The ACP Advocate Blog

by Bob Doherty

Wednesday, March 21, 2012

Dissecting the Ryan Budget

Try your hand at today’s multiple choice quiz about the budget blueprint released yesterday by Rep. Paul Ryan (R-WI), House Budget Committee chair. The plan:

1.    Dramatically reduces the public debt over the next decade.
2.    Relies on unrealistic and vague assumptions.
3.    Drastically reduces health spending on the poor.
4.    All of the above.

The answer is all of the above—even though the first two statements seem to contradict each other.  How can they both be true?  Well, the Congressional Budget Office says this about the Ryan budget:

“At the end of fiscal year 2011, federal debt held by the public was 68 percent of GDP. The paths for revenues and spending specified by Chairman Ryan and his staff would lead to debt equal to 61 percent of GDP in 2023, 53 percent in 2030, and 10 percent in 2050. That debt would be a much smaller share of GDP . . .”

But here is the kicker: the CBO was relying on the “paths for revenues and spending specified by Chairman Ryan and his staff” in coming up with these estimates—that is, it is taking their word that Congress will come up with the required revenue and spending cuts, and that the policies proposed in the document will work as Rep. Ryan says they will. Or, as CBO itself puts it, “Those calculations do not represent a cost estimate for legislation or an analysis of the effects of any given policies. In particular, CBO has not considered whether the specified paths are consistent with the policy proposals or budget figures released today by Chairman Ryan as part of his proposed budget resolution.

And, as the Washington Post points out in its editorial today, the Ryan budget is “intentionally vague” on how it would achieve the revenue and savings numbers that the CBO was working from:

“THERE IS NO credible path to deficit reduction without a combination of spending cuts and revenue increases. This is the fundamental conclusion of every responsible group that has examined the issue, most prominently the Simpson-Bowles commission, and it is the fundamental failure of the budget blueprint released Tuesday by House Budget Committee Chairman Paul Ryan (R-Wis.).  Instead, and unfortunately, Mr. Ryan’s plan lunges in the opposite direction. He dangles the carrots of lower income and corporate tax rates. He says he would maintain tax revenue and in fact have it grow to 19 percent of the gross domestic product by 2025. Yet he fails to do the hard, and politically treacherous, work of specifying what deductions and credits he would eliminate in order to make all that happen. Does Mr. Ryan propose to eliminate the mortgage interest deduction? The preferential tax treatment of employer-sponsored health insurance? The deduction for charitable donations? Mr. Ryan says he’d leave those pesky details to the tax-writing House Ways and Means Committee, and no wonder: The nonpartisan Tax Policy Center said Mr. Ryan’s plan would reduce revenues by an eye-popping $4.6 trilllion — and that’s on top of the $5.4 trillion cost of making the Bush tax cuts permanent.”

What is much clearer is that the Ryan budget would cut so much out of Medicaid (the program that funds medical care for most of the poor) that it would result in millions more uninsured and underinsured poor Americans, according to an analysis by the Center for Budget and Policy Priorities. (The CBO agrees: “the magnitude of the reduction in spending . . . means that states would need to increase their spending [on Medicaid and the Children’s Health Insurance Program], . . . make considerable cutbacks in them, or both.  Cutbacks might involve reduced eligibility, . . . coverage of fewer services, lower payments to providers, or increased cost-sharing by beneficiaries — all of which would reduce access to care.”)

The Washington Post’s Ezra Klein observes that the reduction in spending on the poor isn’t due to any intent on Rep. Ryan’s part to hurt the poor, but because the GOP’s “overlapping fiscal commitments . . .  leave them few other choices”:

“I don't think Paul Ryan intended to write a budget that concentrated its cuts on the poorest Americans. But there's a reason their budgets turned out so similar: The Republican Party has settled on four overlapping fiscal commitments that leave them with few other choices. The Republican plans we've seen share a few basic premises. First, taxes are too high, and must be cut. Second, defense spending is too low, and should be raised. Third, major changes to entitlement programs should be passed now, but they shouldn't affect the current generation of retirees. That would all be fine, except for the fourth premise, which is that short-term deficits are a serious threat to the country and they need to be swiftly cut. The first three budget premises means that taxes and defense will contribute more to the deficit, and Medicare and Social Security aren't available for quick savings. That leaves programs for the poor as the only major programs available to bear cuts. But now cuts to those programs have to pay for the deficit reduction, the increased defense spending, and the tax cuts. That means the cuts to those programs have to be really, really, really deep. The authors have no other choice.”

