket maximum to ensure that no one goes broke due to a particularly bad disease."

I know this post will never be read, but oh well.

Anyway, our 'health system' really consists of two health systems: a pooled market (employer sponsored plans, medicare, medicaid, veterans, etc.) and an individual market. The individual market is broken because of adverse selection issues, which require either a mandate or a pool (really, the same thing) to overcome.

The other market (pooled), is broken for a different reason: cost shielding of consumers. This pooled market dominates health spending in America, and as a result, this cost shielding problem is the largest problem in our overall healthcare system. This third-party problem is not necessarily inherent if I shop around for my own coverage; however, if we broke apart the pools to end it, then the adverse selection problem would take off.

Posted by: eggnogfool | December 20, 2010 10:05 AM | Report abuse

Me: "We have to cap Medicare expenditures. We are over-consuming health care products that are over-priced. To all of you claiming Medicare is cheaper, you are clearly wrong..."

Beowulf: "You are entitled to your own opinions, but you are not entitled to your own facts. Medicare per capita spending growth has been slower than growth in per capita private insurance premiums (per capita growth in spending for socialized VA system has been slowest of all )."

Me: Total expenditures for HSA driven plans, even government run ones, has proven to be lower than expenditures on fixed co-pay driven plans. Give people an incentive to save money, and they will take it.

Here's how Medicare controls costs:
althblog.ncpa.org/how-medicare-spends-1-billion-a-year-on-a-device-that-kills-cancer

Posted by: staticvars | December 20, 2010 3:32 PM | Report abuse

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