The Washington Post described Budget Committee chairman Paul Ryan's "Path to Prosperity" reforms as "the most ambitious alteration of federal benefits since President George W. Bush's ill-fated attempt to overhaul Social Security in 2005." In fact, Ryan's plan is far more ambitious than that — more ambitious, indeed, than any other budget proposal within memory. And more necessary.
As I argued in National Review last year, Medicare and Medicaid provide strong incentives for overspending and waste, Medicare because its benefit structure, following the model of an all-you-can-eat restaurant, provides no reason for patients to care about the cost-effectiveness of their care; and Medicaid because federal matching formulas encourage states to expand coverage even when additional dollars would be largely wasted. Ryan's plan helps address those problems by instituting a premium-support model for Medicare and shifting Medicaid from matching payments to block grants. Seniors wanting more generous coverage can pay extra for it, if they think their dollars will be well spent. States wanting to expand Medicaid will do it on their own dime, ensuring that expansions are cost-effective. Only in Washington would it seem novel that stakeholders should have a reason to care if taxpayers' health dollars are well spent.
On Social Security, Ryan leverages a little-known provision of existing law that requires the program's trustees — the secretaries of the Treasury, labor, and HHS and the Social Security commissioner, along with two public trustees — to outline a plan for solvency if the trust fund falls below a given level. Ryan's plan merely would require that action today, before a crisis hits. If nothing else, this provision would force the Obama administration to finally fulfill its obligation to propose reforms to this important program.
How Ryan's budget proposal will fare is anyone's guess. But agree or disagree, it should be clear that at least one side in this budget debate is finally serious.
Andrew G. Biggs is a resident scholar at AEI