Obama, Ryan and Healthcare

I heard Bill Maher say last week that Paul Ryan’s budget plan, being praised as brave and bold by those on the right, proposes no cuts to the military. That sounds neither brave nor bold. Actually it seems sort of ridiculous. There are other issues. Ryan proposes deep cuts to tax rates, made up for reduction or elimination of deductions, but then does not detail any of these cuts. Ryan proposes deep cuts to Healthcare spending, but it has been suggested that Medicare—critical to seniors, a potent Republican voting block- is largely unscathed. So I wanted to see what all the hubbub was about.  

The “Draconian” cuts Ryan proposes for Medicare aren’t all that much different than Obama’s plan. Medicaid takes the real hit with the Ryan plan and that is where seniors and the poor will be hurt. Over the next ten years Ryan’s Medicare costs estimates are very close to the President’s, albeit with radically different structural approaches to the critical program which provides healthcare to the elderly. I have to be honest Medicare is something I am starting to be concerned with. Ryan’s plan for Medicare overhaul would affect those 55 and younger, leaving me out of the reach of the Ryan plan if it was to come to be. Nonetheless, I wondered why if Obama and Ryan propose near the same rate of growth in Medicare is the Ryan plan considered “Social Darwinism” as the Democrats claim, while the President’s proposals are referred to in the preamble to Ryan’s Plan, Path to Prosperity, as “[Doubling] down on [the] health care law, allowing government bureaucrats to interfere with patient care.”

It got me to thinking how easily the liberals and conservatives are swayed by the rhetoric of the political parties and how little ultimately we know about the competing proposals.

The control of government spending on healthcare will and MUST be an essential element towards any long term plan to control government spending and get control of long term deficit. Considering the results America gets for its out of control healthcare spending it should also be a goal to improve healthcare.  In dozens of measurable categories that US ranks at or near the bottom of all industrialized nations in the health care standards. Perhaps most critically, while 17% of all Americans are uninsured—the highest of any industrialized nation-- the US spends a greater percentage of its GDP—16%. The US spends more and covers less people than another industrialized nation leaving tens of millions out of preventive care. While much is made of the waiting times in some countries with Government run Healthcare programs, the real issue is the urgency of the medical conditions when visits are made. The uninsured do not get nor generally seek preventative stabilizing healthcare.  

In four short years The US is estimated to spend nearly 20% of GDP on healthcare. This is not sustainable. In 1984 the US spent about 10% of GDP on healthcare, about the same as most other industrialized nations spend now. The astronomical increases are a result of expensive technological advances in many cases spurred on by the large profits available with life-saving innovation. The aging of the American population is another major factor. Old people consume far more healthcare than the young and spend far more doing it. In addition America is the worldwide leader in waste and inefficiency in its healthcare system with some estimates running as high as 30% of all expenditures being needless.  Waste runs the gamut from corruption to the end ordering of unnecessary tests. Profit incentives takers at every step in the process are also a major contributing factor to the cost of care, something single payer government run programs available in other industrialized nations do not have.

The core of Ryan’s Medicare proposal is to replace the program with a voucher system by which the seniors would purchase their own insurance with government support, the thinking being that people will be more cautious of dollars spent when they are paying directly for their healthcare. He would also slowly raise the eligibility to age to 67, an inevitable step which will eventually HAVE to be taken.  Ryan’s proposal caps the growth rate on government spending for medical care for seniors at gross domestic product plus 0.5 percentage points. Unless the government steps in the Ryan plan would mean de-facto government rationing of healthcare for the simple reason that if a limited pool of money is available, and if the demands are greater than the pool, ipso facto there will be limits on what health care can be provided. Obama suggests a 0.5% plus GDP target and built his budget accordingly, Ryan proposes a 0.5% plus GDP cap.

The Obama administration through its analysis believes that better long term preventative care will allow him to hit that 0.5% plus GDP target. The Ryan plan pushes seniors into the open market for coverage. He argues that insurance companies, competing against each other will find ways to reduce costs.  In addition to the supposedly hard cap on healthcare expenditures, the Ryan plan places a heavy premium, a theoretical bet if you will, on the free market to control costs. This aspect of the plan might make sense in theory, but in practice results are far from guaranteed. Ryan argues seniors-- much more familiar with the actual costs of their healthcare-- will chose to spend less, essentially self-rationing their own care. Reliance on self-rationing seems like a plausible, though somewhat Darwinian way to save money. With the system in place now, elderly Americans with limited means are already making decisions about what they can afford. The decision on whether to pay the rent or utility bill or getting all the required prescriptions filled is not an abstract for far too many Americans and this is where the multiple layers of profit incentive already cost lives. Ryan’s plan, depending on a method for cost savings with no practical record of success, seems to me at least to be overly hopeful at best, pure folly at worst. Based on what empirical evidence might Americans believe that insurance companies with even greater power and less regulation will find the motivation to save costs?

Our healthcare is largely driven by the free market now, and that has not controlled costs, or even provided very much more healthcare. Well, let me rephrase that: For those with means America has the best healthcare in the world.  So in that sense we do have “the best” healthcare, for some at least, but in addition to the uninsured the system has institutionalized a deeply troubling statistic: 25% of all healthcare dollars goes to care for 1% of all Americans. Disproportionately these costs fall to the elderly. The miracle of our science is that we can keep people alive for very much longer than in the past. The budgetary curse is that it costs a fortune to do that. That being said America for all it’s expense does not lead industrialized nations in life expectancy, not even close. Again and again we have to ask as a nation what are we getting or all we are paying?

