Diana Furchtgott-Roth highlights the urgency with which Republicans and Democrats in Congress must tackle the “Runaway Medicare Train.” She also lays out why Paul Ryan’s proposal is preferable over President Obama’s. The problems at hand are manifold:

 1) Medicare threatens to eat up more than twice its share of GDP by 2050;

2) Rising Medicare taxes on income and capital gains reduce incentives to work and invest;

3) President Obama’s proposal to rely on bureaucratic mechanisms to reduce Medicare spending by lowering reimbursement rates will exacerbate doctors’ shortages for seniors;

4) “Under Mr. Obama’s proposal, Medicare costs would be cut through rationing. If the Independent Payment Advisory Board says your treatment isn’t worthwhile, then it’s indeed “tough luck – you’re on your own.”” – Furchtgott-Roth

Instead, Paul Ryan’s plan offers to lower costs by introducing more choice and competition in Medicare markets, the very properties that lead to lower costs in almost all other areas in the economy. As Furchtgott-Roth explains:

Under Mr. Ryan’s plan, Medicare would pay a certain portion of the insurance company premium, with the amount to depend on the income, age, and health of the beneficiary. The rest of the premium would be paid by the beneficiary.

This would inject more choice into Medicare, turning it from its current structure into a system of competitive managed care, modeled after the Federal Employees Health Benefits Program, with more choice among plans. …

Premium support is the system used by federal government workers, members of Congress and their staffs, and government retirees in the Federal Employees Health Benefits Program.

As health care costs have risen over the past two decades, the program remains popular with government workers. Unlike Medicare, there are few complaints. In fact, many federal government workers value their ability to keep the health plan during their retirement.

The advantage of the federal workers’ health program is the variety of plans at different prices, ranging from traditional fee for service to managed care to health savings accounts combined with insurance for catastrophic care.

More choice means lower costs. Medicare Part D, the prescription drug benefit, has cost less than was forecast because seniors have a choice of plans that compete for their business.

Read the article here.