“Alice Rivlin and I designed these Medicare and Medicaid reforms,” Paul Ryan said on “Morning Joe” yesterday. “Alice Rivlin was Clinton’s OMB director… she’s a proud Democrat at the Brookings institution. These entitlement reforms are based off of those models that she and I worked on together.” But Rivlin — who is all that Ryan says she is, in addition to a former vice chair of the Federal Reserve — is not supporting the reforms as written in Ryan’s budget. I spoke with her this morning to ask why. A lightly edited transcript of our conversation follows.
Ezra Klein: What struck me when I dug into the details of Ryan’s budget is that he changed the target Ryan-Rivlin had set for Medicare from GDP+1% to the rate of inflation. That seems pretty hard to achieve.
Alive Rivlin: That’s a reason for me saying very strongly that I don’t support the version of Medicare premium support in the Ryan plan. It’s both because the growth rate is much, much too low, and because it doesn’t preserve fee-for-service Medicare as the default option.
EK: It also doesn’t do much to actually make the delivery of health-care cheaper. I think that when people look at health-care reform from a budgetary perspective, they tend to rely on blunt financial tools, like simply giving people less insurance. But that just shifts costs to the people and their families. To make costs slow across the system, you need to make it cheaper to treat sick people.
AR: I entirely agree with that. And there’s a great deal in the Affordable Care Act in terms of research, pilot programs, alternative payment structures, alternative delivery systems, research on the effectiveness of treatments, that is needed. That’s why we need to keep the Affordable Care Act and strengthen the parts that hopefully give us more cost-effective care in the future. If you just control the federal spending without changing the delivery system, you just get cost shifting.
EK: Speaking of the Affordable Care Act, you’ve said before that the theory behind the exchanges in Ryan-Rivlin and the theory behind the exchanges in the Affordable Care Act are identical. That would mean Republicans who believe in Ryan’s model should be more optimistic about the Affordable Care Act. But Ryan has said the two of you simply disagree on how to build the exchanges. Can you explain to me the disagreement you have that would make Ryan-Rivlin different from the ACA?
AR: No. I can’t. I think he’s sort of backed himself into an intellectual corner here.
EK: When you would talk to him, did he seem to recognize that?
EK: What I liked about the Rivlin plan as it appeared in the Bipartisan Policy Center’s deficit proposal was that it seemed to go towards a grand compromise in which Medicare, Medicaid and the Affordable Care Act became part of the same system, and we ended up with something more seamless and less fractured. What’s odd to me in Ryan’s budget is that he wants to bring the Affordable Care Act model to Medicare, but take away the Affordable Care Act. In your negotiations on the BPC report, did you sense any interest among the Republicans on a compromise that extended exchanges and private insurance to Medicare and Medicaid?
AR: What seems plausible to me is that Medicare, in many ways, has to be treated separately for at least awhile. With respect to Medicaid, it does seem to me that if we could get the exchanges under the Affordable Care Act up and running successfully, it would be a natural transition to bring the Medicaid population onto the exchanges. Many of those people are already in managed care. Giving them a choice would seem to me to be a good thing.
EK: To move to another aspect of Ryan’s proposal, it tries to bring the budget into balance without using any taxes. When your commission looked into balancing the budget, how did you end up thinking about revenues?
AR: Sen. Domenici’s idea was to start with the spending side because Republicans aren’t going to want to do any tax increases. So we did. We started with discretionary spending and looked at various freezes. Then we moved to the entitlements and worked on Medicare and Medicaid and their rates of growth. And the staff kept adding this stuff up, and we weren’t even close. So then we moved to the tax side and the tax expenditures and we realized there’s a lot of spending through the tax code and you have to take that into consideration.
That’s been a change in Republican thinking, at least some of it: spending does go through the tax code and reducing that isn’t necessarily a tax increase. So then we started working on radical tax reform and we cut a lot of expenditures. The biggest one is the exclusion of employer-paid health benefits from the income tax, and once we did that, we had quite a lot of money over time, and it even helps you on Social Security because it moves benefits from health care and into wages, which are then taxable in both the income tax and Social Security
EK: And what did you end up doing with the Bush tax cuts?
AR: In Domenici-Rivlin, we were operating on a baseline that extended everything but the top brackets.