Paul Ryan begins a much-needed conversation

The proposal is bold and controversial – meaning it won't become law (as written) – but Wisconsin Congressman Paul Ryan's FY 2012 budget plan will hopefully start a national, and adult, conversation about our nation's finances.

The plan, unveiled last week as congressional leaders were trying to avoid (I think) a government shutdown on the FY 2011 budget, would whack $6 trillion from projected spending over the next decade, simplify and lower tax rates in exchange for shedding corporate tax giveaways, and reform entitlements so that they don't drive us off a debt cliff.

The latter scenario would force a combination of very austere budget cuts and economically devastating tax increases on individuals and businesses.

Ryan would accomplish entitlement reform by reshaping Medicare, the government health care program for senior citizens, through a premium support system. In it, the government would pay a $15,000 subsidy to private insurers chosen by seniors, and this is where the public really needs to focus on the debate. Ryan believes this premium support, with annual increases tied to inflation, would force health plans to compete for these dollars, a better way of controlling costs than through the rationing of care. Meanwhile, the Congressional Budget Office estimates this approach would raise coverage costs for seniors as much as threefold, contending that insurance would be more expensive to deliver through private coverage.

For those of us who believe that consumers should be more in charge when it comes to making health insurance choices, it's a welcome debate.

Ryan would attempt to achieve additional Medicare savings through means-testing, meaning the likes of Warren Buffet and Bill Gates would somehow have to find another way to pay for most of their health care costs in old age, thank you very much.

Medicare's current fee-for-service model would be phased out for people under the age of 55, but there would be no change for people already over 55 who prefer the current system. Other variations of premium support, including the one favored by former Clinton budget director Alice Rivlin, would retain fee-for-service as a default option.

Ryan reforms Medicaid, the biggest cost driver for most state governments, with fixed-payment block grants so that states can experiment with ways to improve care for the poor and save money. Rhode Island, a fairly liberal state, received a federal waiver to tinker with Medicaid delivery, and the initial results could make it a national model.

Not everything Rhode Island has tried has hit the mark (co-payments for the poor sort of defeat the purpose), but through components like wellness programs, competitive bidding for providers, greater home care opportunities for seniors, fraud prevention, and hospital and nursing home audits, the state's projected annual Medicaid costs have declined by $1.1 billion.

Perhaps no system will be perfect, but in Rhode Island, it's so far, so good on the care delivery front, and that's according to Rhode Island AARP chief Kathleen Connell, who believes more community-based care has benefitted seniors.

Other states should be allowed to try these types of reforms, especially since Medicaid costs are shared by the states and the federal government, and especially if perverse, cost-driving incentives are removed as part of the waiver.

Perhaps the biggest flaw in Ryan's plan is that he does not really address Social Security, which should also be means-tested. Honestly, is there any sound reason why Donald Trump and other wealthy people should get all the benefits they have been promised if it results in Social Security insolvency for the rest of us? Good grief!

Instead of decrying "cuts" that are actually not cuts but slower rates of spending growth, I hope Democrats will counter not with the usual partisan fear mongering, but with their own ideas on how to avoid a debt crisis. (This week, President Obama is expected to do just that; other Republican plans balance the budget must faster than Ryan’s.) As we've seen in Europe, failure to do so will lead to austerity measures that are much more painful than anything Ryan has proposed.

For those of you who wonder why I decry Gov. Scott Walker and offer qualified praise to Ryan, that's simple. I can see paths to a balanced state budget that do not include the permanent curtailment of collective bargaining, which Walker did not campaign on, but I cannot see a path to federal solvency without entitlement reform. These are, as Ryan notes, the drivers of our national debt.

Ryan's plan effectively repeals ObamaCare – the good and the bad – which means his proposal is more likely to be a focal point of the 2012 election than make it into law in its entirety. But the political courage needed to even propose it is undeniable. Contrast Ryan's resolve with real and/or imagined Republican presidential hopefuls – a collection of the cautious (Tim Pawlenty already is distancing himself from the plan, but we'll see if he offers an alternative), airheads (Michele Bachmann) who couldn't explain these concepts in a million years, and hypocrites (Newt Gingrich) who don't have a snowball's chance of appealing to the broader electorate.

President Obama must be thanking the Almighty for his good fortune in having to run against the person who emerges from this underwhelming lot. That said, Obama needs to engage Ryan to a greater extent on the deficit-and-debt issue because his own projections of future deficits are underestimated by a whopping $2.3 trillion, according to the CBO.

More courageous, and scholarly in a governmental sense, are the health care officials who run Rhode Island's Office of Health & Human Services under liberal Republican Governor Lincoln Chafee. Speaking as a future (I hope) Medicare recipient, that's exactly the kind of government scholarship we need from both political parties!

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