Republican Truths and Un-Truths on Medicare and Their Proposed Plan

An Objective Look at What’s Correct and What’s Incorrect

The Dismal Political Economists is just as amazed as everyone else that Medicare has risen from relative political obscurity to become the number 1 political issue at this time.  Before assessing the Republican claims, let’s see how this came about.

1. After taking control of the House, the Republicans ceded control of all budget measures to Rep. Paul Ryan (R, WI).

2. Rep. Ryan developed a long term budget plan that involved cutting taxes for wealthy taxpayers and cutting government spending for the most needy citizens.  No surprise there.

3. Included in Mr. Ryan’s budget plan, was a proposal that in 10 years those persons who became newly eligible for Medicare would receive help buying private insurance, and that government would no longer be involved in the current Medicare program, except for those grandfathered (or grandmothered) in.

4. The House Republicans voted almost unanimously for the Plan, which caused it to pass the House, and in the Senate all but five Republicans voting supported the plan.

5. In the meantime, a Special Election was being staged in the 26^th New York state Congressional District, because the incumbent, a family man, had exposed his bare torso in e-mails to potential women admirers, and when this became known he promptly resigned the seat.

6. The Democrat in the race made her Republican opponent’s support for the Ryan proposal the centerpiece of her campaign, and won the Special Election.

Rather than moving away from the Ryan proposal for health care for seniors, Republicans have decided to even more enthusiastically endorse it.  In doing so they have set out a plethora of statements.  In the public interest, The Dismal Political Economists examines those statements and renders judgment on them.

1. The Ryan proposal does not end Medicare:

Incorrect:  Medicare is a single payer, government sponsored provider of health insurance program that everyone 65 and older participates in and obtains their health insurance from.  The Ryan proposal would end this program and replace it with private insurance.  This is not Medicare, as The Dismal Political Economist has previously shown, [Ending Medicare is Ending Medicare] unless the Republicans take The Dismal Political Economist’s suggestion and trademark the name Medicare.

2. The Ryan proposal is a Premium Subsidy Program, not a Voucher Program.

Correct:  A voucher implies getting a “certificate” good for something.  The Republican Plan has the federal government contribute to the premium for private insurance.  Calling it a Premium Subsidy is the more accurate term.

3. The Ryan proposal is just like the Federal Employees Health Insurance Plans.

Incorrect:  The Republicans draw this conclusion based on the fact that the Federal government subsidizes Federal employees health care premiums (as does most employer provided/sponsored health insurance programs).  However, those plans are Group Plans, and the premium is based on a risk pool of the Group as a whole. Everyone pays the same rate regardless of age, health condition or health history.  The Ryan proposal would be for individual coverage and the premium would be based on the individual’s health care history and age and current health condition.  This means every individual gets a different rate, and those who need health care coverage the most, the elderly with medical problems, would pay the highest rates if indeed they could get coverage at all.

4. If nothing is changed, Medicare will run out of money.

Correct:  Each year the Medicare Trustees issue a report that has an actuarial analysis of the Medicare Trust Fund.  If nothing changes the Trust Fund will not be fully funded by payroll taxes at some point in the near future.

5. Democrats have not offered a Medicare Plan.

Correct:  While Democrats have proposed and passed a comprehensive health care reform plan, the ACA, they have not presented a comprehensive plan that deals with the coming crisis in Medicare funding.

6. Under Democratic plans, Medicare will ration health care, under the Ryan proposal this will not happen.

Incorrect:   Health insurance companies currently decide what is covered and what is not covered, and what to pay for and what not to pay for.  If Medicare is replaced by private insurance, insurance companies will ration health care for seniors as they do today for everyone they cover.

7. In the long term, The Ryan proposal will bring down the cost of health care for the elderly borne by the Federal government.

Correct:  The amount of health care for seniors paid for by the Federal government will decline under the Ryan proposal compared to what would be paid by the Federal Government if Medicare does not change.  The difference would be made up by higher payments by those covered.

8. The Ryan Proposal will reduce the growth of health care costs.

Incorrect:  This claim is based on the premise that competition by private health care insurers will result in lower health care costs.  Historical evidence shows just the opposite.  For the non-elderly, private insurance companies provide the overwhelming amount of health care coverage in the U. S. through either group plans or individual coverage.  In that environment health care costs have risen much faster than inflation.  Based on this historical record there is simply no reason to expect private insurance for seniors to rein in costs any more effectively than private insurance has for the rest of the population.

Furthermore, the current Medicare program is non-profit.  Private insurance companies will require a profit, and that cost will be in addition to health care costs.  In other words, everything else being equal private insurance will cost more than government provided insurance.  Additionally, the maximum savings in administrative costs is achieved with a single payer system.  With private insurance companies, each company will have its own administrative costs, which will likely be much higher in total than current Medicare administrative costs.

The Republicans have apparently moved all-in on their health care plan for seniors.  One Presidential candidate, Tim Pawlenty has apparently endorsed the plan,

Pawlenty Says He Would Sign Plan

another candidate, Newt Gingrich has left The Dismal Political Economist confused and  wondering, and a third likely candidate, Mitt Romney is expected to be on both sides of the issue.

The first big battle of 2012 has begun.