Rep. Paul Ryan (R-WI) has proposed a Medicare reform plan that is being contrasted with the approach adopted by the Patient Protection and Affordable Care Act (PPACA), what some people call ObamaCare. The plan is the centerpiece of the House Republican budget; it's attracting a lot of criticism from the Obama administration and from left-of-center commentators; and even Republicans seem to be backing away from it.
Both ObamaCare and Paul Ryan propose very large cuts in Medicare spending — cuts that will continue indefinitely into the future. As I said in a previous post, neither plan has a serious proposal to slow the rate of growth of health care spending overall. So under both plans, the amount that the federal government will spend on care for the elderly and the disabled will fall further and further behind what everybody else is spending. (See the spending charts here.)
Looking indefinitely into the future, the approach of ObamaCare is to continue to squeeze the providers. Fees paid to doctors and hospitals would grow at roughly half the rate of growth of fees paid by BlueCross and everyone else. Ironically, for the next decade Ryan's approach pretty well follows the ObamaCare path. But from that point on, it diverges and allows doctor and hospital fees to be determined in the marketplace. Ryan would limit instead the amount Medicare pays to private insurers, who would operate much like Medicare Advantage plans operate today.
Of the two approaches, Ryan's is definitely better — once you get past the first ten years. Obama's approach relies completely on something that has already been tried and failed: price controls. Ryan (at least eventually) would allow market forces to have greater sway. Under Ryan’s approach, doctors and hospitals would be free to offer different bundles of services that meet needs that are now going unmet. For example, they could offer primary care combined with telephone and email consultations, same day appointments, entrées to specialists, etc, much as “concierge” doctors are offering today. Under the Obama approach, however, everyone would be stuck with the basic dysfunctional system we currently have — with Washington dictating what services Medicare will pay for and how much.
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