But nobody is proposing that the government deny you the right to have whatever medical care you want at your own expense. We’re only talking about what medical care will be paid for by the government.
I wish that Paul were correct, but I am not convinced that he is. Chills went down my spine a few days ago when I read the following proposal from the Center for American Progress, a think tank with strong ties to the Democratic party:
Thus we also include a failsafe mechanism that would ensure significant savings. Our failsafe would be triggered if, starting in 2020, total economywide health care expenditures grow at a rate faster than the economy. Should that happen, we would empower the IPAB [the panel of experts set up by President Obama's health care law] to extend successful reforms in Medicare and other public programs to insurance plans offered in the health care exchanges and then potentially to all health care plans, such that the target is met. This will ensure that costs are constrained across the health care sector, preventing cost-shifting and maintaining access for all.*
That is, under the likely scenario that healthcare spending keeps rising faster than GDP, the Center for American Progress would give government the power to prohibit people from buying expensive health plans with their own money. That is not my idea of progress.
—– *Source: Page 43-44 of this document. I put the crucial phrase in bold.
I have been struck at the heated rhetoric surrounding Paul Ryan’s Medicare reform proposal. One thing is not often pointed out: Ryan’s proposed “premium support” structure is in some ways similar to the plan put in place under President Obama’s healthcare reform law. In both cases, an individual would shop among competing private insurers, on an exchange overseen by the government regulators. In both cases, the government would provide financial support for the ”needy” (low-income households in the case of Obamacare, the elderly in the case of Ryancare).
Why don’t we see this parallel pointed out more often? The left wants to demonize Ryan, and the right wants to demonize Obama. Pointing out the similarities of their plans might make each of them seem, well, reasonable. The overwrought politics of health care makes it hard to recognize common ground.
By the way, the esteemed health economist Alain Enthoven had a column on the topic of Medicare reform in yesterday’s Wall Street Journal that is well worth reading.
Keith Hennessey is the most astute observer of the inside baseball of Washington economic policy that I know. Here is his bottom line on President Obama’s speech from yesterday:
The President’s proposal could be the opening bid in a negotiation with Congressional Republicans. When you combine this substance with the President’s aggressive partisan attacks and framing of the Ryan budget, however, it’s hard to see how this leads to a big fiscal deal this year or next….the chances of a long-term grand bargain in the next two years just plummeted from an already low starting point.
I am afraid that Keith might be right.
President Obama certainly has the ability to disagree without being disagreeable. But yesterday he decided, I presume quite consciously, that demonizing the opposition was the right strategy for him. Perhaps this decision suggests that the speech was written to be the beginning of a heated reelection campaign rather than an invitation for negotiation and compromise. I hope this interpretation is wrong. If it is right, then my hypothetical 2026 speech may have be given a few years earlier than planned.
I must applaud the President for today’s speech in which he finally and at long last takes the long-term budget imbalance seriously. There was a surprising amount of finger pointing for a person who claims to be transcending partisanship. That is especially true in light of the fact that President Obama’s proposed policies, as put forth in his own annual budgets, have never shown how he would put the economy on a path with a declining debt-GDP ratio, even after the economy fully recovers from the recession.
But let’s put that inconvenient truth aside for the moment. I am delighted that these fiscal issues are now squarely on the national agenda. If only someone could lock President Obama and Congressman Ryan in a seedy hotel room, turn off their access to cable, give them an endless supply of coffee and cold sandwiches, and not let them leave until they come to agreement, the nation could take a large step forward.
What I found most interesting is the contrast between the President’s vision for Medicare and Congressman Ryan’s. There are two major issues:
How quickly should Medicare spending rise?
What happens if health care costs rise faster than the limit on spending?
As to the first question, the President proposes to set “a new target of Medicare growth per beneficiary growing with GDP per capita plus 0.5 percent.”* By contrast, Ryan proposes growth at the rate of inflation. The difference is probably about 2 percent per year.
As to the second question, the President gives authority to the “Independent Payment Advisory Board (IPAB).” By contrast, Ryan proposes that seniors use their “premium support” to shop among competing private insurers.
