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Thursday, April 07, 2011

Ruth Marcus is soft on Paul Ryan

She writes

The sensible theory behind welfare reform was to change the incentives of the system to make welfare “a second chance, not a way of life,” as Bill Clinton said in signing the measure in 1996.


I’m more open to the notion of restructuring Medicare to be, in effect, a voucher program under which beneficiaries would shop among competing insurance plans. The existing fee-for-service model in which the government foots the bill for unlimited care is not sustainable. Some seniors ought to be asked to pay more for their coverage.

I think you are much to kind to Ryan. You conflate the idea that elderly people should bear a larger fraction of the cost of Medicare with the introduction of vouchers. There is no need to link these policies. The case of Medicare Advtage has made it very clear that converting fee for service to vouchers causes a huge reduction in efficiencym with vastly greater administrative costs. Medicare advnatage increased costs by 14% of the total. Of this 12% of the total was due to reduced efficiency and only 2% due to advantages to participants. It is very clear that replacing Medicare with insurance provided by private companies is costly inefficient and nonsensical.

In contrast it is perfectly possible to make Medicare recipients pay more without introducing the inefficient wasteful folly of vouchers. Medicare premiums can be increased for the relatively wealthy and Medicare could have deductibles. This hasn't been done, because Medicare is politically untouchable. That is the reason that Ryan's proposal will get nowhere. But if we pretend, for the sake of argument, that it is possible to reduce Medicare benefits, there is no need to add waste and inefficiency while doing so.

Oh before someone comments down thread, the health care reform bill didn't reduce Medicre benefits. It eliminated the extra subsidy for Medicare advantage (by Medicare benefits I mean regular Medicare benefits) and it squeezed (or promised to squeeze) hospitals nursing homes and home health care agencies by paying them less to provide the same care. But it didn't change the promises to Medicare recipients. Nonetheless, senior citizens were so outraged that they voted en masse for Republicans.

I also object to your discussion of welfare reform. You choose not to mention that the rate of severe poverty is now the highest on record (BLS records only go back to 1975 I don't know why). Severe poverty is income less than half the poverty line. For some reason, people only look at the poverty rate. The poverty rate can not show the huge gigantic human costs of welfare reform, because AFDC never paid enough to get people over the poverty line. However, it kept many people above half the poverty line. This is why the ration of severe poverty to poverty has gone up so much since 1996. Your assessment of welfare reform is based on the assumption that if you are under the poverty line it doesn't matter how far below.

Your claims about the incentive effects of AFDC were never supported by serious research. They were and are believed by a majority of the public. This is what made welfare reform inevitable and makes politicians unwilling to criticize welfare reform (Obama praised it highly in "The Audacity of Hope." Similarly more than half of US adults think that over 9% of the Federal budget is spent on foreign humanitarian and development assistance. This is absolutely false, but politicians don't dare point out that it is false (when was the last time one did).

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