The Ryan Budget is Worse Than You Think

The important discussion that needs to happen with Medicare and health care spending for that matter is how we can get better care for less money.  I know that sounds like a bit of an oxymoron, but that’s what they do everywhere else.  Republicans call this “rationed care” because that language sounds a lot scarier than cost control or effective care as I would call it.  We shouldn’t be spending more money for the same care, that doesn’t make any sense, but that is what we’ve been doing since the 1960’s.  No, what we need are real cost controls that can stop the growth of spending on health care while not diminishing the results that we see.

The major problem that I have with Paul Ryan’s plan is philosophical.  I don’t believe that our current system of health care delivery works as well as it should and that’s the big problem with it.  It’s not that our health care is bad or somehow not up to par with that of other developed nations, it’s that we pay such a disproportionately larger amount toward health care costs than any other nation on Earth and that it is stunting the growth of our economy and if not properly dealt with, will bankrupt our nation.  The big question thus becomes: okay, what can we do to control costs, ensure fairness in the health code, provide universal coverage to all who want it and still lead the way in innovation?

Paul Ryan put out a plan that deals with how much the government is willing to spend on health care costs and that’s good.  But, that’s not what we need.  We need a plan that creates effective exchanges so that people who don’t have health coverage can get it cheaply and those who already have coverage can get better coverage than they have.  There is a small percentage of Americans who believe that their health care is awesome.  Most of these people are on Medicare or Medicaid, but those who aren’t and want to keep their health care coverage as it is can do so, I have no problem with that and the government has no problem with that.

But for those who want to have decent medical coverage and not have to sell a major asset to get that coverage or pay that cost when they get sick, we need to look at options that provide coverage at a low cost.  The simple part of this argument is two fold.  One, we shouldn’t spend more on health care than we already do.  Second, we need to look at ways to cut down costs while maintaining a high level of service that Americans have come to expect out of their health care providers and their government.  As it is, health coverage is too expensive.  If you believe otherwise I’d invite you to take a look at this graph:

We spend more money per person on health insurance – by far than any country on the face of the Earth.  We’re three thousand dollars per person higher than the next country on the list: Switzerland.  They spend a little more than $4000 per person on health coverage whereas we spend more than $7000 per person.  What’s worse is that the Euro is worth more than the dollar.  So, while this graph is adjusted for purchasing power in 2008, that was before the recession.  Now our purchasing power is greatly diminished.  What’s worse is that prices continue to climb our obligation to Medicare beneficiaries continues to increase because of the retirement of baby-boomers.

The above graph does a couple of things.  One, it shows spending in comparison to revenue.  Note how inconsistent that line has been over the last forty years.  It is likely that over the next fifty to sixty years that revenue will continue to be increasingly unpredictable and thus our long term expenses (primarily medicare, medicaid, and social security) will follow a similar pattern.

Second, this graph illustrates where revenues will be in relation to expenses.  The baseline stays relatively consistent because it doesn’t account for political anomalies.  When you look at the 2000’s, the big thing that should jump out at you is where revenues dipped.  Where revenues dipped is where the real estate market tanked.  Revenues increased after 2004 because there was less unrest in our political system.  When revenues spiked again in 2009, they did so because we were starting to recover money that we lost with the Bush tax cuts.  However, after the 2010 tax deal there is another dip in revenues.

The graph makes the assumption that we allow all of the Bush tax cuts to expire in 2012.  If that happens we’re in okay shape over the long term to deal with our expenses.  If not, we’re going to have a lot of trouble keeping some pretty basic promises.  In short, Americans have to choose between tax cuts and overall fiscal health.  My bet is that they overwhelmingly choose tax cuts because that’s what creates debt crises and that’s how politicians get re-elected.

The third observation that should be made from this graph is how social security payouts go up for about twenty years then go down to roughly where they are now.  This is for intents and purposes, a bubble.  It’s a bubble just like the one you’d find in a business cycle.  It should be treated as such.  Speaking before the PGPF on Wednesday, Fmr. President Clinton talked about the dip and noted that we should account for this in our discussions on how to deal with short-term health costs.  That’s a really good point, as is the idea that it’s unlikely that Medicare will grow at such an exhorbanant rate after the baby boomer boon.

The main problem that I have with the Ryan plan isn’t so much in what it does, it’s with what it doesn’t do.  For instance, the Ryan plan doesn’t call for better care it just calls for more money to be spent on care.  This has shown time after time to grow costs not cut them.  On Medicare alone, the Ryan plan would double the costs to seniors.  The worst part of this whole proposal is that Ryan wants the government to cap how much it will pay out for Medicare.  That’s a great idea if care is getting cheaper, it’s a terrible idea if care is getting more expensive.  All of the privatization models have shown that health care costs go up as a result of privatization because the private, for-profit health care industry can, like any other business, charge more for it’s services.

The important take away from this graph is that the amount of money government is willing to pay out for your health care actually goes down, whereas actual health care costs continue to go up.  The idea behind most systems that seek to address costs in relation to care is that we sacrifice costs and care equally.  The idea behind the Ryan plan is that we would sacrifice neither because the only important part of this equation is the percentage that the government pays.  In the Ryan plan the costs to the consumer are not addressed.  Rather, they are looked at as collateral damage.  The fact that his plan would cost seniors twice as much is merely the cost of doing business in his view.  That outlook, that principled division that seeks to simply cut off the recognizable symptoms of the problem as opposed to dealing with it’s causes is the main reason that I am diametrically opposed to the Ryan plan.


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