The Ryan budget also includes a new version of last year’s Medicare premium support program, but this time, he would allow beneficiaries the option of enrolling in a public Medicare program in addition to the choice of using the government’s allowed contribution to buy private insurance. Under either option, most seniors would pay more for their care, because the government’s allowance would not likely keep pace with the costs of medical care.

Rep. Ryan deserves credit for laying out the fiscal choices facing the country (but not for his vagueness in how he would achieve the revenue and savings estimates). On that score, he has done much more to focus the debate on how to reduce the debt and the choices involved than President Obama and Senate Democrats, who have been quick to criticize while failing to offer their own detailed plans.

But physicians especially should be concerned about the impact of the Ryan budget on health care for the poorest Americans. The American College of Physicians has long advocated that every American, regardless of where they live or work or how much they earn, should have access to affordable health coverage. The Ryan plan, regrettably, violates this concept by taking health care away from those who can least afford it. There are better ways to reduce the public debt than going after health care for the most vulnerable.

Today’s question: What is your reaction to the Ryan budget?

11 Comments :

Blogger Brad F said...

I understand that the Ryan budget allows the SGR cuts to proceed.

If that is true, please inform the conservative physician caucus.

Hint. They might have something to say.

Brad

March 21, 2012 at 7:06 PM  
Blogger Steve Lucas said...

First, this is a plan, a place to start. It is important to remember the Democrats have not offered a budget in over 1,000 days, even when they controlled all three branches of government.

Secondly, the CBO made it very clear they were scoring the Obama Administration’s health care law based on the information provided by the Administration. That also incorporated a large number of logical fallacies.

Going forward the single largest deficit driver is health care. In a March 20, 2012 WSJ op-ed former CBO director Douglas Holtz-Eakin and Nobel economist Vernon L. Smith make the point in ObamaCare’s Flawed Economic Foundations that the current law does nothing to control cost.

My personal feeling is that we have enough money in our health care system. The problem is distribution. We on this blog have all taken different approaches as to how to eliminate some of the distortions.

Troubling is that often it is doctors who are the cost drivers in the system. Many doctors will only prescribe branded drugs, even to their low income patients. Yesterday I read that a high power sedative is being used in colonoscopies requiring the use of a doctor to monitor the patient when less costly alternatives exist. Doctors, you do control the prescription pad.

I also view insurance and medical access as two separate issues. This has become problematic given the rise of the vertically integrated business model where everything from the doctors front office to the corporate health care holding company is a single entity. Often low income people can find cheaper access through cash or retainer practices than they can by using insurance.

What we need is an overhaul of our existing system, not the continuing tinkering around the edges. The problem is the financial incentives are so great this will not take place as any attempts will be ignored at best, derided at worse.

The Ryan plan is a start, it may be a flawed start, but at least it is a start.

Steve Lucas

March 22, 2012 at 8:03 AM  
Blogger Jay Larson MD said...

The thing with the healthcare system is that everything is paid for by someone. Cut Federal funds to States for Medicaid then the State pays more (paid by higher State taxes) for Medicaid services. The States still try to save money by keeping reimbursements as low as possible. Since Medicaid reimbursement is so low, access for Medicaid recipients to non-subsidized primary care is low so the patients go to cooperative health clinics (funded by the Feds) or to the hospitals. The hospital then raises costs for services and directs more resources to increased access to procedures which have high RVU values. These increased hospital costs are then put on the shoulders of those with private insurance whom pay higher premiums.

So long as the primary goal of the lion’s share of the healthcare system is to be as profitable as we will never “save” money, but only spend more.

March 22, 2012 at 1:40 PM  
Blogger Steve Lucas said...

First, this is a plan, a place to start. It is important to remember the Democrats have not offered a budget in over 1,000 days, even when they controlled all three branches of government.

