Mankiw's Misleading Defense Of Paul Ryan

by Jonathan Chait | June 20, 2011

Former Bush economic advisor Greg Mankiw, writing in the New York Times, picks up the GOP talking point that Paul Ryan's plan to radically alter Medicare is really a pretty familiar bipartisan idea being blown out of propotion:

Representative Paul D. Ryan, Republican of Wisconsin, has attracted much attention with his plan to reform Medicare. He proposes replacing the current fee-for-service program, in which the government picks up the bill for medical expenses, with a “premium-support” system in which seniors use federal dollars to choose among competing private insurance plans.
Democratic critics of the plan suggest that enacting it would be akin to pushing Grandma over a cliff. But they rarely point out that the premium-support model is in some ways similar to the system set up under President Obama’s health care law. If choosing among competing private plans on a government-regulated exchange is a good idea for someone at age 50, why is it so horrific for someone who is 70?

This is deeply misleading. Ryan's plan does two things to Medicare that liberals find objectionable. The first is that it transforms it from a single-payer system into subsidies for private insurance. Liberal object to this because that transformation would, as the Congressional Budget Office projects, increase the cost of health insurance. It would interject a costly insurance bureaucracy into the system, and decrease the leverage of the insurer, by fragmenting the market into private insurers who lack Medicare's bargaining power.

Now, it's certainly true that liberals, who couldn't pass universal single payer health care, prefer giving people medical coverage through regulated private insurance subsidies than letting them go without coverage at all. That's why liberals support the Affordable Care Act vis a vis the status quo. But that is not the same thing as liberals agreeing that private insurance is better than single payer health care. Thus Mankiw's claim that the ACA demonstrates "agreement about the value of private competition" is clearly false.

Second, the subsidies in Ryan's plan, unlike the subsidies in the Affordable Care Act, would fall far below the value of private insurance. This is a major part of the objection, but Mankiw treats it as though it doesn't exist. Even if liberals did prefer to turn Medicare into a private insurance voucher, they would strongly object to his plan to make the vouchers grossly and increasingly inadequate to the cost of a plan. Likewise, conservatives agree that the rich should pay some taxes, but they would object to making them pay a 98% tax rate. Mankiw's logic would present this objection as hysterical partisanship -- we all agree the rich should pay taxes, so what's the problem?

Ryan has been hitting Mankiw's second point hard, pretending the only thing he does is to transform Medicare into private insurance subsidies, rather than to privatize Medicare and radically slash its value. Mankiw may share Ryan's ideological values and thus have reasons to wish to discredit critics of his program, but he should refrain from misleading people about the criticism.

Source URL: http://www.newrepublic.com//blog/jonathan-chait/90262/mankiws-misleading-defense-paul-ryan