What If Paul Ryan Proposed a Health Inflation Tax on Seniors Instead?

By Josh Eidelson

Since Paul Ryan introduced his plan to save our grandchildren from our grandparents, I’ve been imagining a different way he could have sold the thrust of it to the public:

“My fellow Americans, it’s time for straight talk, tough decisions, and tight belts. Health care inflation is a prime driver of our long-term debt. That’s why I’m going to save Medicare with my Health Inflation Tax. It’s a simple solution: each senior will just have to pay a tax equal to the increase in the cost of their Medicare to the government beyond 2.7% a year. So if your individual Medicare costs us 10 percent more next year, your tax will cover three-quarters of the increased cost of your care (the other quarter is on us!). Here’s the best part: if you want lower taxes, you just need to use less healthcare. And you can be proud knowing that as your Health Inflation Tax goes up and up, Medicare’s net cost to the government will never increase by more than 2.7% again. Now let’s come together and get my Health Inflation Tax passed. No demagoguery allowed.”

How popular do you think this plan would be? Would it have gotten the same forty Senate votes Ryan’s plan did on Wednesday?

I don’t think so either.

As bad as the politics of Ryan’s plan are, the politics of this Health Inflation Tax (might as well call it “HIT”) would be worse, especially with Republicans. But Ryan’s real plan is not so different from the hypothetical HIT. Like Ryan’s plan, the HIT addresses the rising cost of Medicare first by making seniors pay for most of it, and second by promising them they won’t be paying as much as government would, because they’ll choose to get less care. (Ryan’s plan also undoes the single payer nature of Medicare, which he says will make it more efficient even though it’s far more efficient right now than private insurance). Of course Paul Ryan wouldn’t propose that plan or use those words. But the comparison between the plan Republicans doubled-down on this week and the tax they wouldn’t be seen anywhere near suggests a few things about our budget politics.

First, Republicans’ enthusiasm for raising consumer costs to discourage consumption of healthcare is striking when contrasted with their response to proposals to do the same with other goods. During the health care reform debate, suggestions by academics to finance health care reform with increased taxes on soda or alcohol were quickly denounced as paternalistic. A market-driven cap-and-trade system to make carbon emitters pay for the negative externalities they created has been under fire from Republicans since 2008 (though the Democratic senator from West Virginia outdid them by spraying it with literal gunfire in a campaign ad). The economic logic here is the same. But Republicans would rather increase the cost of getting sick than increase the cost of things that make us sick. Maybe the difference is that making old people pay for their healthcare isn’t paternalistic since it doesn’t help them. Or maybe it’s that polluters don’t have the same kind of responsibility for their situation that cancer patients do.

Second, considering the Ryan plan in this light helps cut through rhetoric from politicians of both parties about government and families both tightening their belts. That simile obscures how public debt can be reduced at the cost of increasing personal debt – and vice versa. Rather than reducing the cost of health insurance, Ryan’s plan shifts it to seniors (he says consumer choice will drive costs down; many economists predict wiping out Medicare’s efficiencies will make costs rise even faster). The government can carry debt that a household cannot, it can issue bonds, and it can make investments that will pay off after generations. These aren’t options available to a family sitting around their kitchen table.

Third, comparing Ryan’s prosperity plan to an “inflation tax” suggests the limits of a “taxes versus spending” frame in describing the actual economic choices in front of us. Republicans have gotten tremendous mileage out of this language, especially the conversation stopper “Not a revenue problem, a spending problem.” The increasing prevalence of the noun “tax expenditures” is a lonely sign of progress in disrupting this misleading framework. The salient feature of the budget endorsed by forty senators isn’t that it cuts spending on seniors rather than taxing them – it’s that rather than distinguishing between necessary and unnecessary care, it relies on the inability of some people to afford care they think they need.

That question is the one too often missing from our budget debates: Who should sacrifice?

Josh Eidelson is a freelance writer and a union organizer. He received his MA in Political Science from Yale.