A health-care plan Ryan, Obama, and Romney should all get behind
With health-care costs skyrocketing, the US faces a critical fork in the road. Medicare for all isn't viable, but neither is Paul Ryan's privatized system. Thankfully, we don't have to choose. Having both a private and a public plan isn't just political compromise. It's what's best for Americans.
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On the other hand, in a public system, innovation and efficiency might be compromised. Politics would also almost surely play a role in establishing how providers are reimbursed and benefits designed. For example, in the Affordable Care Act, evidence about what works to improve health cannot be used to set reimbursement rates for providers, and the powers Congress has given to the independent board whose job is to help control costs are strictly limited.Skip to next paragraph
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But what really kills the idea of Medicare for all is the fact that government budgets for health care would more than double and taxes would have to rise to European levels or beyond to pay for the expanded public system. Can anyone imagine Congress – even a Democratic Congress – voting to roughly double the size of the federal government and the taxes needed to pay for it?
Where Paul Ryan's 'private' plan falls short
One alternative is to move Medicare, which is essentially a single-payer public system, to look more like the private system used by most working-age Americans. Why should only older Americans benefit from a guarantee to health care at government expense?
Republican House Budget Chair Paul Ryan’s proposal to replace Medicare with “premium support” would, in principle, shift the elderly from a public system into an essentially private system similar to the one other Americans participate in through their employers. Under his plan, starting in 2021, newly eligible seniors would receive a subsidy to buy a private insurance plan on a regulated market exchange. The amount of the subsidy would be adjusted for the individual’s age, health status, and income. So far, so good.
The problem is that, under his plan, subsidies would grow only as fast as the rate of inflation in the economy as a whole – a rate that is much slower than the rate at which health care costs have been growing. As many critics have noted, the result is that seniors would have to pay far more out of pocket than they do now.
However, with some modifications – such as a more reasonable rate of growth for the subsidies and a continued public option similar to traditional Medicare – his plan could work quite well.
The promise of a hybrid health-care plan
This kind of hybrid plan was featured in the Rivlin-Domenici Commission report last fall. Insurance companies would compete to provide the best coverage possible at the lowest cost. They would have every incentive to favor providers who innovate in the delivery of care and end up providing better care at lower cost. Consumers would also have more choices than under a single payer alternative.