Ryan's Medicare Plan Would Increase Spending on Healthcare by 40%

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Peter Orzag is the former head of the Office of Budget and Management. He believes that Republicans like the Ryan plan for reforming Medicare. They view the reason for not supporting the plan as political. That is, it might cost some to lose elections. The GOP is right to worry about the politics but Orzag tells them that the Ryan plan would raise healthcare spending by 40% rather than reducing it. Consumer based healthcare reform can't cut costs because 85% of the costs are incurred by 25% of the beneficiaries with problems that would be covered by insurance. If 75% of the pool cut their spending, because they are forced to pay a greater share of the cost, it would do little to reduce spending.

The Ryan plan would reduce government spending on healthcare a lot but it would increase overall spending on healthcare by 40% because Medicare has lower administration costs than private insurers and it has greater bargaining power with providers than private insurers.

We should put the Ryan plan to rest. The GOP will drop it because they value winning elections more than anything else, and studies by the CBO show consumer directed healthcare does not lower spending and that Medicare is more efficient than private insurers.