Economics, Entitlements

Key Obamacare architect endorses Paul Ryan’s Medicare reform plan

First private equity and now the Ryan Plan. Will MIT economist Jon Gruber have to do a Cory Booker-like retraction (via the WaPo):

One health policy idea he thinks could work, albeit in the future, would be a premium support model akin to Ryan-Wyden. Gruber imagines a future health-care system with something like “cradle to grave exchanges,” where all health insurance plans are purchased on a government-regulated marketplace.

“I think, ultimately, something like Ryan-Wyden is a good place to be, but not yet,” Gruber said. “In the long run, it’s a very good model. But right now we’re not good enough at risk adjustment and we have a plan that is working for seniors. Why rip that up and start over?”

But why wait? It seems to me that the endgame Gruber is describing is something like Switzerland’s healthcare system. The Swiss, no matter what their age or income level, buy health insurance from private insurers, with the poor getting purchase subsidies. Companies have to insure everyone. Here is consumer-driven healthcare advocate Regina Herzlinger:

This consumer-driven, universal coverage system provides excellent health care for the sick, tops the world in consumer satisfaction, and costs 40 percent less, as a percentage of GDP, than the system in the US. The Swiss could spend even less by choosing cheaper, high deductible health insurance policies, but they have opted against doing so. Swiss consumers reward insurers that offer the best value for the money. These competitive pressures cause Swiss insurers to spend only about 5 percent on general and administrative expenses, as compared to 12-15 percent in the US. And unlike Medicare, the private Swiss firms must function without incurring massive unfunded liabilities. Competition has also pushed Swiss providers to be more efficient than those in the US. Yet they remain well-compensated.

There is nothing radical or untried about premium support, and it should replace both Medicare and Medicaid. Only politicians looking to frighten voters pretends otherwise.

3 thoughts on “Key Obamacare architect endorses Paul Ryan’s Medicare reform plan

  1. By visiting “Penny Health” you can start lowering your medical insurance premium and help you get better coverage.

  2. So the Swiss support an employer mandate. Why is the AEI now in favor of that? That is nothing but an act of tyrrany no different from the individual mandate.

  3. Policymakers are increasingly looking toward the federal government’s entitlement programs as a means of cutting deficits and returning spending to sustainable levels. To that end, substantial reform of the Medicare program is under consideration, especially when lawmakers take into account the imminent enrollment of retiring baby boomers.
    To this end, Representative Paul Ryan (R-Wisc.) and Senator Ron Wyden (D-Ore.) have proposed an innovative plan that would more or less supplant the traditional fee-for-service system of Medicare in favor of a subsidy program.
    The Ryan-Wyden plan would eliminate current Medicare almost entirely, allowing continued access only for a small number of participants. Additionally, the plan has set its growth formula at the rate of gross domestic product growth plus one. It is believed that this growth rate will allow for government savings while providing ample support for retirees so that their premiums do not become unaffordable.
    Reports vary on how the plan will affect government spending in the area, but most conclude that it will create significant savings (
    The CBO estimated that the 2011 Ryan proposal would probably reduce federal spending by 2030 by 8 to 11%.
    A more recent analysis by Roger Feldman suggests that a fully implemented competitive bidding system would reduce federal spending on Medicare by about 5.6% through 2020.
    Additionally, the financial effects for program participants are largely mild:
    43% of beneficiaries would see no change in their costs.
    22% would face higher payments of less than $40 per month.
    Only about 1% would experience higher costs as much as $352 per month.

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