Here we see the fundamental differences between the parties: One believes in spending more and allocating that spending via central planning. The other believes in spending less and harnessing individual choice and competition to ensure that the money is spent wisely.
To be sure, there is room for compromise, especially on the first question, but the issues are not just numerical. The parties start with fundamentally different visions of markets and government.
—- *The quotation is from an administration fact sheet I was emailed.
As I have noted in a previous post, the sixth edition of my principles text has recently been released. Finding things to update was easy. When the last edition was sent to the printer, President Obama had not yet clinched the Democratic nomination! Just think of everything that has happened in the economy and economic policy since then.
If you wonder more specifically what you will find in the new edition that was not in the last one, here is a list.
Chapter 1 New Case Study: The Incentive Effects of Gasoline Prices New paragraph on the recent downturn added under Principle 10 Two new problems
Chapter 2 New In the News box: The Economics of President Obama Table 1 updated and substantially expanded New Cartoon in Appendix
Chapter 3 Tiger Woods changed to Tom Brady in in-text example. New Question for Review New problem
Chapter 4 New article for the In the News box: Price Increases After Disasters
Chapter 5 New FYI box: A Few Elasticities from the Real World
Chapter 6 New In the News box: Should Unpaid Internships Be Allowed?
Chapter 7 New problem
Chapter 8 New In the News box: New Research on Taxation
Chapter 9 New In the News box: Trade Skirmishes, about U.S. tariffs on Chinese tires and the retaliatory response New problem
Chapter 10 New In the New box: The Externalities of Country Living New In the News box: Cap and Trade New problem
Chapter 11 Introduce new term: Club goods. New In the News box: The Case for Toll Roads Two new problems
Chapter 12 New In the News box: The Temporarily Disappearing Estate Tax New In the News box: The Value Added Tax
Chapter 13 New problem
Chapter 14 New problem
Chapter 15 New In the News box: President Obama’s Antitrust Policy Two new problems
Chapter 16 Two new problems
Chapter 17 New In the News box: The Next Big Antitrust Target? New problem
Chapter 18 New problem
Chapter 20 New In the News box: What’s Wrong with the Poverty Rate? New In the News box: The Root Cause of a Financial Crisis New problem
Chapter 21 New In the News box: Backward-sloping Labor Supply in Kiribati Three new problems
Chapter 22 New In the News box: Arrow’s Problem in Practice New In the News box: Sin Taxes
Chapter 23 New In the News box: Beyond Gross Domestic Product New problem
Chapter 24 New In the News box: Shopping for the CPI New problem
Chapter 25 New In the News box: One Economist’s Answer (to what makes a nation rich)
Chapter 26 New FYI box: Financial Crises Two new problems
Chapter 27 New In the News box: A Cartoonist’s Guide to Stock Picking New In the News box: Is the Efficient Markets Hypothesis Kaput? Two new problems
Chapter 28 New In the News box: The Rise of Long-term Unemployment New In the News box: How Much Do the Unemployed Respond to Incentives?
Chapter 29 New In the News box: Mackereleconomics New Section on Bank Capital, Leverage, and the Financial Crisis of 2008-2009 Much revised section on the tools of monetary policy. It now includes a discussion of the Term Auction Facility and the Fed’s payment of interest on reserves. New In the News box: Bernanke on the Fed’s Toolbox New Question for Review New problem
Chapter 30 New FYI box: Hyperinflation in Zimbabwe New section: Inflation is Bad, But Deflation May Be Worse New In the News box: Inflationary Threats
Chapter 31 Box on Euro updated to discuss problems in Greece New problem
Chapter 32 New In the News box: Alternative Exchange-Rate Regimes
Chapter 33 New In the News box: The Social Influences of Economic Downturns New Case Study: The Recession of 2008-2009 New In the News box: Modern Parallels to the Great Depression
Chapter 34 New FYI box on the Zero Lower Bound New In the News box: How Large is the Fiscal Policy Multiplier?
Chapter 35 New In the News box: Do We Need More Inflation?
Chapter 36 New (sixth) debate added on spending hikes vs tax cuts to fight recessions New FYI box on inflation targeting New In the News box: What is the Optimal Inflation Rate? New In the News box: Dealing with Debt and Deficits
