Why wait to voucherize Medicare
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.
George Hunsucker
Northland
9 months agoHave you even read the plan George? Judging from your blog, you have NOT….
George Harris
Kansas City
9 months agoIt’s easy enough to find info on Ryan’s plan for anyone who wants to parse it. And it’s not 2000 pages!!!:
http://roadmap.republicans.budget.house.gov/plan/default.aspx#Healthsecurity
George Harris
Kansas City
9 months agoA point worth clarifying: Ryan estimates the voucher to be worth $11,000..when fully phased in. My estimate of the value in today’s dollars may be close, but it’s hard to tell.
George Hunsucker
Northland
9 months agoYou did not answer the question George. Have you read the plan. I have, and if you had, you would know that it doesn’t apply to anyone 55 or older, and offers the present Medicare option to younger people.
Of course, younger people will vote for vouchers because it gives them CHOICE, but you libs will lose some govt. workers because a large percentage of people will opt out of traditional Medicare. Not to mention the growing numbers of providers who will refuse to accept Medicare patients.
At least be “fair and balanced” George, don’t just parrot your side’s talking points and pushing grandma off the cliff—so predictable!!!
Mark Hastert
9 months ago“I have, and if you had, you would know that it doesn’t apply to anyone 55 or older, and offers the present Medicare option to younger people.”
…What he’s saying is that YOU should get that option too! Now! But the reason they don’t want to do it now is that the plan stinks and everyone would find. Unless they make insurance sell to you there won’t be insurance for you. But wait! We can’t interfere with the free market. No that would be socialism so the geez bags would just do without, lose their life’s work the first time they go into the hospital and everything else in bankruptcy. You all know that of course because you’ve read the plan! The only reason you support it is you won’t pay the price for Ryan’s folly, the rest of us will. So in the mean time do a little research and go find out what a voucher will buy you, then do the rest of us a favor and opt out.
George Hunsucker
Northland
9 months agoYour link George, as expected, is the original proposal… You really need to get out more often….
Give the link to the current proposal and quit being dishonest.
George Hunsucker
Northland
9 months agoan honest link concerning Ryan/Wyden Medicare proposal:
http://www.nationalreview.com/articles/313757/grasping-medicare-distortion-yuval-levin?pg=1
Kent Mueller
9 months agoMark, why do you call seniors “geez bags”? That is just so unbecoming. It’s just simple respect. I know you don’t understand that, but it really is.
George Harris
Kansas City
9 months agoFrom the National Review article cited by Mr. Hunsucker above: “In order to be scoreable by CBO, the Wyden-Ryan reform also has a kind of backup: a requirement that Medicare’s growth not be faster than 0.5 percent more than GDP growth per year. That is, not by coincidence, the same maximum rate of growth set in President Obama’s budget. Neither maximum rate is really all that meaningful — it’s a scoring convention, not a reform; if it were exceeded, Congress would almost certainly just suspend it, as it has when past maximum growth rates (like the one in place since 1997) have been exceeded.”
George, I’ve read the proposals. The major fly in the ointment is, as stated above, the assumption of .5 percent increases. If Congress ended up waiving the rule for increases above this point, and assuming insurance companies submitted bids, then there would be no cost savings as compared to the present system. That’s why a Republican congress wouldn’t waive the rule limiting increases. And insurance companies aren’t going to submit a bid on which they lose money.
I also don’t think competitive insurance bidding will control health care costs any more than competitive house insurance bids can control the price of home construction. I’ve been on a health insurance company advisory board, and I was a founding member of an IPO (Independent Practicioner Organization) that entered into negotiations with health insurance carriers. There are a limited number of ways insurance companies can control costs, such as limiting fees to providers. But neither Obamacare or the Ryan (or Ryan-Wyden) plan will control costs significantly.
As I’ve said here many times before, it’s true that health care costs are a major problem for Medicare. But no one wants to face the real problems, such as end of life costs, because it conjures up the death panel argument. Until society faces this, we’re just shuffling deck chairs.
George Harris
Kansas City
9 months agoForgot to mention this: A concern about the public option in the ACA debate was that private insurers would skim healthy customers and leave sick people to the public option. The same problem exists with the Ryan-Wyden proposal. That is, would private insurers find a way to exclude people they don’t want in order to keep costs down, thus driving traditional Medicare costs up and eventually leading to its elimination. There may be ways to control this, but I’m skeptical.
George Hunsucker
Northland
9 months agoGeorge, as far as skimming the cream, if insurers were required to take anyone regardless of health, I don’t see how skimming could occur.
Your questioning of the ability of private enterprise to control costs flys in the face of capitalism. Private enterprise has an incentive to control cost that government does not have. This incentive is called PROFIT.
In the R-W plan, insurers submit proposals and the voucher is the amount of the second lowest proposal, adjusted for of course age. This is then private enterprise’s INCOME. The treatment of their customers and overhead will be their expenses. The leftover will be PROFIT. Insurers will do all they can to increase the probability their customers will stay healthy and when they do get sick, use the best tools to get them well. Government with its pay-for-procedure approach has no such incentive.