Secondly, the CBO made it very clear they were scoring the Obama Administration’s health care law based on the information provided by the Administration. That also incorporated a large number of logical fallacies.

Going forward the single largest deficit driver is health care. In a March 20, 2012 WSJ op-ed former CBO director Douglas Holtz-Eakin and Nobel economist Vernon L. Smith make the point in ObamaCare’s Flawed Economic Foundations that the current law does nothing to control cost.

My personal feeling is that we have enough money in our health care system. The problem is distribution. We on this blog have all taken different approaches as to how to eliminate some of the distortions.

Troubling is that often it is doctors who are the cost drivers in the system. Many doctors will only prescribe branded drugs, even to their low income patients. Yesterday I read that a high power sedative is being used in colonoscopies requiring the use of a doctor to monitor the patient when less costly alternatives exist. Doctors, you do control the prescription pad.

I also view insurance and medical access as two separate issues. This has become problematic given the rise of the vertically integrated business model where everything from the doctors front office to the corporate health care holding company is a single entity. Often low income people can find cheaper access through cash or retainer practices than they can by using insurance.

What we need is an overhaul of our existing system, not the continuing tinkering around the edges. The problem is the financial incentives are so great this will not take place as any attempts will be ignored at best, derided at worse.

The Ryan plan is a start, it may be a flawed start, but at least it is a start.

Steve Lucas

March 22, 2012 at 3:58 PM  
Blogger Harrison said...

If the problem with our society is that we have a federal government, then I think Rep Ryan has a plan to solve that problem.
He will eliminate that.
The problem is that politicians can choose the electorate they want to pander to.
They can pander to those who globally think that too much government is the problem and make ludicrous suggestions about eliminating it, when in fact the specifics are wildly unpopular and probably wrongheaded.
Or they can pander to those like me who don't fear the government all that much and can see good in government programs.

And then there is the problem that politics is a zero sum game.
In real life we should be able to find solutions that allow the political polar opposites to coexist easily.
In political real life though that means someone is caving in and will lose supporters and dollars because they are losing.

So when Mitch McConnel says that the GOP's main goal is to make Pres Obama a one term president it isn't necessarily that he is personally opposed to so much of the President's agenda.
It is simply the conundrum that he has that if President Obama wins, then he loses.

That is where we are.
It isn't new.
Jefferson and Adams were locked in such a political debate for most of their lives.

We will survive.

Harrison

March 22, 2012 at 4:43 PM  
Blogger ryanjo said...

I don't know if I fall within the "conservative physician caucus", but the Kaiser Health News (March 9, 2012) reported "House Budget Committee Chairman Paul Ryan's upcoming budget proposal is expected to include a deficit neutral "reserve fund" to deal with Medicare's Sustainable Growth Rate formula". So the SGR cuts go away. Which is more than the the Affordable Care Act ever did. So is ACP backing the wrong horse in this race?

March 22, 2012 at 5:18 PM  
Blogger Dr. PJ said...

All I know is that the PPACA law may just be history after the Supreme Court hears its challenge next week. I think that the ACP is just being biased in support of the current law. It overturned where do we go from here? Ryan at least is proposing fiscally sound options to a health care plan that is also financially flawed. I still do not understand why if everyone is expected to have health insurance that the expands medicaide, the VA, Indian Health and community health clinics. Should we just have supplemented those who could not afford care with a grant to purchase a policy on the open market?
Dr. PJ

March 23, 2012 at 4:22 PM  
Blogger PCP said...

