In a surprise move, Paul Ryan found a Democratic partner to propose a new Medicare plan that does not fully privatize it, but instead keeps fee-for-service Medicare as an option alongside a premium support plan. This is the same proposal that the front-running Republican Presidential candidates have made.
Here’s the plan in a nutshell, from Ryan and Sen. Ron Wyden’s op-ed:
Our plan would strengthen traditional Medicare by permanently maintaining it as a guaranteed and viable option for all of our nation’s retirees. At the same time, our plan would expand choice for seniors by allowing the private sector to compete with Medicare in an effort to offer seniors better-quality and more affordable health-care choices.
Under our plan, Americans currently over the age of 55 would see no changes to the Medicare system. For future retirees, starting in 2022, our plan would introduce a “premium support” system that would empower Medicare beneficiaries to choose either a traditional Medicare plan or a Medicare-approved private plan. Unlike Medicare Advantage, these private plans would compete head-to-head with traditional, fee-for-service Medicare on a federally regulated Medicare exchange.
This reformed Medicare program would include the toughest consumer protections in American government.
Low-income seniors who qualify for both Medicare and Medicaid would continue to have Medicaid pay for their out-of-pocket expenses. Other lower-income seniors would receive fully funded savings accounts to help offset any increased out-of-pocket costs, while wealthier seniors would receive less help.
All health plans that participate in the Medicare exchange would be required to offer benefits that are at least as comprehensive as those covered by traditional Medicare, and participating plans would be forbidden to charge discriminatory premiums and would be required to cover everyone regardless of age, gender or health status.
So you have the Ryan plan, competing with traditional Medicare.
First of all, there’s nothing novel about this plan. This is what Newt Gingrich proposed in the mid-1990s, when he thought that Medicare would “wither on the vine” in the face of competition with private companies. Actually what we’ve seen is that Medicare Advantage, which despite the claim above is basically in competition with traditional Medicare, costs a lot more and doesn’t provide better coverage. And Medicare hasn’t withered at all. People love the single-payer plan. My expectation would be that if this took effect, it would depend on who ran Congress and the White House as to which program, traditional Medicare or premium support, would have a leg up, at least at the outset. But Medicare simply does a better job of providing care with low cost. Any savings from this plan for the government goes onto the consumer, and insurance companies pocket the difference.
I’ve heard a few people say that this is the exchanges with a public option, and that’s not all wrong. But there’s a difference between imposing exchanges with a public option on the individual market and imposing it on a working single payer system. The former would be a step forward; the latter is a step backward. This fractures the market for seniors, and any smaller pool would raise overall costs. This degrades the market, by replacing a more efficient program with this Rube Goldberg approach. Ryan and Wyden bend over backwards to claim that the premium support would be robust enough, and that nobody would be discriminated against, and all the rest. If that’s the case, why make the change at all? Ryan and Wyden would say that competition is the reason: that putting private insurance companies in competition with Medicare would lower the cost. The experience of Medicare Advantage shows just the opposite; the costs of Medicare Advantage are rising. Similarly, in the individual market, where companies allegedly compete with one another right now, costs rise much higher than in Medicare. Health care just isn’t the same kind of market from the laissez-faire capitalism textbooks. The invisible hand doesn’t deliver the same results when someone is sick and needs a doctor right away.
And there’s this hand-wave, with a cap on Medicare spending but somehow a pledge that the cap won’t effect patients:
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.
Um, how? How exactly would you cap Medicare spending and not have it impact anyone? I don’t know what “bureaucratic cuts” could cover, that’s pretty vague, but capping spending would not help but have a direct impact on seniors.
Why is Wyden involved in this? First of all, he has a history of partnering with Republicans on health care issues; remember Wyden-Bennett? Second, the plan includes his Free Choice Act, the option whereby employees can take the money their employer used to purchase health insurance and buy their own coverage tax-free. This is a form of Wyden-Bennett that could open the exchanges to many more workers. It doesn’t put a public option there, but it’s probably a small positive.
From a political standpoint, I don’t know why you would bail out Paul Ryan, although the early coverage makes it look like he caved by keeping regular Medicare alive. Democrats will probably run the same ads on the Ryan plan to end Medicare. But they will have lost their bite. Republicans will say that Ryan has a new plan, and even Democrats agree with it. They may not even endorse the plan. But it gives them an out.
UPDATE: A bit more here, though I’m sure Jon Walker will add on. The budget cap is at GDP +1%. That’s much better than CPI + 1% from the original Ryan plan. But it’s still above where Medicare is at now. There are ways to reduce the cost of Medicare, and I can think of a few of them that wouldn’t impact patients. Allowing negotiation for prescription drugs is one, and new payment delivery systems are another. So is opening up the medical profession to free trade, allowing qualified, lower-cost providers abroad to provide service. I doubt that Ryan has any of these in mind.
UPDATE: I think Igor Volsky has this mostly right.




