Tuesday, November 8, 2011

Mitt Romney’s Medicare Plans Belongs in a Bad Fiction Novel

Has Mr. Romney Completely Removed Himself From Reality in Order To Sell Himself to Radical Conservatives?

Medicare has come back into the 2012 Presidential Campaign.  The issue was thrust into the public arena earlier this year when Rep. Paul Ryan (R, Wi) proposed to end Medicare and provide seniors with a subsidy to purchase private plans.  The public rejection of this structure  lead to a Congressional defeat for Republicans in a previously solid Republican district in Western New York, and the total lack of embrace of the Ryan Plan by the Republican Presidential candidates.

Mitt Romney has taken a page from the Rick Perry campaign.  Mr. Perry is proposing a tax reform package that would cut taxes for the wealthy, but raise them for lower and middle income taxpayers.  In order to remove that rather odious characteristic from his plan, Mr. Perry would offer taxpayers the option of paying under the existing system.  This would mean some people’s (the wealthy in case you didn't guess) taxes would go down and no one’s taxes would go up.  Yes the deficit would explode, but these are Republicans, they love that.

Mr. Romney’s Medicare proposal does the same thing.  He would adopt the Ryan plan but give seniors the option of remaining in the existing program.

The proposal, offered to conservative activists Friday afternoon, would be similar to one proposed by Republican Rep. Paul Ryan of Wisconsin earlier this year, but with one big difference. Mr. Romney, the former governor of Massachusetts, said he would keep the current system as an option, while Mr. Ryan and House Republicans voted to drop traditional Medicare altogether, except for those now 55 and older.

This, of course, is fiscal and logical lunacy.  It exists only in a fantasy world where competition amongst private insurers reduces costs. 

The Romney campaign, however, is putting its faith in the ability of a competitive market place to maintain health-care quality at lower costs and greater efficiency. He said the private plans would be required to offer coverage at least as good as Medicare's. Seniors could choose more generous plans but would have to pay more out of pocket. Seniors who choose less expensive plans would be able to keep leftover cash from their vouchers to pay other medical expenses such as co-payments and deductibles.

Seriously, this plan would actually lower costs so that Senior’s premiums would be less than the subsidy?  Does anyone believe that?  Private plans have higher administrative costs if for no other reason than duplication (overhead is needed for each plan) and have a profit requirement that Medicare does not have.  Medicare with its massive, diversified base has lower risk, and its huge market presence means it could negotiate much lower costs than any smaller private insurance company.  If the profit requirement on $200 billion of Medicare spending were only 5%, that's a $10 billion cost increase for private plans that Medicare does not have. 

Here is reality

But by turning the federal role in seniors' health care into a voucher – or "premium support – Mr. Romney would give the government considerably more latitude to lower its costs. A Congressional Budget Office analysis of the Ryan plan suggested that a voucher system would shift costs from the taxpayers to seniors, as the rising cost of health care outstrips the value of the voucher.

As for the costs of all this, well everyone will just have to trust Mr. Romney.

Mr. Romney did not say how much money he believes his proposal would save the government. He cautioned that he would make no changes to the system for current Medicare beneficiaries or those approaching retirement, meaning that any savings from his plan would be slow in coming.

Just so everyone knows what "cost savings" we are talking about here, these are cost savings to the government by a massive shift of health care costs to individual seniors.  That's the cost savings of the Ryan plan and that is the only cost savings available from the Romney plan.

And the issue that private insurance can reduce costs and that Medicare results in higher costs, well the facts show just the opposite as The Dismal Political Economist and others have recently shown.  But the Romney plan is not a real plan, it is a political stunt aimed at appeasing the Tea Party crowd without taking an unpopular stance.

Does Mr. Romney really think they are that dumb?  Well, obviously yes.

Are they really that dumb?  C’mon man, have you not been paying any attention to news and events?

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