Harrison makes a point about polarization in the political process. Fair enough sir. Now lets look at a few points. Math is aout as concrete as it gets, but even there we get attempts at fuzzy math by politicians, they are the only creatures capable of that!
Nonetheless, here is what should be apparent even the the most left leaning individuals.
Our budget deficits are around 10% of GDP, currently spending is at 25% and tax receipts are aroumd 15%. Most economists believe anything more than 2-3% is unsustainable in the long run. We are in our 3rd yr of this and it goes on for about as far as the eye can see.
We are already financing this deficit with funny money where our federal reserve is buying gov't issued debt.
Our private sector is scared rigid by the current policies and afraid and/or unwilling to expand.
The budget deficit can only be closed when the private sector is encpuraged enough to expand again, and therefore back into tax paying mode. Even if we assume taxes go up, then we will perhaps take in maybe 16 or 17% of GDP(assuming an average 10% across the board rise in taxes, which ain't happening). That still leaves a gap of 8 or 9%. That can be closed only with two other options, cutting gov't spending or expanding the private sector faster than the gov't grows(which given the track record of the past decade is no easy feat sans chinese like growth).
The problem here is unlike past decades, we do not have the luxury of time. Our debt as a percentage of GDP has exploded to near 100%, a historic high, yet we see deficits as far as the eye can see and we are servicing it with historically low interest rates, because we are monetizing that debt via the federal reserve. That smacks of desperation and buyers of US treasuries are not oblivious to this at all. We are not fooling anyone. They want more dollars for their oil and commodities and have bid up gold as a store of value.
So the only realistic solution to this problem is a cutback in gov't spending or the fortune of 100 steve jobs like innovators, whose products are revered by the worlds masses. Since I think the latter unlikely, then we need to cut significantly, otherwise we will go over the cliff. We can do it the greek way(debt restructuring) or the argentinian way(hyperinflation) but we will have to do it some way. Either is painful. In my view, Only action in the next presidential term can halt that fate. I do not see that happening with Mr.Obama and sadly neither do it see it with Mr. Romney. I desperately hope I am wrong but I fear I will be right. For some reason as we speed toward the cliff, those like Harrison prefer denial to preventative care.
Dr. PJ. Please read some of my previous posts. The ACP leaderships vision for the general internist is one where he/she is employed in a CHC with a nurse practitioner as the medical director, charging the federal/state gov't twice or thrice the rate of reimbursement in private practice, with inefficient unaccountable staff and a chairwoman of the chain of clinics is paid lavishly by the designated non profit organisation. Astonishing to me that they lobby so hard for those clinics and ignore the plight of a dyimg breed, the solo private practice internist. I can guarantee that history will treat unkindly the ACP and those like it that supposedly represented this profession while standing passively and even supporting policies that led to the death of solo private practice serving the masses. Solo private practice will only survive boutique style and that is if they do not outlaw it.

March 23, 2012 at 7:26 PM  
Blogger Brad F said...

@ryanjo
You are correct.

My guess, based on the language and precedent, is it is only a budgetary mirage:

House Budget Committee Chairman Paul Ryan's upcoming budget proposal is expected to include a deficit neutral "reserve fund" to deal with Medicare's Sustainable Growth Rate formula, a common fiscal measure that seldom translates into action.

CBPP, a center left but reputable policy shop, included the cuts when analyzing his proposal.
http://www.cbpp.org/cms/index.cfm?fa=view&id=3723

Translation: unspecified, but the fix will probably be real in lite version, but not realistically translated if and when it gets scored with all the details.
Brad

March 23, 2012 at 9:19 PM  
Blogger Harrison said...

I don't know how the Supreme Court will rule because it is part of the political dialogue in the country -- but there is a pretty good argument to be made that the 'mandate' fits within the powers of Congress, and this is especially true since the penalty for not having insurance is spelled out in the legislation and it fits within the taxing authority of Congress.

Politically I think that Justice Thomas can be counted on to vote against it. He consistently votes against federal government expansion and this certainly fits in that framework.
I think that Justices Ginsberg, Breyer, Sotomayor, and Kagan can be counted on to vote for it.
I think that Justices Roberts, Kennedy, Scalia, and Alito are all hard to predict. They will be torn between precedent, which probably favors the ACA, and the strident voices of the political right which see it as an unconstitutional expansion of government.
They may be swayed by the conservative appeals court judge who ruled in favor of the legislation with the comment that the conservative political voices need to carry their own weight in the legislative realm and stop asking the court to do it for them.

Harrison

March 24, 2012 at 12:42 AM  
Blogger johnmilste said...

Your summaries are always top-notch. Thanks for keeping us apprised. I’m reading every word here. sunscreen

April 26, 2012 at 2:44 AM  

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About the Author

Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog

Email Bob Doherty: TheACPAdvocateblog@acponline.org.

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