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Give private health insurance two more years to demonstrate their superior outcomes and lower costs. If, at the end of those two years, private health insurance costs are not lower than the average cost per person of all industrial countries, with superior outcomes and with everyone covered, then the US offers Medicare for All to everyone and we admit that after 60 years of trying, “free” enterprise could not produce a more efficient product than the government.
as a disabled person i can tell you right off that medicare is a great great insurance.
i have never had a single issue or a problem since there are no limitations that i am aware of regarding care tests etc.
of course the real issue is the secondary plan.
if you have a good one you have NO MEDICAL BILLS at all.
but my guess is very few people on medicare today would ever change there plan or even consider switching to private health insurance plans.
they know what seems good today is gone 3 years down the line.
and where the hell are the democrats on this??
they should be screaming to leave medicare alone, at the very least!
How much would Medicare for All cost?
So they’re making a system that’s just like Medicare with strict restrictions on the new system, so what’s the point?
and of course we cant ever expect these corrupt ho politicians to admit that they dont give rats ass about the patient but seek only to enrich the insurance companies.
obama killed the prospects of a single payer and so killed millions of poor people unable to afford health care and medicines.
that issue alone earns him a place in hell.
Anything that takes away from medicare begins the programs slide into nothing more that a welfare program for the poorest and most sick and makes it easier for the PTB to ultimately dismantle it. Not to mention that it takes away a big stick that Dems could have used on Repugs in 2012.
Ron Wyden should know better and I believe he should pay a price for this betrayal.
What nonsense.
1. the current Medicare Advantage already functions this way. although it’s not called a “voucher,” you can have Medicare contribute to the premium of a private insurance plan, in lieu of straight Medicare. The eligible plans must provide at least the coverage of Medicare; it can offer more, but if it costs more, you have to pay extra for it. How is this different? It’s not.
2. The current Medicare Advantage has required about a 14% subsidy to be competitive with Medicare. When Congress proposed to reduce the subsidy to reduce Medicare costs, the private insurers squealed, claiming that would be the end of Medicare/Advantage for millions. It was a lie.
3. The CBO has already priced out what would happen if you expand the number of people getting private insurance; the cost of Medicare will go UP. By trillions. Dean Baker at Beat the Press already hit this point.
4. Ron Wyden is an idiot to do this. There’s no policy merit to this, no savings, nor more choice than today, and it’s a stupid political move. Someone should occupy his office.
5. Offering policies on an “exchange” accomplishes nothing. All that means is that you go to a common website to find the links for each company/policy, instead of several websites. An Exchange does not make the industry more competitive, does not eliminate concentration, does not change the private insurer’s incentives for cherry-picking patients through advertising and adverse/discriminator treatements/billing practices.
Provide a “alternate” to traditional Medicare, then slowly withdraw support for it. In a couple of years come back with the “no need for both programs” argument.
Not too hard to read between the lines.
Hospital Insurance (HI), or Medicare Part A expenditures have exceeded income annually since 2008 and are projected to continue doing so until the fund becomes exhausted in 2024.
What then?
Good question, but it’s an economy-wide problem from the private sector. It is not a “medicare problem.” Medicare costs less than total private care. So expanding private care will increase costs. Just math.
Health care costs are rising for the entire economy, and we pay providers about twice what other countries do. If you don’t solve that, it impacts the whole economy, not just that part of the care system funding via Medicare. Drug monopolies, concentration of hospital ownership, conflicts with Dr.-owned hospitals — which charge way to much and prescribed too much are all problems of the private health care system. The effect on the Medicare budget is just a symptom of this private sector problem.
Wyden is a corporate douche bag.
The data is already there, private insurance companies lose big. Here’s just two examples which can easily be verified:
http://healthaffairs.org/blog/2011/09/20/medicare-is-more-efficient-than-private-insurance/
http://www.healthpaconline.net/health-care-statistics-in-the-united-states.htm
Much less than with private insurance:
“According to CMS, for common benefits, Medicare spending rose by an average of 4.3 percent each year between 1997 and 2009, while private insurance premiums grew at a rate of 6.5 percent per year. (See Table 13)
According to a calculation by the National Academy for Social Insurance, if spending on Medicare rose at the same rate as private insurance premiums during that period, Medicare would have cost an additional $114 billion (or 31.7 percent).
…
The CBO has predicted that the rising cost of private insurance will continue to outstrip Medicare for the next 30 years. The private insurance equivalent of Medicare would cost almost 40 percent more in 2022 for a typical 65-year old.”
— http://healthaffairs.org/blog/2011/09/20/medicare-is-more-efficient-than-private-insurance/
That’s why we implement the “cap”. Now, I’m sure you read the article and there are a few details of the “the cap” that need to be worked out. But we have, as you pointed out, until 2024 to iron out those little details. I’m thinking a reverse algorhythm would probably work here.
