Paul Ryan Joins The Hidden Consensus On Health Care Costs

If even the architect of Medicare privatization can admit rising health care costs are driving our fiscal problems, maybe there is common ground for reform.

The Washington Post’s Wonkblog had a brilliant idea to ask 18 economists and policymakers to submit their “favorite” — as in most revealing — charts or graphs of 2011. Our own Mike Konczal had a good entry, but I was particularly intrigued by this entry from Rep. Paul Ryan.

“Health care costs are the primary drivers of the debt,” the chart declares, and Ryan explains that “Relentlessly rising health care costs (coupled with demographic changes) are driving the growth of these programs.”

It’s easy to see this as just a veiled argument for Ryan’s plan to end Medicare (yes, I said it; come and get me, Politifact), but we should also acknowledge that there’s a big shift here in language about the long-term deficit. A few years ago, we were told that it was an “entitlement crisis” — and demographic changes were not an afterthought, but an essential fact — that made changes to Social Security and Medicare necessary. We just couldn’t afford benefits for all those people. It was liberals like Henry Aaron of the Brookings Institution and Peter Orszag during his stint at the Congressional Budget Office who began to produce charts like Ryan’s. “There is no entitlement crisis other than health care,” Aaron insisted. “There is no practical way to deal with public health-care spending other than by general health-care financing reform.”

This was a controversial claim at the time and a direct challenge to the “Fiscal Wake-Up Tour,” a slideshow that David Walker of the Peter G. Peterson Foundation was taking around the country. But via Orszag, it was a lesson deeply absorbed by the Obama administration. The Affordable Care Act, in addition to expanding coverage, included numerous provisions that might bring down overall health costs, and the appointment of Dr. Donald Berwick, a preeminent expert on reducing wasteful spending in health care, to run the Medicare and Medicaid programs showed the priority of cost management. Of course, the Republicans have pledged to repeal every last bit of the ACA, including the cost-cutting provisions, and they blocked Berwick’s appointment. (He was given a recess appointment, but recently gave up on a longer-term confirmation and left the job.)

But does Ryan’s chart indicate that the right is now willing to join the consensus that health care cost inflation, and not demographics or Social Security, is the driver of long-term fiscal problems? If so (and I’m being deliberately overoptimistic) then perhaps there’s a basis for a conversation about methods. Would the Ryan plan for Medicare — essentially a coupon for insurance — be a good way to reduce overall health care costs? What do economists who aren’t blatantly partisan think? What about alternatives, like better preventive care, universal coverage so that people don’t land on Medicare with long untreated problems, or the Dartmouth studies of comparative effectiveness, which identify practices that seem to result in lower costs and better results? We can have that conversation.

Here’s another example along the same lines. Noah Kristula-Green wrote in the interesting and increasingly unpredictable FrumForum about an excellent paper by Heather Boushey of the Center for American Progress arguing that economic inequality is related to instability and low growth. Kristula-Green warns conservatives to be ready for this as “the coming liberal argument,” and doesn’t challenge Boushey on the basic fact that inequality has skyrocketed and that productivity gains had not translated into wage gains for average workers even before the recession. “One immediate question that comes to my mind,” Kristula-Green responds, “is why middle class incomes were not rising. If it was because healthcare costs were consuming all the productivity gains the American worker was making, then that suggests that better controls for healthcare costs could have saved everyone a lot of trouble. There can be a lot of arguments as to how best to do that, but that does not sound like a story about higher income taxes for the top 1% of society.”

The answer is not that “healthcare costs were consuming all the productivity gains.” A slack labor market, reduced bargaining power for workers, and top executives and investors taking a greater share of gains are the primary causes of wage stagnation. But rising health insurance costs, which replace wages, probably had a small something to do with it. And so, again, perhaps there’s common ground here: Shifting health care costs away from employers, toward a common system in which there’s greater ability to manage costs, would be good for business and probably put more cash in the pockets of workers, even after they pay for health care. The ACA doesn’t do that, but the exchanges, mandates, and subsidies it creates would make it possible to move to a post-employer-based health system. And, also, we should raise taxes on the top 1% (and the top 20%) not with the aim of reducing inequality, but simply because they have a far greater ability to pay.

I shouldn’t read too much into one chart, probably offered by Ryan’s press secretary, or one blogger. But it’s interesting to see that the liberal argument about health care costs from three years ago seems to have been adopted by some conservatives, and perhaps that’s an early signal that someday, we’ll be able to find some common ground on reducing the deficit, raising middle-class incomes, and generating economic growth.

Mark Schmitt is a Senior Fellow and Director of the Fellows Program at the Roosevelt Institute.

Cross-Posted From The Roosevelt Institute’s New Deal 2.0 Blog

The Roosevelt Institute is a non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.

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