The liberal Internet has decided to pile on this piece in The New Republic from William Galston of the Brookings Institute. Galston thinks that Democrats ought to lay off Paul Ryan, because demonizing his plans for Medicare might invalidate premium support as an option for keeping the program finances sustainable. I think Paul Krugman says most of what needs to be said here.
What’s wrong with this lament? How about the fact that Romney-Ryan actually is a plan to end Medicare as we know it? (And why the quotation marks? That’s what it is – replacing the system with fixed-value vouchers). It is also a plan for drastic cuts in food stamps and Medicaid, not to mention canceling the expansion of coverage under the Affordable Care Act, which would mean lost insurance for tens of millions of Americans – thousands of whom would, in fact, die as a result.
Yet pointing out these truths is, in the eyes of Very Serious People, “demagoguery.”
But as for invalidating premium support, let me join with Scott Lemieux in saying, “Good.” Medicare holds down costs better than any other health program in America, maybe with the exception of the more radically government-centered Veterans Administration plan. The reason is that it has a large risk pool, can bargain on prices, and bring those savings to the individual. And there are a number of demonstration projects on coordinated care and bundled payments that could work to drive costs down even more. The last thing you want to do in that case is to add another middleman into that process, with them taking their percentage off the top. We don’t have to guess about whether opening up Medicare to “competition” will spur lowered costs. We have a series of good examples of that kind of competition in action, and it doesn’t work. It didn’t work for Medicare Advantage, whose costs are far higher than Medicare as a whole.
Premium support plans merely shift medical costs to individuals. That’s the only way it makes money. The benefits of “competition” accrue only to the competitors. The plan subscribers get screwed, either denied coverage or forced to pay through the nose for it. And with the cherry picking of healthy seniors sure to occur by the private plans, premium support doesn’t preserve Medicare, it undermines it:
Under premium support, traditional Medicare would tend to attract a less healthy pool of enrollees, while private plans would attract healthier enrollees (as occurs today with Medicare and private Medicare Advantage plans). Although the proposal calls for “risk adjusting” payments to health plans — that is, adjusting them to reflect the average health status of their enrollees — the risk adjustment process is highly imperfect and captures only part of the differences in costs across plans that stem from differences in the health of enrollees.
Inadequate risk adjustment would mean that traditional Medicare would be only partially compensated for its higher-cost enrollees, which would force Medicare to raise beneficiary premiums to make up the difference. The higher premiums would lead more of Medicare’s healthier enrollees to abandon it for private plans, very possibly setting off a spiral of rising premium costs and falling enrollment for traditional Medicare. Over time, traditional Medicare would become less financially viable and could unravel — not because it was less efficient than the private plans, but because it was competing on an unlevel playing field in which private plans captured the healthier beneficiaries and incurred lower costs as a consequence.
Digby is right that plenty of Democrats would like to bring Obamacare to Medicare, and create an integrated system with private insurance companies in an exchange, with a government, or public, option on the menu as well. This would have improved the current private market for individual insurance, but it clearly degrades Medicare, on price and quality and everything that matters. The idea of scaling down Medicare to Obamacare is not nearly as appealing as scaling everything else up to Medicare.
So in this context, blowing the Ryan plan to end Medicare out of the water isn’t just a means to win an election, it actually is a means to make such an idea toxic. Because it would in fact BE toxic for senior citizens.