Over at National Review Online, I take a look at Congressman Paul Ryan’s “Roadmap” for entitlement and tax reform. The piece focuses on the reforms which are crucial to building a functioning marketplace in the health sector. An excerpt:

Elected Democrats and their allies have also taken note of Ryan’s proposal. Their main interest seems to be, as usual, in scaring seniors about supposed Republican “privatization” plots. In particular, liberals are focusing their anti-“Roadmap” fire on the proposal to convert the Medicare entitlement for those currently under age 55 into a system of fixed contributions toward the purchase of insurance.

Ryan’s opponents are right to highlight this reform. It is a dramatic shift from current law. But they’re wrong to argue that it would do nothing to control health-care costs. These critics claim that Ryan’s plan would simply shift the burden and risk onto individuals, because the government’s financial support for health-insurance enrollment would no longer keep pace with premiums. But that’s the wrong way to look at it. Our goal shouldn’t be to keep pace with premiums, but to bring premiums under control by eliminating the widespread inefficiency that exists in the health-care sector today. That’s the only way to slow the growth of health-care costs without harming the quality of care.

Forget one-off ideas for trimming this or that. What is needed is a continuous, long-term, dynamic process that will lead those who deliver services to want to provide better care at less cost. What can bring that about? Ryan’s emphatic answer is that a functioning marketplace can, and an essential feature of such a marketplace is cost-conscious consumers. Under current law, when costs rise, the federal government pays a sizable portion of the extra costs, thus undermining the incentive to find better and cheaper ways to go about things.

Ryan’s reforms would provide substantial federal support to encourage broad-based insurance coverage and enrollment, but the support would not be open-ended as it is today. A person who buys economical health care would get to keep all of the savings. Conversely, a person who selects expensive health care would have to pay more out of his own pocket. That’s the way the new Medicare drug benefit works, and costs have come in 40 percent below original expectations. To root out inefficiency, improve productivity, and provide powerful incentives for cost-cutting innovation, the entire health-care sector must be transformed into a vibrant, competitive marketplace. And that’s exactly what the “Roadmap” would deliver over time.

The full article is available here.