You can’t save Medicare by raising taxes

Tim Egan’s column detailing the generational warfare at the heart of Paul Ryan’s political strategy is quite good, but his policy conclusion is quite wrong. “There is a very simple way to make Medicare whole through the end of this century, far less complicated, and more of a bargain in the long run than the bizarre Ryan plan,” he writes. “Raise taxes.”

The problem with health-care costs is that they rise faster than wages, GDP or most anything else. That’s why balancing Medicare and Medicaid’s books through straight cost-shifting, as Ryan does, entails such savage cuts in care, and why balancing their books through straight tax increases, as Egan suggests, would be such a disaster. You wouldn’t just need to raise taxes. You’d need to raise them again and again and again, because every tax increase would soon be outpaced by Medicare’s growth.

This wouldn’t be so worrying if we were getting more for each additional health care buck. If costs were increasing because lives were getting longer and diseases were being cured and disabilities being reversed, then godspeed, dear health-care costs, may you rise forever. But there’s little evidence of that. Instead, we seem to be spending much more for essentially the same results, and it’s squeezing out plenty of other priorities that would, among their advantages, do more for the health of the population than an extra dollar sent to Medicare. As Harold Pollack, a public-health specialist at the University of Chicago, once told me, “One unintentional benefit of health-care reform would be that if we get health-care financing on a better footing, we would stop killing all sorts of social programs that do more on the margins for health than health care does but are being starved for resources.”

That’s why Ryan’s plan isn’t real health-care reform: it has no plausible strategy for slowing the growth in health-care costs, and instead just cuts federal spending on the program. Simply raising taxes, however, is the mirror image of that. It just tosses more money into the maw of Medicare, and leaves less for everything else. What we need is to cut the actual growth in health-care costs, so there's room for us to make needed investments elsewhere, and, while I’m on the subject, so private businesses can give their workers larger raises rather than diverting every spare dollar to health-care insurance. The Affordable Care Act makes a good start on that, and a series of committed, attentive Congresses could finish the job. But let’s not get distracted by a debate over spending cuts or tax increases. Both are wrong. In the long run, reform is the only way forward.