Thursday, April 14, 2011

Obama vs. Ryan on Medicare

The federal budget deficit continues to get top-level attention from both political parties.  The Bowles-Simpson commission recommended roughly a 50-50 split between increasing tax revenue (by eliminating tax breaks and lowering tax rates) and cutting spending in all categories.  Last week Rep. Paul Ryan (R-Wis) outlined his plan which relied entirely on spending cuts (albeit a bit light on the military side).  Yesterday President Obama outlined his framework, which emphasized cuts in defense spending, tax increases for higher income households, while largely protecting government-paid health care and Social Security. 

Greg Mankiw provides a good comparison of the Obama and Ryan plans for Medicare, which is probably the most important issue that must be resolved if we are to make any real progress in reducing the debt-GDP ratio.  Ryan's proposal has tighter spending controls by a modest margin, but the biggest difference between the two proposals centers on the role of markets and choice.  Obama would essentially use expert panels to ration care, whereas Ryan thinks that competition for individual health insurance business will hold cost inflation in check. 

Although I tend to be a consumer-choice, market-competition type of guy, there are so many parameters through which insurance policies vary (e.g., not just premiums, caps, deductibles and co-pays, but also what conditions and medications are and are not covered) that there would still need to be some standardization of policies so that individuals can make informed comparisons.  Don't look for government to get out of the health care business any time soon, regardless of who wins the next election. 

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