Add in tort reform and you truly have the setting for a major cost reduction which the R-W plan recognizes.
Of course, this means that government is a lot less in the picture which your side doesn’t like, but our side wants to truly save Medicare vs. have it consume America.
George Hunsucker
Northland
9 months agoCan Medicare Supplement providers “skim the cream” George???????
George Harris
Kansas City
9 months agoGeorge, I don’t have any facts about the Medicare supplement providers. (I assume you don’t mean Medicare Advantage?)
But regarding “skimming the cream,” there are any number of ways insurance companies accomplish this now. One major way, and they do it now, is to say that they will cover a particular illness and then when they have a subscriber with the illness, they find ways to deny payment (which you call making a profit.) Appeals processes are nightmares, and the subscriber gets discouraged and goes to another insurance company or drops coverage altogether because the insurance isn’t covering the illness anyway. (I have been personally affected by this strategy and have seen it done to many of my own clients/patients.) Ironically, this strategy will become even more effective when there is guaranteed issue from another company. People will switch companies hoping to find a company that treats them better. In a nutshell, whenever a business doesn’t want a customer, it finds a way to get them to move on, leaving the “good (healthy)” customers behind. I believe what would happen is that sick people would inevitably end up in traditional Medicare, which would balloon Medicare’s costs even more than at present. Again, I don’t have data on this, but I’d be willing to bet (but not $10,000) that the pool of Medicare Advantage subscribers is, on the whole, healthier than the traditional Medicare subscribers, for the reasons outlined above.
But the main Ryan problem is that the amount of money the vouchers are supposed to provide isn’t enough to cover policies now in existence. I don’t have a lot of data on this, but I know a whole bunch of 60 to 65 year old people in reasonably good health whose private insurance costs in the range of $1,000/month. And this is with a high deductible. Simply put, the voucher Ryan proposes is not realistic. Insurance companies won’t issue policies at lower costs unless they are allowed to offer bare bones policies. Ryan says his plan will have minimum coverage requirements, but that could mean a whole lot of things. In order to make the numbers work, there will have to be a lot of uncovered expenses.
IMO, the problem starts with language. Health “insurance” really isn’t insurance but health care expense funding. Insurance is good for accidents and house fires, but nobody will issue insurance for costs of basic maintenance on a home. The reality of health issues is that it’s not a question of “if” we’ll get sick but “when” we will. By calling this health coverage “insurance” we begin to think of it like other kinds of insurance that covers unexpected expenses.
Phil Cardarella
9 months agoInteresting.
The Israeli single-payer Universal Health Care System praised by Mitt because it operates at an 8% administrative cost level is LESS efficient than Medicare (@6%). Both are fare more efficient than private insurance companies — who are angry because they are now required to refund anything over 20% in administrative costs to their policyholders.
Mark Hastert
9 months ago” if insurers were required to take anyone regardless of health”
…GH, are you suggesting that the government can/should force private insurers to insure anyone that comes along? Like with Obamacare?
“,Can Medicare Supplement providers “skim the cream” George??????”
…Actually GH, they are. The private Medicare Advantage providers are getting paid a premium to provide care. They’re getting 15% extra above the government’s cost for providing traditional Medicare. It’s that 15% premium that O-care eliminated resulting in the howls by Ry-omney that Obama cut $714,000,000 from Medicare. Supplemental insurance providers aren’t bearing the brunt of the costs born by regular Medicare.
George Hunsucker
Northland
9 months agoGeorge,
You are missing the point with the Ryan plan, which you need to better understand. Govt. dictates minimum coverage. Insurers provide quotes to provide this coverage. The base voucher is the second lowest quote amount—adjusted for age.
So my cyber buddy, there can be no skimming the cream, since as with my supplement, NOT AN ADVANTAGE PLAN, any insurer offering that coverage HAS TO TAKE ME.
The donkey plan merely keeps tossing money down the hole we all know is unsustainable. Why are you so against trying something that at least has a chance of bending the cost curve vs. the donkey plan of merely telling providers such as yourself “screw you, we aren’t paying anymore for that service”?
Mark Hastert
9 months ago“any insurer offering that coverage HAS TO TAKE ME.”
.. now GH you can thank the government for that because without that government mandate you you be uninsurable. Now consider that effects of rising health care costs and your premium support. They’re say that the difference will be about $500/month
George Hunsucker
Northland
9 months agoYou are so ignorant on the issue Hastert I am breaking my pledge not to resspond to you.
FYI, a Medicare Supplement pays the differnce between what Medicare pays for a service and the Medicare price for that service. This is the insured’s copayment if you will.
ANY insurer with any brains can figure out what my average copayment is and issue a policy to cover that.
Your ignorance is astounding, but like my grandfather used to say, “never let a lack of knowledge prevent you from speaking with authority.” You are the epitome of that quote.
Now, I return to no longer talking to you dough-head!
