David Frum

10.11.12

David Brooks Defends the Ryan Plan

From the New York Times:

Give recipients a choice among insurance options and have providers compete to offer comprehensive coverage like today’s Medicare.

This idea has been floating around for a while, and it used to be popular in parts of the Democratic Party until the party swung left. Senator John Breaux, a Democrat, co-led a commission that promoted this idea in 1997. Bill Clinton floated a “managed competition” plan for Medicare late in his presidency. Democrat Alice Rivlin and Republican Pete Domenici have co-authored a premium support plan for the Bipartisan Policy Center.

Paul Ryan wrote his own version a few years ago and has come up with a more moderate version with Senator Ron Wyden, a Democrat. Whenever you hear a Democrat say that Romney and Ryan would end Medicare or cost seniors $6,000, that is a misleading reference to the original Ryan plan, not anything on offer today. Today’s Romney plan would not shift costs to seniors.

Would a market-based approach reduce costs? There are some reasons to think so. A study published in the Journal of the American Medical Association found that if Ryan-Wyden had been in place between 2006 and 2009, costs might have come down by around 9 percent with no reduction in benefits. Under a demonstration project in Denver in the 1990s, private plans bid 25 percent to 38 percent less than government-determined payment rates.

The Medicare drug benefit began in 2006 with a voucher approach. Costs have been about 30 percent below early estimates. A RAND Corporation study of consumer-directed high deductible plans found that when families had an incentive to monitor costs, they spent about 14 percent less.