Once more with feeling: The GOP's "Ryan Plan" RAISES total health care spending for seniors

Peter Orszag, former White House budget director:

Under (the Ryan/GOP budget) proposal, starting in 2022, the government would issue new Medicare beneficiaries a payment that they could use to purchase private insurance. These payments would increase in line with the consumer price index but not with faster-rising health costs. The slower increase in payments would generate large savings (and less risk) for the federal government; indeed, this would be the single most important driver of savings from the Ryan budget plan as a whole.

As the government paid relatively less for Medicare, beneficiaries would bear an increasing share of the cost of their care. It is no great accomplishment, however, merely to shift health expenditures from the federal government to consumers, without doing anything to decrease them in total.

The CBO’s analysis of the Ryan plan confirms that federal expenditures would be reduced, by a lot. By 2030, payments for a typical beneficiary would be more than 20 percent lower than current projections, according to the report, and the beneficiary’s personal costs would increase.

So far, nothing unexpected. On the critical metric of whether the Ryan plan would reduce total health-care costs, though, the CBO conclusion is shocking: The plan would not only fail to decrease health-care costs per beneficiary, it would increase them –- by an astonishingly large amount that grows over time. By 2030, health spending on the typical beneficiary would be more than 40 percent higher under the Ryan plan than under existing Medicare, according to the CBO report.

Health-care costs would not be reduced on the backs of seniors; they would be raised on the backs of seniors.

How could this possibly be, when the point of reform is to reduce costs? The CBO points to two factors: Private plans have higher administrative costs than the federal Medicare program, and less negotiating leverage with providers.

Everything in life is relative. The CBO’s analysis of the health-reform act that was passed last year was, well, lukewarm on its potential to reduce costs. Compared with the Ryan plan, though, the health reform act comes across as an efficient cost-containment machine. 

Via Kevin Drum