To those who insist that they’ve “paid for” their Medicare benefits and dare politicians to change the program, consider this: A typical couple retiring last year, with both spouses having worked and paid taxes their whole careers, would have paid a total of $149,000 in Medicare taxes. But they are expected to consume an average of $351,000 in medical services in their retirement years (in constant dollars), according to a study from the Urban Institute.
That $202,000 gap would have to be financed by higher and higher taxes on fewer and fewer of tomorrow’s workers or by more deficit spending that puts trillions of dollars in debt on the shoulders of our grandchildren.
Clearly, Medicare is not sustainable, especially with more than 70 million Baby Boomers starting to enter the program at the rate of 10,000 a day.
We do not have the option of ignoring this growing tsunami of red ink or of spewing false accusations about the serious reform plan offered by House Budget chairman Paul Ryan.
Under Obamacare, the president’s plan to “save” Medicare relies primarily on paying doctors and hospitals less and less to the point that 40 percent of providers will either go bankrupt or stop seeing Medicare patients, according to Medicare actuaries. The dreaded Independent Payment Advisory Board will put the thumb screws on through a rationing strategy.
This is not a solution for a free people. Further, Obamacare doubles down on the fiction by spending the same dollars twice — once to extend the solvency of Medicare and again to pay for Obamacare’s massive new entitlement spending. Medicare actuaries have chastised the administration and allies in Congress for this double-counting.
In contrast, Representative Ryan’s plan guarantees that seniors would continue to receive a Medicare benefit, with the government’s contribution equal to the cost of traditional Medicare in a given market or the cost of the second-least expensive plan, whichever is less. As Representative Ryan explains, this means the government would fully cover the premium costs of some plans or the cost of traditional Medicare. Those who are older, sicker, or with lower incomes would get additional help.
Nothing changes for those on Medicare today or for those who qualify for Medicare between now and 2022.
After that, seniors would have more choices of plans that are competing for their business, just as the popular Medicare Advantage plans and prescription drug plans provide today. These private Medicare plans would have to offer coverage that is equivalent to traditional Medicare. While the benefits and financing structure could vary, the value of the plans would have to be the same.
Experience has proven that consumers choosing from among competing plans can lower costs. Yuval Levin explains how this “premium support” model would work with the plan developed by Ryan and Senator Ron Wyden (D., Ore.):
On August 1, three Harvard researchers published a study in the Journal of the American Medical Association (you can find it here, but it requires a subscription) that used data from the Medicare Advantage program (a much more limited experiment in insurer competition in Medicare) to consider how the Wyden-Ryan reform would have worked if it had been in effect in 2009. They found that, “nationally, in 2009, the benchmark plan under the Ryan-Wyden framework (i.e., the second-lowest plan) bid an average of 9% below traditional Medicare costs (traditional Medicare was equivalent to approximately the tenth-lowest bid).
Further, the Part D prescription drug program in Medicare is costing taxpayers 46 percent less today than expected when the benefit was created in 2003.
The reason? Competition and consumer choice.
So the debate over Medicare is a microcosm of the larger debate over the role of government in our lives. Voters have a clear choice this election year between two very different visions. Should we entrust government to control and micromanage decisions that impact our lives or should we create new incentives and modernize programs so we can make decisions about our future as adults and free citizens?