Rep. Ryan proposes radical solution to budget problem

Rep. Paul Ryan (R-Wis.) has proposed a radical budget plan involving privatization that the Congressional Budget Office says would wipe out our projected long-term deficits entirely.
Rep. Paul Ryan (R-Wis.) has proposed a radical budget plan involving privatization that the Congressional Budget Office says would wipe out our projected long-term deficits entirely. (J. Scott Applewhite/associated Press)
By Ezra Klein
Washington Post Staff Writer
Sunday, February 7, 2010

I spent the first part of the week thinking about President Obama's proposal for next year's budget. It's a modest document meant to take current policy and nudge it forward and leftward while beginning the hard work of pushing the deficit downward. It makes its changes at the edge of the state, freezing growth here and expanding programs there.

But I spent the latter part of the week thinking about the proposal from Rep. Paul D. Ryan (R-Wis.) for what our budget should look like 60 years from now. Ryan's budget is a radical document that takes current policy and rolls a live grenade underneath it. Social Security? Ryan's adds private accounts. Medicaid? Ryan privatizes it. Medicare? Same thing. Health care? Ryan repeals the subsidy for employer-provided insurance, replacing it with a tax credit.

The boyish Ryan is a conservative darling and the ranking Republican on the House Budget Committee, but there's nothing conservative about this document. It does not respect, much less preserve, the status quo. But then, that's a point in Ryan's favor. The status quo does not deserve our respect. It is unsustainable. Left unchecked, it will bankrupt our country. On that, Ryan's radicalism is welcome, and all too rare. The size of his proposal is shocking, but it is proportionate to the size of our problem: According to the Congressional Budget Office, which examined a simplified version of his proposal, it would wipe out our projected long-term deficits.

Facing up to how he does this is a worthwhile exercise in understanding our budget problem. It's not the privatization that does it. His proposal to add optional private accounts to Social Security actually increases the program's cost, which is a good reminder that Social Security plays little role in our long-term deficits. Similarly, his proposal to privatize Medicare increases costs. As the CBO points out, Medicare negotiates lower prices than private providers and is run more efficiently. "Beneficiaries would therefore face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare," the wonks conclude.

Ryan saves his money after he privatizes the programs. Under his proposal, seniors stop getting Medicare, which is both government-run and pays for any procedures that can be shown to help improve their condition. Instead, the seniors get a voucher to buy private insurance, and that voucher grows more slowly than medical costs. That means the coverage that voucher buys is going to grow more slowly than medical costs. Seniors will be in the same position the rest of us are in: Either you can afford the coverage and care you need through savings or subsidies or both, or . . . you can't.

That, at least, is what the CBO is scoring. Ryan's hopes are different. "You compartmentalize the programs," he tells me. "Don't do that." In his telling, his proposal unleashes market forces by pulling people out of Medicare, out of Medicaid and out of the employer-based market. He envisions insurance exchanges and better information on quality and cost. Combine that many consumers with that much money and that much transparency, and it'll have to reform itself into something we can afford. "This sector isn't immune from free-market principles," he says.

Health care may not be immune from free-market principles, but we don't necessarily want to treat health care the way we treat normal markets. Here's the thing about markets: Lots of people can't afford to participate in them. That's usually okay. If you can't buy a television, you'll watch less TV. If you can't buy a car, you'll take the bus. But health care isn't like that. As a society, we don't think it's okay when people can't participate in the market for treatments for, say, Parkinson's disease. The way markets deal with scarcity is by pricing some things out of reach. Are we comfortable with life-saving treatments being out of financial reach for the people who need them?

There's an argument to be made that we should be. Resources are limited, and they need to be apportioned somehow. This is rationing, and as Ryan notes, "It happens today. The question is who will do it? The government? Or you, your doctor and your family?" I think that's a bit off: The question is more about whether society should ration in consultation with voters and doctors and politicians and researchers, or whether your bank account should ration in consultation with pharmaceutical companies and medical-device manufacturers and hospital companies.

But Ryan is right that we will need to ration somehow, and along the way, we will need to change the health-care sector dramatically. His radical embrace of the free-market vision is one option. So, too, is the liberal vision of a nationalized system modeled off the far more affordable and efficient examples we see in France, Germany, Japan and elsewhere. The likeliest outcome is some blend of the two: a better, more transparent, more navigable market ensconced within a tighter regulatory apparatus. That, in fact, is the vision that's messily embodied in the Senate and House health-care bills, and that's been implemented in countries such as the Netherlands and Switzerland.

Whatever the outcome, it is long past time we faced up to the seriousness of the problem. The House and Senate bills, though I think they are worthwhile, do not go nearly far enough, and few politicians share Ryan's appetite for proposing daring solutions to dangerous problems. (Democratic Sen. Ron Wyden of Oregon whose excellent health-care proposal was largely ignored this year, is another.) Liberals and conservatives may disagree over Ryan's solution, but I imagine most Americans would support his approach to the work. "This is my 12th year," he says. "If I lose my job over this, then so be it. If you're given the opportunity to serve, you better serve like it's your last term every term."

© 2010 The Washington Post Company