Paul Ryan (R, Wi) Abandons Plan to End Medicare and Replaces It With Plan That Keeps Medicare Without Adequate Funding

A Goldmine for Private Insurers and the Shaft For Seniors

Last spring Rep. Paul Ryan (R, Wi) proposed saving Medicare by totally eliminating it and replacing it with a set of private insurance programs that were subsidized by the government.  The idea was that the cost to the government would be far lower than continuing Medicare, and so money would be available for tax cuts for the wealthy.  Since total costs would be unchanged, the lower government spending would result in higher spending by seniors, but that’s okay with folks like Mr. Ryan.  After all nothing comes before tax cuts for the wealthy.

The plan has received lukewarm support from Republicans and no support from anyone else.  So now Mr. Ryan has enlisted a useful idiot in the personage of Sen. Ron Wyden (D, Or) to co-sponsor a new program.  In this new program Senior would still have the choice of traditional Medicare, or they could choose a private plan with subsidy support from the government.

What exactly this would do is not clear.  It doesn’t look like it would save money for health care costs unless history reverses itself, since the costs of private insurance have risen substantially in the past and are currently rising faster than the costs for Medicare.  To control government costs

the growth of Medicare would be capped; in general, spending would not be allowed to increase more than the growth of the economy, plus 1 percentage point — a much slower rate of increase than Medicare has historically experienced.

And there are as yet unnamed structural changes in Medicare.  The private plans would be required to provide coverage at least as good as Medicare, which means they really cannot be competitive, since Medicare has very low administrative costs and does not have the profit requirement that private plans would have.  So the only way that private plans can compete is to cover only the younger, healthier seniors, leaving the high cost seniors with serious expensive illnesses to Medicare.

But the sponsors of the plan believe in fantasy.  They think this system would reduce costs and provide better care, an impossibility.  Here is some of their hallucinatory logic, from, as you might have guessed, the editorial pages of the Wall Street Journal (Yes, the fact that Mr. Ryan and Mr. Wyden published there almost automatically means it is bogus).

In the event that these efforts did not stem the rising tide of Medicare spending, there would be a cap on the program's rate of growth. But unlike other proposals, spending that exceeds the cap would neither be addressed through bureaucratic cuts nor passed on to seniors by default as higher premiums.

Instead, Congress would be required to do its job: Determine why the costs exceeded the cap and—when the evidence merits—reduce payments to providers, drug companies, or others who may be responsible for escalating costs.

By giving seniors the power to choose among competing plans, our plan would add a level of cost control, customization and quality to the health security of older Americans that today's Medicare is not in a position to achieve.

Who in their right mind expects that Congress has the ability to determine why health care costs are rising and do something about it?  Really, on what planet does that happen?

But all of that is not the point, the point is that a bi-partisan group of politicians can say they have preserved Medicare, introduced competition, and provided for cost control even though at the end of the day when such a program is enacted none of these things would take place.

In actuality the only way in which health care reform can take place is if the trend towards eliminating traditional insurance takes place.  This would happen when insurers purchase health care providers and when health care providers purchase insurance, a trend that is starting to take place.  But that is happening in spite of, not because of what the government is doing.  If this occurs then Medicare can simply pay the health care provider/insurance organizations a fixed fee to take care of any senior who selects them, and as long as the payment is the same for everyone regardless of age or health condition, and as long as any plan must accept all who want to join, Medicare as we know it is saved without the rediculous proposal of Mr. Ryan and Mr. Wyden.

As always with health care costs, we end with the following question.  First here is Mr. Ryan and Mr. Wyden on how bringing private insurers into Medicare will control costs.

In order to offer better benefits and lower costs than traditional Medicare, private plans will have to develop better delivery models and design better ways to care for patients with chronic illnesses. Imagine health plans tailored to help patients manage diabetes, prevent heart disease, or combat high blood pressure.

leaving us once again to ask the question, "since private insurance is the dominant provider in the non-senior population, if private insurance would do all of that innovation and cost control, why hasn’t it done so?"  Get back to us Mr. Ryan and Mr. Wyden when you can answer that question.