Rep. Ryan's Budget

Rep. Ryan's Budget by Michael Sean Winters

This budget will score points for Ryan in GOP land, but it is as dead in the Senate as Obama's budget was in the House. Unless the GOP can pick up 13 Senate seats in 2012, with 26 possible, it can't dictate terms. As it is, they may lose seats due to Tea Party challenges.

It is a bit irresponsible for Ryan to hang his hat on repealing health care reform, since doing so undos valuable fixes to Medicare that put it on the road to solvency. His major objection appears to be that the funding fixes are one big step toward VAT funding, or something similar like a Business Receipts Tax as proposed by Lawrence B. Lindsey. While the entire fiscal establishment is looking at such a broad based tax as a solution, Ryan is going the other way. This is a great way to get moderate Republicans and Democrats to roll him on every issue.

It is a bit early to worry about Medicare and Medicaid in the long term, considering that Ryan is correct in the need for a major overhaul in the Affordable Care Act. This is not the case because mandates are unconstitutional or even unpopular, although the latter enters into it. It is because they are inadequate and are not likely to be raised in the face of pre-existing condition reforms which may well cause people to drop insurance coverage until they get sick. We are not sure how consumers will react, but if it becomes clear that they are economically rational, the health insurance industry's stock price will tank before most policies are cancelled, leading to a bailout by the Federal government and a defacto single-payer system funded by a broad based payroll or consumption tax. The other alternative is to enact a public option as part of deal to drop patient protections, with funding done in the same way.

When funding the next round of reform is settled, funding the shortfalls in Medicare and Medicaid will likely be settled as well.

We can't do this with budget cuts, even if they are masked in premium support schemes. The annual doc fix shows that Medicare provider rates will never be cut to the extent required by law (Ryan is right about that conclusion), so the only alternative really is enhanced funding. Bifurcating Medicare won't fly either, since it would likely be more expensive to fund parallel plans than can be saved in cutting benefits for younger retirees. Once that becomes clear, the GOP loses its base. Indeed, recent analysis shows that the only way that the Ryan Medicare plan might work is under the Exchange Ruberic of the ACA. Cut out the exchanges and seniors go without.

As for giving more power to the states on Medicaid, one need only look how they are coping with higher costs now to see that this is a bad idea. Provider cuts look good in the short term, but they will eventually put more people in the ER for primary care. While in the ACA transition period, that may get them coverage under federal health care reform, such a move is unsustainable in the long run. A more viable option for the states is to simply take a page from Reagan and federalize Medicaid entirely in exchange for dropping the deductibility of state income, sales and property taxes. As long as the feds develop a sound funding source for health care as a whole as part of comprehensive tax reform (which eliminates the requirement that most people file taxes at all), it is a win-win for everyone.