Peter Orszag Exposes Fault in Ryan Plan

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House Budget Committee Chairman Representative Paul Ryan proposes new plan to share healthcare costs, but economist Peter Orszag warns that the plan lacks substance.

Healthcare has long been a relevant political issue, but as the costs associated with these services rise, and as the government faces a tighter budget, the fate of current healthcare programs, like Medicare, loom uncertainly over congressional meetings. Representative Paul Ryan from Wisconsin recently put forth his own proposal for cutting the costs of healthcare, aptly called the "Ryan Plan," but as Peter Orszag points out in his article "Sharing Costs Is No Way to Fix Medicare" this plan is far from perfect.

The Ryan Plan hopes to reduce the financial strain of healthcare on the government's budget by cost-sharing with beneficiaries, meaning that more individuals will pay a higher amount of their medical bills. While this may reduce government spending up front, it will also increase the amount of individuals that go without care as a direct result of being unable to afford it. The upside to this is that unnecessary care will be forgone by beneficiaries, but the downside is that individuals that need medical attention may not receive it.

Economist, former head of the Obama administration's Office of Management and Budget, and previous Director of the Congressional Budget Office, Peter Orszag certainly has the experience needed to weigh in on this subject. To add to his credentials, he was a major contributor to the "Obamacare" reform that restructured the healthcare sector. In his article, Peter Orszag concedes that this plan will cut costs for the government, but highlights the ways in which it will shift the burden onto beneficiaries and fail to reduce healthcare costs overall.

"While more consumer cost-sharing would help reduce unnecessary care," writes Peter Orszag in his article, which appears in the Bloomberg View, "the plan would not live up to its billing in cutting health costs for America. According to the nonpartisan Congressional Budget Office, it would do the opposite (...) The CBO points to two factors: Private plans have higher administrative costs than the federal Medicare program, and less negotiating leverage with providers."

With the previous passage, Peter Orszag brings the big issue into focus: the underlying cost of healthcare. According to his article, the cost of healthcare itself must be reduced without sacrificing quality of care in order for it to be affordable by both the government and the public. Following his criticism of the Ryan Plan, Orszag outlines a rough sketch of what must be done to get the issue under control: "The truth is that constraining future health care costs will require a variety of approaches, but in particular it will mean improving the information that providers have about their patients and best practices, and the incentives that providers are given to deliver better care, especially in expensive cases."


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Ted Simon
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