Peter Orszag versus Paul Ryan: Part Deux

Jon Ward Contributor
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White House budget director Peter Orszag has gone after Rep. Paul Ryan’s “Road Map” plan before, critiquing the Wisconsin Republican’s vision for solving America’s entitlement and debt crisis earlier this year, when releasing President Obama’s budget.

On Wednesday, Orszag used the enlarged platform bestowed upon him in his last speech as a White House adviser to go after Ryan again, this time in more detail than ever before. As before, it was civil, but Orszag went to considerable lengths to argue that Ryan’s plan would not work.

Orszag’s criticism comes just days after Ryan himself delivered back to back speeches in Washington touting his plan. Ryan’s remarks at the Brookings Institution, a center-left think tank, drew attention when he called out his own party along with Democrats for letting political concerns crimp serious discussion of how to fix the nation’s debt and deficits.

The decision to so publicly elevate and critique Ryan shows both the seriousness with which Obama and his top advisers take Ryan’s alternative vision for the country’s future, as well as the vehemence with which they disagree. Orszag’s push against the “Road Map” came on the same day that the Democratic National Committee attacked the plan in a preview of their midterm election strategy.

Ryan blasted Democrats for their response to his plan.

“It is unfortunate that the Democratic leadership’s only response to our nation’s fiscal cancer is to engage in tired political demagoguery against a sincere effort to tackle this challenge,” he said in a statement e-mailed late Wednesday to The Daily Caller.

Orszag spoke Wednesday from the same podium inside Brookings as Ryan did nearly a week ago, and made the case that the “Road Map” would not bring down health care costs, leaving seniors in Medicare with vouchers under Ryan’s plan that over time would cover less and less of their medical expenses.

Under Ryan’s plan, Orszag said, seniors would purchase “high deductible insurance plans, insurance plans in which they would pay out of pocket for regular medical expanses and insurance would only cover higher cost, catastrophic situations.”

“The logic goes that such plans would encourage seniors to shop among doctors and treatments and rationally economize on their health care spending. The core problem however, is that the bulk of health care spending is concentrated among those with serious illnesses and high health care costs,” he said. “For example, CBO found that in 2001, high cost Medicare beneficiaries – that is the top 25 percent of Medicare beneficiaries ranked by their costs – accounted for 85 percent of total Medicare spending. For such high cost patients, high deductible plans would do little to change the delivery of health care.”

Orszag continued: “Patients would rapidly run through their deductibles, and most of their costs are above those levels. Indeed, in the context of traditional health plans, [the Congressional Budget Office] concluded that even universal high deductible plans would reduce costs by only about 5 percent relative to conventionally designed PPOs, and not reduce costs at all relative to HMOs.”
The “Road Map,” Orszag concluded, “mechanically cuts Medicare by increasing its vouchers more slowly than healthcare costs. The result is that most of the budget savings would come simply from shifting more and more cost and risk onto seniors without substantially altering the overall course of health care costs.”

A spokesman for Ryan contested Orszag’s characterization, saying the vouchers under Ryan’s plan would be risk adjusted and thus substantially more generous for high-cost patients.

“Ryan’s Roadmap recognizes that the majority of Medicare spending is for high cost beneficiaries,” said Ryan spokesman Conor Sweeney. “Proper risk-adjusting will ensure that seniors who need additional assistance will receive it.”

“The current Medicare program as it presently exists offers no protection against catastrophic costs,” he said. “The only option for today’s seniors who face high out-of-pocket costs is to spend down their assets and qualify for Medicaid.”

Orszag, who is leaving the White House for a post at the Council on Foreign Relations, said Obama’s health law, which was signed into law in March, “recognizes that the key to constraining health care costs involves those high cost cases.”

Obama’s health care plan “therefore preserves senior’s coverage and instead focuses on reforming information and incentives for medical care providers, so that they’re encouraged not simply to provide more care, but instead to provide better care,” Orszag said.

Ryan has responded to Orszag’s criticism in the past by stating that his plan changes nothing for Americans currently enrolled in Medicare. The changes would take affect only for those under 55 if and when his plan was enacted.

Nonetheless, Rep. Mike Honda, a 69-year old California Democrat, on Wednesday decried plans from the right to change entitlement programs as a threat to his mother, even though under Ryan’s plan nothing would change for her.

“My mother depends on Medicare and also Social Security. You do this, you mess with my mother,” Honda said.

Ryan said earlier this year, “it’s true that the Roadmap dramatically changes the future structure of the Medicare program. But that’s the point.”

“Either we reform the Medicare program and restore fiscal order, as the Roadmap does, or allow the program to go bankrupt and drag down the entire Federal budget and U.S. economy in the process,” Ryan said.

Ryan’s plan for bringing down health care costs overall hinges on changing the way that the tax code interacts with health insurance. Currently, Americans receive tax exclusions for health insurance if they receive it through their employer. Self-employed Americans don’t receive the same benefit, resulting in higher premiums for them.

The thinking behind Ryan’s plan is that if all Americans were given vouchers with which to purchase their own insurance, that would create more market competition than the current system, where patients don’t often see what they are charged for services because their payments go to the insurance company who negotiates prices with their employer, not them. If insurers and providers had to negotiate directly with consumers, who could take their money elsewhere more easily, that would put more downward pressure on prices, Ryan’s plan assumes.

“Placing those decisions in the hands of individuals and families will encourage insurance companies to offer more variety, higher quality, and more cost-effective plans to meet the needs of their customers,” Ryan says in his “Road Map.”

A Ryan aide said “the health care overhaul implemented by Mr. Orszag and the Administration treats everyone the same, and ultimately puts the government in charge of rationing their care.”

“To contain costs under this system, the government has to twist the screws through formulaic cuts, displacing individual control with bureaucratic dictates,” the aide said.

Orszag said later in his speech that “even with the enactment of the Affordable Care Act, we remain on an unsustainable fiscal course. More remains to be done.”

He also stipulated that much of the promise of Obama’s plan is contingent on full implementation.

“Mere enactment is not enough … implementation is essential,” Orszag said. “My point only is that the law includes the most promising set of potential reductions for future health care cost growth that has ever been enacted.”

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