George Harris
Kansas City
9 months agoGeorge, I’m sure (and I’m not being sarcastic) that you could teach me some things about the Ryan proposal and conservative ideas generally. But I think I could teach you some things about the way insurance companies work. I’ve dealt with health insurance companies not just for my own and my daughter’s needs but for clients in my practice. The overwhelming majority of people who work for insurance companies are really good people who try to do the right thing. But there is no doubt in my mind that policies put in place in many cases are designed to maximize profit while sacrificing any reasonable sense of quality medical care. I’ve been on the phone with people at insurance companies contesting a decision, and they practically cry when they tell me what they have to do. On one occasion, when dealing with someone who initially seemed uncaring about the client’s problem, I said, “How can you live with yourself doing this job?” There was a long pause, then the answer. “I need a job.” That told me all I needed to know. The for-profit model ought to be replaced, or returned to, the non-profit model for health insurance. Just my opinion but based on years of direct experience.
George Hunsucker
Northland
9 months agoI truly do respect your knowledge and life experiences with the industry George, and I am not just being PC with you. I truly do, and you are correct, I have no inside knowledge of how insurance companies work.
I just do not see how replacing a government bureaucrat for a greedy insurance head is going to fix the problem.
I think if you give people the choice to buy ANY POLICY from any company, the cream, so to speak, will rise to the top. This may be my true belief in the free market, or my naivete.
I just think today’s system of not letting people buy across state lines allows the types of situations you have obviously ran into. I have empathy for what you must have gone through for your child. There shouldn’t be bounds on what gets done for a child IMO.
Limiting the role of lawyers merely adds more money for treatment vs. lining their pockets, aka tort reform.
George Harris
Kansas City
9 months agoGeorge, allowing companies to sell across state lines won’t work IF they are allowed to sell bare-bones (or worse) policies just to make them cheap. Currently, states set requirements about required coverage. Elimination of state oversight would lead to a race to the bottom, and consumers would simply see cheap but worthless coverage.
But if national standards are set to require minimum coverages, this might help some. However, insurance companies have limited influence over costs. They can negotiate rates with doctors and hospitals, but they’ve already done this. Unfortunately, what they do now to reduce costs is deny payments on various grounds, and their denial is difficult to overcome; they can’t be sued for damages for failure to provide payment but only for the cost of the treatment. This makes litigation virtually impossible. So, if you get cancer and they deny a drug that would save your life, your family can’t later sue them for damages because you died. That’s the way I understand this anyway.
George Hunsucker
Northland
9 months agoYou bring-up one of the beauties of the Ryan plan to me George.
By giving a voucher for the 2nd lowest quote for the BASE MEDICARE COVERAGE, Ryan’s plan gives consumers a choice, IF THEY CAN BUY FROM ANY PLAN, ANYWHERE.
For those consumers who think they are in good health etc., they can opt for the as you call it bare bones. For those not, they can either do the base plan or pay more for more coverage. This takes insurance out of being a one size fits all, or a size determined by some state bureaucrat who may or may not be “influenced” by a state-approved carrier.
What I want is to get insurance companies to move to being a commodity provider so they will push for the most effective treatments, not those that give they and the providers the biggest payoff.
I also of course want people to have CHOICE and tort reform.
For instance, today I can choose between standard Medicare or an Advantage Plan. With standard Medicare, I can choose to have a supplement or not. Being basically risk-averse, I have a supplement, but have never cost that carrier more then our premiums—good deal for them, better deal for us since we are blessed with good health.
With the Ryan plan, people will have more choices INCLUDING traditional Medicare!
Mark Hastert
9 months agoGH here is a succinct explanation of the difference between Obama and Romney’s plans for Medicare from the LA Times:
“To recap: As part of the Obama health reform law, Congress voted to reduce payments to certain hospitals, insurance companies and other healthcare providers by about $716 billion over the next 10 years. The law directed the money to help pay for expanded prescription drug coverage for seniors – eliminating the so-called doughnut hole – and to help cover younger Americans who do not have insurance at their jobs. When Rep. Paul D. Ryan, Romney’s choice as his running mate, drafted his budget plan, he included repeal of Obama’s health law. The move would mean Medicare’s main trust fund would run out of money in just four years, rather than 12 under Obama’s plan. And because Romney did not offer any new revenue to cover the $716 billion cost, nor any offsetting reductions, the price tag would simply be added to the national credit card”
In other words GH assuming you live four more years Romney is going to cost you personally and increase the deficit by 3/4 Trillion dollars. God only knows what will happen to your Medicare coverage when the trust fund goes broke because the Republicans aren’t going to raise a dime in taxes or cut a dime from defense spending to save you and the other elderly citizens (I’d call you a geezer but the term upsets some of your fellow elderly. Frankly I’d prefer geezer)
You are right though, you’re going to have more new choices:like buy your meds or eat, go into the hospital or lose your house! It’s going to be very exciting for you!
BTW I’m going to be arranging monthly chartered bus trips to Canada. All aboard!