In his so-called “Path to Prosperity,” U.S. Rep. Paul Ryan pledges to “preserve America’s social contract with retired workers” by rescuing Medicare from collapse.
“Current retirees deserve the benefits around which they organized their lives,” the plan states. “Future generations deserve health and retirement security they can count on.”
There’s no question that Medicare is in real trouble. It is already placing enormous pressure on the federal budget, and once the Baby Boom generation begins to retire and claim their benefits, the stress will become untenable. Unfortunately, Ryan proposes to save Medicare by destroying it.
First, some basics. Under Ryan’s plan, Americans 55 and older will be guaranteed standard Medicare benefits. However, those who turn 65 after 2021 will be placed on an entirely different plan. They will in effect be given taxpayer-funded vouchers that they can use to purchase insurance from government-run exchanges, much like the much despised ObamaCare model.
However, those vouchers will not cover the entire cost of health insurance for those retirees. In fact, under the proposed formula, by 2021 those vouchers would probably cover roughly three-fourths of the cost of current Medicare coverage, and that percentage would decline in each succeeding year. Senior citizens would be forced to cover the difference out of their own pockets.
For some retirees, that would be manageable (the plan envisions unspecified higher subsidies for low-income retirees and those with more serious health problems.) But for others it would not, particularly as private and public pension plans falter and proposals are made to slash Social Security.
Ryan argues that the change from a government-managed plan to a voucher plan would actually drive down the cost of health insurance and make it more affordable for retirees. As the plan describes it, “50 million empowered seniors holding providers accountable in a true marketplace” will be more effective than the government in driving down health care and insurance costs.
“Putting patients in charge of how their health care dollars are spent will force providers to compete against each other on price and quality,” the plan argues. “That’s how markets work: The customer is the ultimate guarantor of value.”
There’s an idealism in that claim that is almost charming. The problem is, we have considerable data proving that such belief is nonsense. We know, for example, that since 1970, per capita costs for Medicare coverage have risen more slowly than per capita costs for private medical insurance. Ryan himself acknowledges that fact, complaining that Medicare pays hospitals and doctors less than private insurers while also claiming that “the open-ended, blank-check nature of the Medicare subsidy drives health-care inflation at an astonishing pace.”
When you make an apples-to-apples comparison in what are called common costs — defined as “benefits commonly covered by (both) Medicare and private health insurance” — the price-containment difference is even more stark. Since 1997, the per capita cost for such benefits provided by Medicare has risen at an average annual rate of 4.1 percent, compared to a rise of 6.6 percent among private insurers, a difference of more than 50 percent.
The truth is, individuals in the confusing, frightening and complicated health-care marketplace don’t have the information or analytical skills needed to drive a hard bargain with providers. That’s particularly true of an elderly demographic. If you doubt that, walk into a hospital and try to negotiate a better price for a knee replacement than Aetna or BlueCross has negotiated, using their experts and market power. You can’t do it.
These are not surprises. Nor are they design flaws. The Congressional Budget Office, in an analysis of the Medicare plan requested by Ryan, laid out its impacts in a letter last fall.
“Voucher recipients would probably have to purchase less extensive coverage or pay higher premiums than they would under current law, for two reasons. First, most of the savings for Medicare under the proposal stem from reducing the amounts that the federal government would pay for enrollees on a per capita basis, relative to the projections under current law. Second, future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.
For both Medicare and Medicaid, the budgetary effects would become larger over time because federal payments would tend to grow more slowly under the proposal than projected costs per enrollee under current law. Although the level of expected federal spending and the uncertainty surrounding that spending would decline, enrollees’ spending for health care and the uncertainty surrounding that spending would increase.”
Ryan bristles at the description of his approach as a voucher plan, preferring the term “premium support program,” but that’s what it is. But it’s a voucher plan. Through Medicare, this country has made a commitment to its senior citizens that they will not be denied needed medical care because they can’t afford it.
The Ryan approach to Medicare reform abandons that commitment. The best thing that can be said about it — and it’s a contribution not to be belittled — is that this proposal begins a much-needed conversation about how to tackle one of the most serious financial challenges facing us as a society.
That word, by the way, was not chosen lightly. How we treat our senior citizens is an issue for our society, not our government, to solve. It is a challenge to our values, our morals, our ethics and our humanity.
– Jay Bookman