Felicia Muftic: GOP Medicare plan would cost seniors
April 13, 2011
Rep. Paul Ryan’s and the GOP’s plan to privatize Medicare is a theory resting on an illusion. Its success depends on market conditions that do not exist. It needs a serious reality check.
Republicans have repackaged a 40-year-old platform of privatizing Medicare with a proposal to give seniors vouchers (a government subsidized credit card or something similar) to buy private insurance in the free market. This privatization scheme is based upon a theory that the insurers would compete for your voucher, driving down costs.
The problem with that theory is that there is little free market in the health insurance business. In fact, there are few companies left in the market at all, making it easier for providers to set prices and terms of coverage among themselves. What it means for seniors is that they would have a limited choice of a couple of similar plans provided by companies who can offer customers a highest price premium with lowest benefits – and get away with it.
What? Isn’t that kind of business practice illegal? No. Health insurers are exempted from antitrust/anti-monopoly prosecution: Competition in the health insurance industry across the country is already dominated by one or two insurers, according to the American Medical Association’s 2010 edition of Competition in Health Insurance: A Comprehensive Study of U.S. Markets.
“The near total collapse of competitive and dynamic health insurance markets has not helped patients,” said AMA President J. James Repack, M.D. “As demonstrated by proposed rate hikes in California and other states, health insurers have not shown greater efficiency and lower health care costs. Instead, patient premiums, deductibles and co -payments have soared without an increase in benefits in these increasingly consolidated markets.”
This may explain why premiums have increased, yet the reform law is not fully implemented until 2014.
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There is also no guarantee that vouchers would be subsidized enough to give seniors the ability to afford a policy that would offer benefits and deductibles similar to current ones. The amount of those subsidies is critical since insurance policies issued just for seniors would be very expensive. Senior care costs most because it covers deteriorating health. Government will be left with little choice but to cut costs by reducing the dollar amount of subsidies, sticking consumers with higher co pays and larger premiums.
Defunding health care reform legislation is on the GOP’s agenda at the same time as privatizing Medicare, yet “Obamacare,” as Republicans tag it, is estimated to save Medicare $400 billion over 10 years.
There are surer, less harmful ways to save Medicare and reduce the deficit than privatization. The Simpson Bowles debt commission concluded the health reform law should be retained to help cut the deficit in the future. Simpson-Bowles also proposed increasing the eligibility age as an alternative to raising out of pocket expenses.
“Obamacare” will end the 13 percent markup private insurers charged the government to administer Medicare through the Advantage program. The new law also funds vigorous prosecution of fraud and abuse, and supports greater use of home health care and other efficiencies. It sets up “exchanges” that provide opportunities for real free market competition within them and that can become standards for other insurance plans to follow. By defunding Obamacare, the GOP would take a giant step backward from its goal of reducing the deficit.
One of the most indelible impressions I had attending town halls in the 2008 presidential campaign was the look of fear and anger on the faces of Tea partyers waiving signs: “Do not let the government take away my Medicare.” Let us hope they have realized Medicare is a government entitlement program by now.
To head off voter outrage in 2011, the GOP’s plan would not affect seniors over 55. In 2011 the younger crowd ought to be the ones waiving signs: “Do not let the Republicans take away my Medicare because they will stick me with both higher costs and a lingering deficit.”