As noted Obama’s Medicare plan is by measure of expense not that much different than Ryan’s. Obama’s spending goal of GDP growth, plus 0.5%, starts only in 2018, later than Ryan. But even so most of the real difference at least on the surface is philosophy and NOT actual expense. Right at the top, Obama would ensure that the healthcare available to seniors does not fall below its current level by committing the government to pick up the tab for growth beyond GDP plus 0.50%. Republicans have jumped on this fact to suggest that Obama does not really plan for healthcare cost containment at all. Although both plans have the GDP plus 0.50% cap, I doubt that either party really expects that to hold. 

While last year’s Ryan proposals suggested a complete elimination of Medicare to be replaced with a voucher system, bowing to political reality this year’s plan keep Medicare as an option for those seniors who want to do that, but only emphasizes the push for privatization. Ryan does not mandate it. Little reported is the fact that the "premium support" proposal is based on a model developed by Ryan and Sen. Ron Wyden (D-Ore.) This proposal has both merits and challenges. Stripped of demagoguery the fact of the matter is that private plans in some areas of the country are able to supply medical care for seniors at cost at or in some cases below that of the government run program. Though Democrats are constitutionally opposed to privatization of health care coverage, if costs savings can be had with private care, it seems to me at least those ought to be explored. This is where the size and the scope of the challenge become so hard to address, especially in a polarized demagogic political environment.

Based on the two competing Medicare proposals America’s real choice is between the competing views for how to contain costs. Obama’s primary goal is to spread the costs of healthcare over a far wider pool of people, insuring a far greater number of people earlier and longer in life. For all the talk about government run healthcare this is a huge bonanza for the insurance companies. As a price for that he demanded better more humane coverage including no caps for catastrophic illness, portability and so forth. Obama placed a far greater emphasis on preventive care, regular checkups, childhood vaccinations, birth control and so forth. All of these methods are well known to be far more cost effective and far more beneficial to the overall health than visits to the emergency room, heart valve replacement surgery and so forth.

In response to Ryan, Romney, and the Republicans, Obama argues that given the free market insurance companies will cherry pick the healthiest of clients, leaving the poor to whatever Government health program for the poor still exists—Medicaid. This is where the Ryan plan, endorsed by Romney, really requires scrutiny.

The Ryan plan has aggressive cost containment proposals for Medicaid, capping expenses at the general rate of inflation. According to the Center for Budget Policy and Priorities Ryan proposed cutting Medicaid by 34% through 2022. In addition his proposal would turn the entire Medicaid program back to the states through a block grant approach. While this would allow for greater experimentation, it almost certainly would mean a drop in the quality of care in some states with already poor track records in their commitment to the poor in general and the healthcare of the poor specifically. Does anyone really question that the states at the bottom in terms of investing in education, so willing to sentence their young people especially their poor young people to lives far removed from the American dream, would somehow miraculously decide to do the right thing with a block grant Medicaid program? What happens if the costs for private, public or some hybrid approach are eclipsed?

Every American knows Healthcare has far outpaced the regular rate of inflation. Medicaid is where the politics for Ryan and the Republicans get a bit sneaky, bordering on cynical. They propose a more market based Medicare for the future. However, the poor, the clients of the Medicaid program, are not constituents of the Republican Party. Since Ryan proposes a hard cap on government healthcare spending, his proposal would have the effect of either passing additional expense onto seniors, or forcing them into a Medicaid system in line for deep cuts. By definition a program with limited resources and expenses in excess of those resources will need to resort to rationing. This is where the Social Darwinism, layered with political cynicism, comes in to the picture. Ryan, expecting far more resistance to Medicare (senior’s healthcare) cuts than Medicaid (healthcare for the poor) crafted his proposal accordingly.  

But I still do not believe that Ryan’s healthcare plan mean that he wants to throw women and children into the streets.

I believe the plan that emphasizes low or no cost preventive care, including contraception, and a larger pool of insured with low cost access to basic preventative care, would provide the best opportunity to both improve care and the general health of the population, while at the same time controlling costs. The Ryan plan is heavy on free market cost containment, but it does little to address the catastrophic numbers of uninsured Americans or the quality of care in general.

In the event of a Supreme Court decision overturning the entire Healthcare Affordability Act, or even critical parts of it, I do not think any anyone wants to allow the Insurance companies to once again run roughshod over the patients. The mandate to allow children to be carried on their parent’s plan has meant that millions of kids have been added to the roles of the insured. Obamacare, as crafted, still leaves much to be done, especially in my view in the area of cost containment. A single payer system which many Democrats now seem to be hoping for in the wake of a negative Supreme Court decision is still a long way away. The question is in the interim can Americans agree on any way forward. The challenges are so great, and the two sides so ideologically divided, the chances for any sort of compromise seem remote. Ultimately the only road to compromise or resolution seems to be some sort of hybrid plan that encourages free market experimentation while at the same time guaranteeing coverage and emphasizing preventative care. Somehow, every American needs to be brought into the plan. No matter the decision of the Court, this dilemma will continue for many years to come.