So Mitt Romney released a fiscal plan. I hope his idea to eliminate Title X family planning funding, going much further than even many House Republicans, gets more attention. And there are some other far-right proposals in there as well, like raising the retirement age and capping spending at 20% of GDP and block-granting Medicaid. But for now, many have focused on the fact that Romney’s plan would create a modified version of the Paul Ryan voucher system for Medicare. These are the bullet points of the Romney plan:
Medicare should not change for anyone in the program or soon to be in it. Nor should tax hikes be part of the solution. Reforms must honor commitments to our current seniors while giving the next generation an improved program that offers the freedom to choose what their coverage under Medicare should look like:
• Give future seniors a choice between traditional Medicare and many other healthcare plans offering at least the same benefits
• Help seniors pay for the option they choose, with a level of support that ensures all can obtain the coverage they need; provide those with lower incomes with more generous assistance
• Allow beneficiaries to keep the savings from less expensive options or choose to pay more for costlier plans
• These reforms will encourage insurers to lower costs and compete on the quality of their offerings
• Gradually raise the retirement age to reflect increases in longevity
First of all, let’s dispense with the notion that there’s any kind of difference between any Republican candidate. This is the platform all of them will run on, with limited modifications. The Paul Ryan budget is the blueprint, and the base will have nothing less.
But I want to address the idea that Romney’s premium support in competition with traditional Medicare represents an endorsement of the public option, and proof that the differences between Democrats and Republicans on health care are largely semantic.
The first part of this is that seniors already have this kind of private choice when it comes to Medicare, in the form of Medicare Advantage. And we already have the statistics on this. It costs more. It costs more for the government, which subsidizes the MA plans. If it costs more for the government, it costs more for individual taxpayers. The Affordable Care Act “cut Medicare” by bringing many of these overpayments back into line. Maybe this will lead to some kind of competitive bidding process for the services of old patients. But it never has in the past with the Medicare Advantage setup. Competition between Medicare and private insurers didn’t lower spending. Period.
Second, there’s no indication of how generous the premium support would be. There’s no growth target, like the Consumer Price Index or economic growth, that Romney pegged. Any level of premium support below the average cost of insurance coverage just shifts costs onto the consumer. And the whole point of privatizing Medicare in this way is to offload costs. So it’s fair to say that the premium support would not be generous enough.
Third, as Igor Volsky points out, you’d almost certainly see adverse selection, where insurers would cherry-pick the healthiest applicants for private coverage, leaving the Medicare pool with the sickest and most needy.
But most important, there’s a HUGE difference between degrading a universal insurance program by instituting “competition” and improving a broken private market by introducing a public option. I don’t understand why so-called “experts” don’t see this. Medicare works best because it’s a large, universal market for people over 65. Any change to that, whether through raising the Medicare eligibility age (which Romney, as you can see, also supports) or this premium support plan, will tip Medicare from its perch as a large health care bargainer on provider prices. In the eligibility age example, it will raise costs on the Medicare pool, by removing 65 and 66 year-olds who are on average healthier than older beneficiaries, AND raise costs on the pool wherever those 65 and 66 year-olds go, because they are tend to be SICKER than those younger pools. The same consequences would occur from splitting up the risk pool in Romney’s plan.
The public option in the individual and small-group employer market would have broken apart those pools as well, but those pools already are fractured and have no bargaining power. The hope was that the public option would increase, have low administrative overhead and eventually use market power to lower prices. That’s why the best option was for it to piggy-back on Medicare rates. By contrast, splitting the Medicare pool just degrades universal insurance, raising costs across the system. It doesn’t matter if the systems appear to look similar. It matters where the starting point comes from.