Republicans in Washington face a tough question after unexpectedly winning the presidency and controlling the Senate in the 2016 elections. They have regained single-party governance for the first time in a decade, with GOP hands on all the electoral levers of federal government. Donald Trump will have an opportunity to nominate a successor to the late Antonin Scalia, restoring the nominally conservative balance to the Supreme Court.
The question is this: What now? One answer, ironically, comes from Nancy Pelosi.
Republicans in Congress have long hoped to reinvent Medicare to resolve trillions of dollars in unfunded mandates over the next few decades. Just within the next decade, the Congressional Budget Office projects that Medicare spending will rise from $648 billion in 2015 to $1.28 trillion in 2025. Heritage Foundation senior fellow Dr. Robert Moffitt warned in July that “outlays will generally outpace the growth in the general economy (as measured by GDP), aggregate national health expenditures, and private health insurance.”
The only solutions on the current trajectory to bend the cost curve downward while maintaining the current single-payer framework of Medicare will be “major tax increases, savage benefit cuts, or some undesirable combination of both.”
If that sounds familiar, it should. Colorado voters overwhelmingly rejected a referendum that would have forced its residents into a single-payer health system called ColoradoCare. The measure failed spectacularly in large part because of a non-partisan analysis from Colorado Health Institute that predicted a sea of red ink. The program’s budget would have quickly run annual deficits in the billions while doing nearly nothing to save health-care costs. The only way to close those gaps, CHI concluded, were either tax increases or benefit cuts and reducing payments to providers, who would then be incentivized to seek business elsewhere.
As I wrote at the time, those are the inevitable end options in single-payer systems. Those operate on scarcity models, using rationing and taxation where healthy markets use price signaling, competition, and incentives for providers to join markets rather than drive them out. It’s no coincidence that Congress has used the same options in futile attempts to tweak Medicare’s single-payer structure and no surprise that they have not solved the underlying structural issues of an aging population and fewer workers from whom to transfer wealth.
House Speaker Paul Ryan has seen the writing on the wall and has proposed a restructuring of Medicare into a premium-support model to serve those who come into the system in the future. Democrats have attacked this as “privatizing Medicare,” and Pelosi warned this week that she will rally Democrats to defeat any attempt by Republicans to implement it. She warned Ryan what happened when George W. Bush tried reforming Social Security in 2005.
“Bush had just been elected,” Pelosi told Washington Post analyst Greg Sargent. “He gave us an opportunity by saying he would partially privatize Social Security. Everybody stuck together. The opportunity that we have now is the equivalent of the opportunity we had in ’05.”
Ryan’s likely to take that advice, although not because Pelosi offered it. A decade ago, conservatives had built a good public case for entitlement reform and had a president who wanted to accomplish it. In 2017, however, they will have a president who openly dismissed talk of restructuring entitlement programs, insisting that he can make it work by putting his superior business acumen to work on it. The populists who lifted Trump to the White House have little taste for revamping Medicare or Social Security.
In fact, national debt and budget deficits appear to have dropped off the GOP’s radar screen, at least for the moment. Trump has promised a trillion-dollar stimulus to update national infrastructure, a key part of his “Make America Great Again” campaign pledge, and Democrats want to jump on board that part of his bandwagon. Trump’s plan differs from outgoing President Barack Obama’s 2009 stimulus bill in key ways, but so far it doesn’t come with explicit spending cuts elsewhere to fund it.
Former Senator Alan Simpson, a Republican deficit hawk who has crusaded for budget and entitlement reform, sees both as lost causes and fiscal conservatives as locked out of the process, at least for now. “I don’t think our phones will be ringing off the hook,” Simpson told the Post’s James Hohmann. “Deficit or debt, fiscal or monetary, the real issue is the budget guys aren’t dealing with two-thirds of the budget – the entitlements.”
The Trump administration will spend its first months working on its campaign promises and other goals. If Trump does anything significant with Medicare, it’s likely to be addressing the “waste, fraud, and abuse” that he and other politicians from both parties insist are the real problems in the entitlement system.
Perhaps by the midterms in 2018, Trump will have learned that those issues only nibble at the edges of the coming debt nightmare of Medicare, and will be willing to act more boldly. By that time, Republicans have a fair chance of achieving a nearly filibuster-proof majority in the Senate that could push Democrats into a sense of fiscal reality as debt continues to spiral out of control.
Until that reality dawns across the aisle – and down Pennsylvania Avenue – fiscal conservatives have little hope of progress on that front and will have to focus their efforts elsewhere. That’s why single-party Republican governance will continue the current tradition of kicking the Medicare can down the road, at least a little further, while unfunded liabilities continue to accrue.