House Budget Committee Chairman Paul Ryan said Congress needs to "move the debate from billions in spending cuts to trillions" when he unveiled his budget this week. He's right. The American people clearly support reducing spending. Our next task is to convince them why sweeping reforms and larger savings are needed.
Key elements of Ryan's plan would essentially turn Medicaid into a state-based block-grant program and apply a premium-support model to Medicare (for those now under 55). While there is plenty of room for debate on the specifics, what should be beyond debate is the need for drastic change.
The American people want to hear the truth: Our health-entitlement programs -- Medicare and Medicaid -- are hemorrhaging taxpayer dollars, and threatening our nation's future. According to the Congressional Budget Office, "the single greatest threat to budget stability is the growth of federal spending on health care."
The Government Accountability Office has estimated the federal 75-year fiscal gap -- the difference between anticipated tax receipts and government spending -- is a staggering $76.4 trillion, or more than five times our current national debt. Entitlement spending alone accounts for more than 80 percent of that debt.
Broad health-entitlement reform is a necessity, not a choice. As Federal Reserve Chairman Ben Bernanke told Congress earlier this year, at some point the rest of the world will simply stop loaning us money if our debt continues to skyrocket. When that happens, our safety net -- and our economy -- could collapse. The time to make these choices is now.
Medicare and Medicaid already burn through one in five federal tax dollars -- and taxpayers lose an estimated $100 billion a year to waste, fraud and abuse in the two programs. To put that staggering figure in perspective, the annual average cost of the wars in Iraq and Afghanistan is about $115 billion.
Even more troubling is these broken programs often deliver substandard care for patients. Nearly half of physicians don't accept Medicaid patients because the reimbursement rates are so low. Not surprisingly, patients on Medicaid have poorer health outcomes, higher rates of infant mortality and more complications after major surgery than individuals with no health insurance at all.
Medicare is often perceived as popular, but millions of seniors still have care delayed or denied because they can't access a physician. The government-run Medicare payment process creates perverse incentives through a dizzying array of billing codes that often overpay for specific tests, but underpay for primary care.
By default, the complexity of this government-run process puts politicians and bureaucrats in charge of deciding how much doctors get paid for their services and what services are covered.
Unfortunately, the 2009 health "reform" law made the unaffordable status quo even worse, by double-counting illusory Medicare cuts and enrolling 16 to 24 million Americans into Medicaid. Even worse, the unpopular partisan law created two new entitlement programs -- a long-term care program and an insurance subsidy program.
It's no surprise that a recent poll found that only 11 percent of Americans believe the overhaul will reduce the deficit. The American people know the law is a budget-buster.
Chairman Ryan deserves credit for telling the American people the truth about our runaway health spending and for putting forward real solutions. His plan repeals the wrong-headed health law and replaces it comprehensive reforms. Medicaid's safety net for the poorest patients would be strengthened by transitioning to a block grants that empower states to provide care in a more efficient and cost-effective manner.
His plan would save Medicare by reforming the program to ensure its continued existence for current and future beneficiaries. Medicare would be transitioned in coming years, giving all beneficiaries a high-quality private plan like members of Congress enjoy. This approach largely mirrors bipartisan proposals put forward by former CBO Director Alice Rivlin, and by the Breaux-Thomas Medicare commission.
If Congress is serious about preserving economic prosperity and freedoms for the next generation, we must change course. Purveyors of conventional wisdom have long argued that structural reforms to Medicare and Medicaid are too risky politically. Yet, the greater risk is to toss away our country's future by continuing down our present path. The time to start the conversation about reforming these entitlements is now.