When cost control really isn’t

In the past, I’ve critiqued Rep. Ryan’s concept of Medicare cost control as so unrealistic it will actually lead to cost increases. My reasoning — and I’m not unique in thinking this way (see Krugman and Cowen, for example) — is that holding Medicare subsidies to private plans to GDP + 1%, which was what the Ryan-Rivlin plan recommended, would never be permitted politically. Beneficiary, provider, and insurance advocacy groups would demand increases, and they’d get them, just as they have in Medicare Advantage.

Well, if promising increases in voucher levels no greater than GDP + 1% won’t work, will an even lower rate of increase fly? Certainly not, but who is proposing something lower than GDP + 1%? Turns out, Rep. Ryan is. Ezra Klein has the explanation:

Ryan’s actual budget unexpectedly holds both Medicare and Medicaid to inflation, not to GDP+1%. So let’s say that in 2024, inflation was 2 percent, productivity growth was 2 percent, and health-care costs grew at 6 percent. Under Ryan-Rivlin, Medicare and Medicaid would grow at 5 percent [= GDP + 1%] — a bit less than health-care costs in general, but not that much less. Under Ryan, Medicare and Medicaid would grow at 2 percent [= the inflation rate] — beneficiaries would have to make up the difference.

Naturally, given what I’ve already said, I agree with Klein that this is totally unrealistic, more unrealistic than any other serious Medicare reform plan I’ve seen, and certainly less realistic than what Congress passed last year.

We have a health care cost problem in this country. We need to do something serious about it. Proposing something so draconian as to be obviously politically unsustainable may be a conversation starter. But the danger is that it is so divorced from the realm of the possible that the conversation ends rather quickly. Perhaps we should start talking about something that might actually work.

 

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