NEW YORK (TheStreet) -- Republicans are losing elections they could win by slavishly clinging to untenable solutions for skyrocketing health-care costs that voters reject.
The House Budget Committee, chaired by Wisconsin Republican Paul Ryan, is drafting a plan to balance the budget in 10 years. That requires lowering the trajectory of Medicaid and Medicare costs, which account for 24% of federal spending.
He proposes offering seniors the choice of a subsidy to buy private insurance or continuing in the existing Medicare system, and giving the states block grants to manage Medicaid.
Conservatives believe seniors could shop for health insurance, as they do for groceries, to drive down prices. The states, freed from excessive federal oversight, could similarly drive down costs.That's absolute fantasy. Seniors would confront large insurance companies armed with too little information, and limited choices or monopolies when they purchase drugs and hospital care. Already, large employers operate in a similar market space -- free to negotiate with health insurance companies -- and even they have not been able to harness rising health insurance premiums. Granny will not do any better than General Motors (GM) jawboning Humana (HUM) and Walgreen (WAG). Federal Medicare spending could only be cut by providing inadequate subsidies that would require seniors to pay much larger premiums and out-of-pocket costs than they currently bear with traditional Medicare. Similarly, it is doubtful that the states, acting individually, can do a better job of negotiating reimbursement rates for Medicaid services for the poor than does the federal government. In fact, the Ryan solution could drive up prices because providers could play off states against each other. The Ryan approaches were incorporated into the 2012 GOP presidential platform and rejected by voters. If the House budget plan incorporates these approaches, Republican senators will be forced to choose between supporting those or abandoning the House budget in favor of Senate Democrats' plans for higher taxes. That could prove poisonous for Republican senators seeking reelection and House Republicans considering runs for Senate seats. Sometimes markets don't work. That's why we don't have private fire departments selling subscriptions and taxi fares are regulated in major cities. Every other major industrialized country has given up relying on competition to harness health care costs.
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