Dick Army and Matt Kibbe
Medicare reform has risen to the top of the national agenda and will be the defining issue of next year’s elections. The outcome of this debate will greatly shape America’s fiscal future, because without substantial Medicare savings the budget cannot be balanced. Period.
The second largest federal program and the fastest growing—with long-term liabilities in excess of $38 trillion—Medicare now threatens to bankrupt the U.S. government in the next few decades. The window is closing fast on our ability to reform it without touching current retirees’ benefits.
Why, then, do some politicians want to keep putting off what everyone knows are needed fixes? The entitlement debate has long been plagued by Republicans who don’t dare and Democrats who don’t care. Fortunately, the House GOP now has members who do dare. Under the 10-year budget outline proposed by Rep. Paul Ryan (R., Wis.) and approved last month by the House with the support of all but four Republicans, Medicare would be preserved for future generations by slowing its growth rate without reducing current benefits.
And yet this plan has been attacked by congressional Democrats as “dangerous” and “ending Medicare as we know it” — one TV ad literally shows grandma being thrown off a cliff — while Republican presidential candidate Newt Gingrich this past Sunday criticized it as “too big a jump” and “right-wing social engineering.”
Whoa, that does sound like a pretty “radical” plan. But which part is the radical one? Is it the provision that guarantees that today’s Medicare benefits and eligibility remain exactly as they are for seniors born before 1956, and for everyone else for the remainder of this decade? Or is it the part that gradually raises the retirement age to 67 from 65 over a period of 12 years starting in 2022? Or is it the section that gives all beneficiaries a lot more coverage options, similar to the array of health-plan choices currently enjoyed by members of Congress?
The answer, we suspect, is none of the above. For the Democrats, the real concern is that requiring health-insurance plans to compete for seniors’ business would actually work to hold down costs, proving once again that markets are more efficient than government. In other words, for the party of government, it’s about maintaining the government’s monopoly.
As for Republican critics, we suspect they are simply fighting the last war, haunted by their failures in the 1995 budget fight that shut down the federal government. They seem to forget that while they lost that particular battle, they won the war. They forced President Clinton to accept most of their proposed Medicare savings in the Balanced Budget Act of 1997.
Neither of these two strategies—cynicism or timidity—will work politically, and neither serves the interests of seniors or the country.
Instead of throwing grandma off a cliff, we are trying to save grandma’s Medicare. The case for reform has gotten stronger since 1995. Spending, borrowing and debt are all far greater problems now. Global bond markets are now openly skeptical of Washington’s ability to pay its creditors, as evidenced by Standard & Poor’s recent downgrade of U.S. debt from “stable” to “negative.” Such a downgrade would make higher borrowing costs and a painful fiscal restructuring likely, unless large spending reductions are enacted soon.
We go into this fight on much better ground than 16 years ago. There was no tea party then. A recent Wall Street Journal/NBC News poll found that three-fifths of Americans want a balanced budget. And according to a recent FreedomWorks poll, conducted by Luntz Global, 78% of swing-state voters think “no spending should be off-limits,” while 88% believe entitlement reform is “urgent and necessary.”
Mr. Ryan has bravely started a debate the country needs, putting forth a proposal that fiscally conservative, limited-government reformers can strongly support. If we could improve on his plan in just one respect, it would be to give seniors still more choice and control.
Under today’s Medicare, seniors are subject to an individual mandate more subtle but just as coercive as ObamaCare’s. By regulation, seniors must enroll in Medicare or forgo their Social Security checks. By law, they are denied the right to go outside of Medicare and buy the kind of private insurance they prefer. They are thus trapped within a single-payer government monopoly. Add budget pressures to the mix, and you have the perfect conditions for rationing.
Mr. Ryan’s proposal for “premium support”—a publicly funded system of competing private health plans in a tightly regulated government “exchange”—would save money. But as a form of “managed” competition it’s not a true market, and thus it can only work when individuals are compelled to participate.
It’s no accident that proposals like HillaryCare, RomneyCare, ObamaCare and premium support have many similarities. All assume that government can set up a bureaucratic “marketplace” or “exchange,” force individuals to participate in it, and somehow produce better results than could a real market with real consumers shopping for real value.
Managed competition is better than bureaucracy, to be sure, but real competition is even better. Besides, liberty is every person’s natural, unalienable right. The obvious and simple remedy for the flaws of managed competition is to let individuals opt out. While those choosing to exit would lose their Medicare subsidies, they would gain something more precious: the freedom to use their own money to buy the insurance they want, without fear of government rationing or losing their Social Security benefits. This reform would make Medicare better—and the Ryan plan more politically defensible.
The politics of spending has changed. Most Americans understand the math and recognize the challenge. They want to get behind bold, principled entitlement reforms that can save the country from a debt collapse while making the safety net stronger and individuals freer. The Ryan plan plus Medicare freedom is such a reform.
Any serious GOP presidential candidate must be absolutely clear on this issue. Kicking the can down the road is no longer an option. A candidate who is timid on entitlement reforms is not qualified to be president.