Why wait to voucherize Medicare
The Kansas City Star
Simply put, if turning Medicare into a voucher program is such a good idea, why wait ten years to do it.
The Ryan-Romney ticket (and that’s the right order at the moment) says that seniors should get a voucher so they can choose their own health insurance on the open market. (Estimates vary on the value of the voucher in today’s dollars, so let’s work with an estimate of $8,000 annually.)
This private insurance option sort of existed with the Medicare Advantage concept, but the federal government had to subsidize these policies with private insurers an estimated 14% to 20% to get private insurers to issue policies. The elimination of those subsidies accounts for much of the so called “cuts” to Medicare in the Affordable Care Act.
But there are two major questions about the voucher program’s feasibility. How much would individuals have to pay in addition to their voucher in order to get insurance. And, would they be able to buy insurance at all.
As I posted here several months ago, insurance costs for a 65 year old person under the Missouri High Risk Insurance pool range from $812/monthly to $1925/monthly. For an 85 year old the premium ranges from $1734/monthly to $3615/monthly. A senior citizen at minimum would be a few thousand dollars short of enough money to buy insurance and could be as much as $35,000 short on an annual basis.
In other words, anyone with a significant preexisting condition would not have sufficient funds with a voucher to cover the cost of an insurance policy. And by the time a person reaches age 85, the premiums almost guarantee unaffordability for most of the population.
Whether seniors would be able to buy insurance at all remains an open question. If states discontinued their high risk pools, there is no doubt that insurance companies would not sell policies to high risk individuals, which is almost everyone as we age.
In theory, states or the federal government could require insurance companies to sell policies, but such a requirement is economically disastrous unless everyone is required to buy insurance. And the Ryan-Romney guarantee that they will repeal Obamacare, in part because of its individual mandate, assures that there will be no such requirement.
The Ryan plan says it would supplement poor people to allow them to buy a policy. Details of this are sketchy, but it is difficult to imagine there would be the political desire to pay sufficient supplements.
What would happen then to senior citizens who didn’t have enough money to buy insurance, even with supplements? Many would likely decide not to buy insurance and instead throw themselves on the mercy of hospital emergency rooms. Maybe they would demand to be paid the cash to use as they choose for medical care.
So, to return to my question: Why wait ten years to begin the voucher program? The answer is that it’s the only possible way to sell the plan politically. Senior citizens who already have Medicare don’t want it touched.
But maybe they’ll let their children and grandchildren take a voucher and fend for themselves in the private insurance market.
My guess is that senior citizens won’t like that scenario, and Ryan-Romney will have a tough time selling their plan in the battleground states of Florida, Pennsylvania and Ohio, where there are a lot of senior citizens.
Not to mention Iowa, where Mr. Ryan got an initial taste of the reaction to his plan yesterday at the Iowa State Fair. We’ll see.