When President Obama decided to take the political low road and demonize House Budget Committee chairman Paul Ryan’s Medicare-reform plan in his budget speech last month, it wasn’t really surprising. President Obama already demonstrated that he was a world-class practitioner of shamelessly dishonest political attacks when he went after Sen. John McCain in the 2008 campaign for proposing a change in the tax treatment of health insurance — and then pushed for a change himself once he was elected. Given this track record, there was every reason to believe he would jump on the chance to demagogue on health care again if the opportunity presented itself. And boy, has he. It’s now clear, based on four weeks of a relentless barrage, that his reelection effort will be based heavily on creating fear in the electorate, and specifically among seniors, about the supposed negative consequences of the Ryan Medicare plan. So much for an administration devoted to hope and change.
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But what exactly is the substantive basis for the president’s attack on Ryan’s proposal? Here’s the key passage from the speech: “[The Ryan plan is] a vision that says America can’t afford to keep the promise we’ve made to care for our seniors. It says that ten years from now, if you’re a 65-year-old who’s eligible for Medicare, you should have to pay nearly $6,400 more than you would today.”
Where did the $6,400 figure come from?
Best as anyone can tell (the president didn’t cite a source), it seems to have been derived from the Congressional Budget Office’s April 5 analysis of the Ryan budget. On page 22 of that report, CBO (always so helpful!) provided its assessment of what it would cost an average 65-year-old to enroll in a private health plan compared with what it would cost that same average 65-year-old to stay in traditional Medicare. It’s an illuminating piece of work on the part of CBO, but perhaps not for the reasons CBO intended.
The mechanics appear to be as follows: CBO says the Ryan plan would provide an $8,000 “premium support credit” for average-health 65-year-olds in 2022, which would cover only 39 percent of the total cost of providing a standard Medicare package of services to such beneficiaries. That puts the total cost of the private plan at $20,500, of which the beneficiaries would be required to cover $12,500 out of their own pockets.
By contrast, CBO says the traditional Medicare program could provide the same standard package of services for just $14,800 in 2022 (in what’s called the “alternative fiscal scenario”). Under current law, the government would cover about $8,600 of the total cost, leaving a little under $6,200 for the beneficiaries to cover themselves. With rounding, the difference between what it would cost the average 65-year-old under the Ryan plan compared to what it would cost under current law is “nearly $6,400” in 2022, or so it would seem from CBO’s numbers.
Ironically, this analysis from CBO actually tells us much more about CBO than it does about what the Ryan plan will mean for seniors in 2022.
While I am old enough to not have to be affected by Ryan's plan, I called one of his offices and found out I can opt into premium support instead of traditional Medicare. "Care on paper" is useless, and this will mean that (if there is a plan I can afford, with the support) I will get actual care.
Now if only the definition of required services can be restricted to something that an affordable plan could actually cover.
One, the half of spending on medical care in the US paid by the federal government is seeing cost increases of 8% per year. The half that isn't is seeing cost increases of only 2% a year. This is the exact opposite of what price controls claim to be able to do.
Two, expecting lower prices from pouring a $750 billion annual subsidy into anything is the sort of economic idiocy only the government could believe in. Artificially goose demand always results in artificially goosed prices, and huge portions of the subsidy paid do not provide any incremental service, only incremental income to the end providers. Here, doctors and medical researchers and the millions of line workers in the industry. The same happens in education, by the way.
Third, the reason medicare is popular anyway is it pretends to pay for a cost that current consumes 7% of GDP (the federal half of 14% of GDP paid on medical care in the US) while charging only 1.45% of payrolls to workers, and 1.45% more to their employers.
Payrolls are not GDP - more like 50-60% of GDP. 1.5-2% of GDP cannot pay for a bill that costs 7% of GDP. The difference is in fact merely being borrowed.
Thus the fundamental dishonesty about medicare is that the premiums it is charging are way way too low. The payroll contribution for medicare ought to be more like 5%, for starters. If people saw on their paycheck stubs what it is actually costing them they'd have a very different attitude toward the deals available in the private insurance market.
Expecting private insurance to compete against outright lies as to cost by a factor of 3, is crazy.
In the city of Buffalo, one of the biggest public employee demands over the past few years is that they not be denied a choice of insurance plans after the city council and school boards decided they could save a lot of money by working more closely with a single provider.
The big private insurers here are very competitive. My employees have chosen to change plans three times over the past ten years.
I guess I'd be considered a crony capitalist by some since the bulk of our business comes from doing Medicare and Medicaid claims for home health services. Medicaid is pretty rich in this state, but all my clients are working hard to beef up their private business.
Insurance companies are a lot easier to deal with.
