From Ezra Klein’s awesome breakdown of Ryan’s response to Obama’s anti-Ryan jeremiad:

CLAIM: “If health care costs rise faster than the amount of the voucher — as, by the way, they’ve been doing for decades — that’s too bad.”

REALITY: That too is wrong. Under competitive bidding, there is no risk that any senior will be unable to afford his or her guaranteed Medicare benefits. There will always be one plan that is fully covered by the premium-support payment, and there will always be one plan that costs even less.

Ryan has a point here: His plan caps the growth of Medicare at GDP+0.5 percent. But it doesn’t spell out what happens if Medicare grows more quickly than that. All he says is “Congress would be required to intervene.” So he’s right that the extra cost doesn’t necessarily get passed onto seniors, as was true in the previous iteration of his plan. But it could be passed onto seniors. He’s left it vague. Some would argue the likeliest outcome is Congress does nothing at all, but if that’s true, then Ryan’s plan won’t meet it deficit-reduction targets.

Did you get his? Ryan is making two promises here:

1) Medicare will only grow at GDP+0.5%. He doesn’t specify whether that’s RGDP or NGDP but let’s be generous and say NGDP so that allows it to grow just a bit faster than inflation.
2) Medicare will always cover the second-cheapest plan available (and thus by extension the cheapest plan with a couple pennies to spare).

Do you see where 1) and 2) collide like mis-routed locomotives? On the one hand, Medicare’s overall spending is capped at a fixed number; on the other is a guarantee to pay a certain benefit. Now it’s possible that the FreeMarketGods could work their desired magic and the second-cheapest plan will grow at NGDP+0.5% or slower. But it’s possible it might not! And given both the propensity of health care costs of skyrocket and the well-documented and well-tested disinclination of Congress to shave even a penny from benefits or industry profits, it may very well be the likliest outcome! Considering how crucial this is to Ryan’s deficit reduction target (not to mention the health of the American economy and the health of American citizens relying on these programs) one would hope he has a solution to this vexing problem!

And he does:

All he says is “Congress would be required to intervene.”


So Congress intervenes and:

-Refuses to lift the cap, denying the promised benefit
-Lifts the cap, giving the promised benefit in spite of budgetary impact
-Sets a price ceiling on insurance premiums through legislative fiat

These solutions translate to:
-Seniors get no healthcare
-Budget explodes while industry profits
-Command economy

Of course we could always “directly insure everyone directly and use a tax-funded monopsony to negotiate directly with providers and industry stakeholders.” But that would be The Dread Pirate Socialism! So instead we’re going to a) mandate that insurance companies do it for us, b) pay them whatever they want and let health care gobble the economy public and private alike or c) say “frack it” and let seniors line up at charity clinics and/or Alan Grayson.

Yet Paul Ryan says his plan + FreeMarketGods will fix everything for sure! And Paul Ryan is a serious man.