The Congressional Budget Office (CBO) estimate of Rep. Paul Ryan’s (R-WI) recently unveiled “Path to Prosperity” demonstrates the difficulty of placing programs like Medicare and Medicaid on the right “path” without taking significant steps to slow the growth of health care spending by going after the and inefficiencies in the system. Ryan’s only discernible method of cost control is the free market, which, in effect, shifts spending from the federal government to the beneficiary. From the CBO’s analysis of Ryan’s proposal:
Under the proposal, most elderly people would pay more for their health care than they would pay under the current Medicare system. For a typical 65-year-old with average health spending enrolled in a plan with benefits similar to those currently provided by Medicare, CBO estimated the beneficiary’s spending on premiums and out-of-pocket expenditures as a share of a benchmark: what total health care spending would be if a private insurer covered the beneficiary. By 2030, the beneficiary’s spending would be 68 percent of that benchmark under the proposal, 25 percent under the extended-baseline scenario, and 30 percent under the alternative fiscal scenario. … CBO estimates that average spending in traditional Medicare will be 89 percent of (that is, 11 percent less than) the spending that would occur if that same package of benefits was purchased from a private insurer.
As the CBO explains, Ryan dumps seniors into a Medicare exchange with private plans that have higher costs than traditional Medicare — both because of higher “administrative costs (including profits) and payment rates to providers” — and provides those insurers with a voucher (excuse me, “premium support”) from the federal government that does not not keep up with health care spending:
In 2030, the government’s contribution under the proposal would be smaller than that under either of CBO’s long-term scenarios because the premium support pay- ment would grow at a slower rate than is projected for Medicare spending under either scenario. In that year, under the proposal, the government’s contribution would cover 32 percent of a typical 65-year-old’s total health care spending…When expressed as a percentage of the benchmark [total private health care spending to cover a beneficiary], the beneficiary’s share in 2030 would be 68 percent under the proposal, 25 percent under the extended-baseline scenario, and 30 percent under the alternative fiscal scenario.
At the same time, Ryan is doing nothing to make health care itself more efficient. In fact, he’s repealing some of the Affordable Care Act’s delivery reform demonstration projects (that could yield potential savings) and cost control mechanisms like the Independent Payment Advisory Board. Health care costs, in turn, go nowhere but up.