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Premium Support? Or Vouchers?

The idea of replacing traditional Medicare with a "premium support" system has a long pedigree. And the term itself traces back to a proposal co-authored by economist Henry Aaron.

So what does Aaron think of House Budget Chairman Paul Ryan's twist on the idea? Not much. And in an interview with Ezra Klein, Aaron explains why:

If one does the arithmetic, income grows a few percentage points faster than prices. Health-care spending grows faster than income by a couple of percentage points. So we’re looking at linking [the value of federal assistance to seniors under Ryan's proposal] to an index that grows less rapidly than health-care costs by three to four percentage points a year. Piled up over 10 years, and that’s a huge erosion of coverage. It’s vouchers, not premium support.

Not only that, but Ryan simultaneously manages to stop all of the promising experiments in cost control that will take place under the Affordable Care Act:

we’ve just enacted the Affordable Care Act. It includes, in my view, just about every idea for reining in the growth of spending that analysts have come up with, though it doesn’t go far on some of them. So here we are, we’ve just enacted a piece of legislation under which we might mobilize the potential of the Medicare program to leverage changes in the delivery system and payment systems, and just at that moment, we now have a call to scrap all that and turn to the possible power of just a fraction of health insurance buyers to rein in the growth of spending.

The whole interview is worth reading, as is Aaron's op-ed in the New York Daily News.