‘The Ryan Plan’ Trumps Obamacare

by Lyman Stone
Columnist

When I wrote last week’s column, I had no idea that Rep. Paul Ryan, R-Wis., was reading my mind. He could hardly have offered a better solution to the long-term problem of crippling entitlement costs. Finally, someone has made a proposal to do something about our $70 trillion in unfunded Medicare liabilities.

Ryan has proposed a structural change as well as a funding change to Medicare that will enable our nation to maintain a social safety net without the evisceration of our credit rating.

The “Ryan Plan” proposes that Medicare as we know it be completely scrapped. No more unilateral provision of secondary-market health care. All health care will be bought in the same market at competitive rates. There will be no guaranteed market for health care providers anymore. They will have to compete for both Medicare recipients and others.

Instead of the current Medicare setup, Medicare recipients would receive a health care stipend covering the first $15,000 of their plan. This would reduce Medicare liabilities by $4 trillion over the next 10 years.

Moreover, as this plan is not as heavily indexed as Medicare, the government would no longer be bound to pay whatever the health care industry charges. Indeed, the government would just stop working with the health care industry and simply provide direct vouchers to Medicare recipients.

Simplifying the bureaucracy of health care, providing consumer choice to Medicare providers, and putting Medicare recipients back into the market for health care — this will drive down health care costs. Obamacare will not. Ryan’s plan will reduce the deficit drastically, will not unduly injure the elderly (those over 55 will keep their current Medicare plans), and will set up our entitlement system to weather the next few decades.

The crucial thing to recognize is that the Democratic “criticism” of the Ryan plan is true. It will reduce coverage, and it will not keep pace with inflation as much as the current system. That is true. That is also the whole point.

Between 2002 and 2016, Medicare will double in cost, according to the Wall Street Journal. Incomes will not. The economic activity of the United States will not. We cannot afford to have Medicare outlays keep up with inflation. We need to find ways to cut costs.

Expanding the market and encouraging health care consumers to be conscientious of costs will lead to increased efficiency, better quality of care and lower costs.

Continuing to encourage inefficient, expensive and unaffordable bureaucratic systems like Medicare will not lead to a 21st-century health care system. Implementing a market with effective price-signaling, consumer freedom and competitive incentives will.

As the only reform plan on the table, and also as a darn good plan, Congress should adopt Rep. Ryan’s proposal. It won’t be. Democrats don’t want this problem fixed, and most Republicans are cowardly.

Even so, the plan will stimulate substantive discussion concerning Medicare reform. If Democrats can’t find a proposal to reform health care and cut costs, they may find the electorate unhappy in 2012.

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