Comments on Alice Rivlin's Entitlement Reform Testimony

The Brookings Institution’s Senior Fellow Alice Rivlin prepared testimony for the House Committee on the Budget -- one of the centers for entitlement reform and debate. She presented ways to reform Social Security, Medicare, and Medicaid while reducing the federal deficit. The views and options she expressed were the recommendations of the Bipartisan Policy Center’s Task Force on Debt Reduction (Domenici-Rivlin). Below, I highlight a few points that particularly struck me.

Medicare: As a member of the President’s Debt Commission, she worked with Congressman Paul Ryan (WI-1) to produce the Rivlin-Ryan Plan. Touted by panelists at NTUF’s Moving Forward on Entitlements event, Medicare would be remade into a voucher program. After 2020, new enrollees would receive fixed health care-related contributions at a growth rate of GDP plus one percent. Much like Congressman Ryan’s Roadmap, the plan would greatly increase Medicare’s longevity.

“The Affordable Care Act includes important provisions aimed at improving health outcomes and reducing cost growth: authorizing Medicare to contract with accountable care organizations on the basis of shared savings and value-based payments to providers; pilot projects to try out other payment reforms; ... . However, the impact and timing of these efforts is still uncertain.”

The Patient Protection and Affordable Care Act (PPACA), otherwise known as Obamacare, greatly increased the bureaucratic weight on the health care system. To help offset some of the pressure, accountable care organizations -- “a provider organization that takes on responsibility for meeting the health needs of a defined population” a.k.a. HMOs under government control -- are said to save money while increasing health care efficiency. However, this is a very optimistic outlook. To assume a new level of control of care, charged with ensuring quality and lower cost curves, is to institutionalize quality. Ask Medicaid how that turned out.

Pilot programs under PPACA may not have the results many proponents of Obamacare would hope. In improving quality and prices through such programs, many of the factors leading to success are oft times difficult, if not impossible, to replicate in other cities, states, or regions. NCPA’s John Goodman has explored pilot programs and their seemingly random success rates. I am not branding pilot programs as useless but they ought to be used in targeted instances with realistic measures of success. The general provisions used in PPACA open a door for pilot programs to become legacy government efforts, not to improve health care.

I agree with many of the reforms Rivlin proposed for Medicaid. Many of the problems occur because the give and take of “dual eligibilities” -- low-income earners receiving both Medicare and Medicaid -- and the shared financing system between state and federal governments. Many states are given larger shares per capita than others because they have learned to game the system. Rivlin goes on to say, “states could be given more leeway to design their own programs, either through block grants… or through waivers under the existing program.” By cutting out the federal bureaucracy, states would get medical care funds to those who need it more quickly.

Rivlin’s stance on Social Security reform is a mixed bag. She calls for a “change in the calculation of annual cost-of-living adjustments for benefits to more accurately reflect inflation” and to “slightly reduce the growth in benefits… for approximately the top 25 percent of beneficiaries” (otherwise known as means testing). Both measures would bring more accurate cost controls, while maintaining benefits for which the program was originally intended.

However, her last point concerned me the most: “The Task Force plan would cover newly hired state and local government workers under the Social Security system, beginning in 2020, to increase the universality of the program.” Certain government employees can opt out of the system in favor of their own group pension plans, which often are more successful than Social Security. By bringing more people into the system, a short-term cash infusion would result but, if no systemic reform occurs, they would end up in precarious situations similar to current beneficiaries.

You can check out Rivlin’s testimony here and the entitlement reform efforts of NTU Foundation here.