If I math that out it comes to about $10,800 per person. Can that be right?
NIce piece of research. FWIW, in round numbers the per capita expense I rcently saw somewhere (some place crebible) was $7,800 per person.
What I meant to say was that you’re probably not totally out of the ballpark. $3 grand, give or take.
My numbers came from the Medicare Trustees report.
2011 ANNUAL REPORT OF THE BOARDS OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUNDS
https://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf
Whether the number is $10,800 or $7,800, that’s per person. How could a family of 4 afford that?
Wyden is looking ahead to when the Supreme Court tosses Obamacare next year.
The only way left to provide universal coverage will be through Medicare.
The more “market-based” these reforms make Medicare look, the easier it will be to back Republicans into supporting universal Medicare; President Romney/Gingrich won’t have to renounce their long-held opposition to single payer healthcare to sign on for that.
From a political standpoint, I don’t know why you would bail out Paul Ryan,
They got blackmail on him or met his bribe price.
Regarding the last update, 40% of GDP is in financial services. That means 40% of GDP is based on smoke and mirrors.
I’d hate to think Wyden is throwing in the towel while, it is possible that ryan could be in trouble. I would like to see him wait till after the election to find someone to deal with.
Depends on benefits provided – a system for all would need to define coverage to be “basic care” – as in other countries (we could just lift the Brits NIH rules) – and for that basic care a “payroll tax” that was on all income, including investment income, would be about 6% on ee and er, and 12% on the self-employed -
or about 1/3 less than we currently pay.
We’d need an excise tax/windfall profit tax on companies that used the new law to pocket the savings from not paying the prior ins company premium payments, waived if they subsidized the workers 6% to some percentage – say 90% – of the dollar amount they previously paid.
From memory that sounds about right – private insurance would be 16,000 to 18000 for this group (end of life care is expensive).
Similarly the cheaper to cover under 65 group would be $6000 per year to cover – again less than the 9000 to 11000 in the private sector.
The family of four already pays for health care -
and the current payment method kills job growth in the US
the ending of the most common bankruptcy cause in the US – medical bills – would be nice.
The HI premium of a payroll tax of 1.45% will need to be increased in 2024, or the system will continue but only pay some lower percentage – say 90% – of the hospital bill, rather than the current 100%.
Finally -back to the post by David -
Excellent summary David -
“spending that exceeds the cap would neither be addressed through bureaucratic cuts nor passed on to seniors by default as higher premiums”
is nuts – any “addressing” means fewer benefits.
The link to Igor Volsky http://thinkprogress.org/health/2011/12/15/389711/wyden-ryan-medicare/ provides info that is mostly correct, except his discussion of how to get around actuarial equivalence is a bit off – if properly applied, there is no getting around actuarial equivalence and there would be by definition no savings except administrative savings – which we know don’t exist. So what he is saying is that the private sector would do a “dread disease” policy that the states over the years have heavily regulated because of the abuse, and use actuarial values for the over 65 population as the “actuarial equivalence” comparison for their 20 to 50 year sales.
Given ins company control of the National Association of Ins Commissioners (and of state houses) as shown in the recent medical loss ratio proposal to HHS under the 85% rule for claims to premiums under ACA, it is likely that we would be getting little preventive care and just “dread disease” under the Ryan plan.
I’m with you on this (I think). Forget all the private insurance, vouchers, etc. Just jack up the taxes on everyone and move on. It’s not as if they’ve never raised payroll taxes in the past.
Remember the population served by those costs, alanltx. We are elderly, we require lots more care, have many more hospitalizations, rehab, medications, etc. etc. etc. than a “typical” family of four.
If I was a betting man and had Willard’s $10K I would bet you that the SCOTUS accepts the mandate in the law. Two things to start off with in any debate about healthcare -
First, any plan agreed to by Paul Ryan is BAD of the American public. Secondly, any plan that keeps the insurance companies in business, gouging us and making life and death decisions, is also BAD for the American public. After those points are agreed to, then negotiate and “compromise.”
Well technically the health insurance my family has costs around $25,000 a year. We’ll be paying $213 monthly but the company my husband works for pays 9 times that.
Unlike any production enterprise which makes a profit delivering some product or service, Health Insurance makes its profit by delivering as little as possible. They are supposed to deliver payment for health care, but their profit depends on denying, delaying and diverting as much of the bill as possible.Its the exact opposite of what captitalism is supposed to support.
Okay, so now we know that it’s Wyden’s turn to be a Dem rotating villain.
The Democrats’ Rotating Villain routine is here in evidence again (see Greenwald if you are not familiar with this concept). Carl Levin was the designated Democratic villain whose role was to insure the gutting of the fifth and sixth amendments–Wyden was one of only seven senators to vote against that bill. But now some Democrat has to step up and give cover to the 1 per cent’s attempts to gut or at least weaken Medicare, and it seems it’s Wyden’s turn to be the villain.