Insight, analysis & opinion from Joe Paduda

Apr
8

The Ryan deficit plan, part two – shifting cost to Medicare recipients

Rep Paul Ryan’s (R WI) Plan to address the deficit relies heavily on private health insurers to solve the seemingly-intractable health care cost inflation problem. Today we’ll finish the discussion of his solution for Medicare.
Ryan’s Medicare plan does include means-testing and increases in the age of eligibility, both of which will affect costs on a macro scale. Means testing increases revenues for CMS, while increasing the eligibility age reduces the number of recipients – both valuable and needed, but neither does anything meaningful to restrain the increase in health care costs for Medicare recipients.
In fact, Ryan’s plan will increase Medicare’s cost trend by ‘fixing’ the physician reimbursement schedule, a fix that will add about $350 billion to the deficit today, and do nothing to reduce physician costs going forward. Beyond that, there’s precious little in his plan that does anything material to address the real problem – health care cost inflation.
For that, Ryan is relying on private insurers, who would take over responsibility for Medicare. They would be paid a fixed price, and would be expected to provide all necessary benefits for that price – an approach that’s very similar to how the private insurance market works today. How’s that going to work?
Pretty well, according to Ryan, who asserted that the Congressional Budget Office had reviewed his numbers. (at least that’s what I think he says; read it yourself here.)
Well, the CBO did review his plan, and the results are pretty discouraging.
Here’s Forbes’ Rick Ungar:
“Accordingly to the CBO estimates, the program would result in seniors paying twice as much for their care – a sum that would total more than $12,510 a year…
The GOP proposal, which would begin in 2022, involves providing a ‘voucher’ – or as Ryan likes to call it, ‘premium support’ – to seniors to help pay for their health insurance. The average American would receive a check for $8,000, representing roughly what the CBO estimates Medicare would have to fork out for the average beneficiary in 2022. In addition to the government’s costs, the CBO estimates that seniors, in 2022, would lay out about $6,150.00 in out-of-pocket costs in the Medicare system. That totals an average cost of health care for participating seniors, in 2022, to be $14,770.
Under the GOP privatization plan, the cost to purchase the health insurance policy would cost about $20,520 per year – leaving the seniors out of pocket in the amount of $12,510 or more than twice what they would pay in 2022 should the Medicare system we currently have continue.”
Ryan says his plan is adjusted to account for medical inflation; in actuality Medicare premium increases in the Ryan plan are based on the overall inflation rate, which is significantly lower than the medical CPI.
Fact is, private insurers have been managing Medicare for millions of beneficiaries for well over a decade, and they’ve shown no ability whatsoever to control costs. In fact, when the subsidy paid to private insurers was cut, they screamed bloody murder.
What does this mean for you?
While there are parts of Ryan’s Medicare plan that deserve serious consideration (increasing eligibility age for one), his reliance on private insurance is naive at best, and the complete lack of real controls over cost is quite disappointing. After all the fanfare over his plan and willingness to take on the tough issues, Ryan’s shown himself to be just another number-massaging political operator.


One thought on “The Ryan deficit plan, part two – shifting cost to Medicare recipients”

  1. Must say I agree with the essence of your evaluation of Ryan’s proposal. In part, I believe you are correct when you describe Ryan as naive to think that the private health insurance industry has the will and ability to successfully manage rising health care costs! The past 20 years is testament to the industry’s inability demonstrate the will to achieve that goal. So, what may be Ryan’s motivation for this enormous “cost shift”? From what I read about Ryan’s ideological development, reducing the size of government at any cost is far more important than the practical aspects of providing a reasonable level of care to an aging population.

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Joe Paduda is the principal of Health Strategy Associates

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