Containing health care costs

Date posted: February 8, 2011

The two big federally supported health care programs Medicare and Medicaid are growing at fast rates. Any plan to reduce the relative size of the national debt will have to address these programs. N.C. State University economist Mike Walden talks about some new ideas that have been offered.

“Well … we have a very interesting bipartisan plan offered by one Democrat, one Republican. The Democrat is Alice Rivlin, who has held many top posts in various administrations of the federal government. The Republican is Congressman Paul Ryan. They have a plan that they have put forth to deal both with both Medicare and Medicaid rising costs.

“What they would recommend for Medicare is that instead of the program directly paying for senior’s medical expenses is they would take — what’s the money — the money that’s in Medicare, divide by the number of people in the program and give everyone a voucher. And that voucher would be used by the recipients to purchase private insurance. And so what this would do would be to put a cap on the amount of money spent each year in Medicare, and people would need to get private insurance and follow those rules.

“For Medicaid what they would do is rather than the federal government now providing money to the states and combining that with the states’ money to pay for medical expenses of lower-income people, they would convert that to a block grant. Again they would set the amount of money each year, which is not what happens now with Medicaid, but they would say this is the amount of money we are going to spend. We are going to block grant it to the states. The states have to use that to help meet the medical expenses of low-income people, but the states can decide how they are going to do that — maybe vouchers; maybe other things.

“The Congressional Budget Office estimated that by doing this plan, this would reduce cost of Medicare and Medicaid as a percent of the economy in 2050 from 14 percent of the economy down to 10 percent. So very interesting idea. I think it is going to get a lot of comment.”

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