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Ryan's plan a step -- but in wrong direction

By Aaron E. Carroll, Special to CNN
  • Aaron Carroll: Rep. Paul Ryan deserves credit for proposing plan, but it doesn't add up
  • He says Ryan's claims that plan would cut unemployment to 4% by 2015 an unbelievable figure
  • Carroll says Medicare voucher plan will end up costing seniors; Medicaid cuts will hurt old, poor
  • Carroll: Counterproposals should include cutting fraud, letting Bush-era tax cuts expire

Editor's note: Dr. Aaron E. Carroll is an associate professor of pediatrics at the Indiana University School of Medicine and the director of the university's Center for Health Policy and Professionalism Research. He blogs about health policy at The Incidental Economist.

(CNN) -- This week, U.S. Rep. Paul Ryan unveiled his "Path to Prosperity" budget proposal and made some bold claims about what it would do. He said it would bring spending and the deficit under control while stimulating the economy to recover from the recession with amazing speed.

The Wisconsin Republican deserves credit for producing a proposal that can be scored and debated. Nobody should be demonized for offering ideas.

But Ryan shouldn't be lionized either. Some of his claims are hard to believe. He maintains that his plan will reduce unemployment in 2015 to 4%, a stunning figure. This is especially odd given that the Federal Reserve might consider that level of unemployment too low and fight against it.

Moreover, since there are at least 150 million people in the potential U.S. work force, reducing unemployment in the next year by more than 2% would mean adding more than 3 million new jobs. I've not seen any other economist who claims this is possible, let alone sustainable.

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Rep. Ryan also proposes changes to Medicare that are major, not minor. Medicare today is essentially a defined-benefit program, meaning that everyone using it knows exactly what benefits they are going to get. Every year, the government figures out how much it will cost to provide those benefits, and it pays the bills.

Ryan is proposing a defined contribution plan. Everyone would get vouchers to buy private insurance. Voucher amounts would be set to rise at a rate far below the historical rate of increase in health care costs, meaning that more of the cost will fall on the shoulders of senior citizens each year. His hope is that this will force costs down. The more likely effect is that more and more senior citizens will find adequate insurance unaffordable.

One more thing -- Ryan's changes affect only those who are now 55 or younger. Everyone else still gets traditional Medicare. This means that younger Americans will have to pay for their elders' potentially better and cheaper insurance but will not get it themselves.

Make no mistake, this is a fundamental shift in Medicare.

As deep as his proposed Medicare cuts are, those for Medicaid are far deeper. Rep. Ryan has recommended that Medicaid be first converted into a block grant program and then reduced. The block grants would allow states to do whatever they want. Some might cut the benefits or reduce Medicaid in other ways. But with reduced funding, it's easy to imagine what will happen to benefits. They will have to go down, or physician reimbursement will.

Medicaid is already underfunded. Ryan describes Medicaid as "welfare," but it's not close to what we traditionally think of welfare. More than half of Medicaid spending goes to the disabled or to senior citizens who are so poor they qualify for both Medicare and Medicaid. These people are not "out of work." Many are very sick or institutionalized. Most of the rest are children or pregnant women. Cutting their benefits won't make them more productive.

And as some complain about how many physicians are refusing to accept Medicaid now, is there anyone who thinks that more of them will do so once funding is reduced and reimbursement goes down? This isn't a fix.

GOP's high-stakes gamble to slash deficit

It's important not merely to point out the flaws of others, however, but to offer counterproposals. Here, the media have missed the target. Other proposals exist but have not gotten nearly the amount of attention that Ryan's has. In the interest of practicing what I preach, here are a few:

For Medicare reform, we could consider novel ways to cut spending, such as reducing fraud, permitting Medicare to negotiate as a program for lower drug prices or even consider some form of competitive bidding. For Medicaid, we could also start with fraud reduction. And that doesn't even include nonhealth-related measures, such as allowing the Bush-era tax cuts on the wealthy to expire or engaging in targeted reductions in discretionary spending, including subsidies to numerous industries and interest groups.

These are not my ideas; others have proposed them before. Where Rep. Ryan deserves praise is for making his proposal official. He has made it concrete, in his name and in public. If other politicians disagree with his proposals, they need to advocate their own -- in their name and in public. Failing to do so, and merely attacking Ryan, may work politically but will not reduce the deficit. He has caused the debate to begin in earnest. It's time for other politicians to join.

The opinions expressed in this commentary are solely those of Aaron E. Carroll.

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