For the past couple of days, I have been following the conversation about the Ryan budget, its breathtaking Path to Poverty agenda, and of course its active plan to end
Medicare, masquerading as "reform." Some have argued that Ryan's new plan on Medicare is markedly improved from the one last year, and it "preserves" a Medicare guarantee by letting seniors choose to stay in the traditional Medicare program. But the fact, hiding in plain sight, is that the only difference between his last year's plan and this year's is that this year's plan kills Medicare by starving and choking it off as opposed to last year's plan simply decapitating it. Paul Ryan hasn't ended his adventure to kill Medicare, he has simply changed his method from the electric chair to lethal injection. He does this by turning the Medicare system over to an wild insurance market deregulated by the repeal of the Affordable Care Act.
Here's Ryan's plan, as described by Paul Ryan
- Repeal the Affordable Care Act. [And with it, all the patient protections and insurance reforms.]
- Gradually increase Medicare eligibility age to 67 by 2034.
- In a "Medicare exchange," those now 55 and younger will be able to choose the traditional Medicare plan or a private plan with "premium support" when they reach Medicare eligibility.
- Private plans would have to provide at least the actuarial value of traditional Medicare. Growth is limited to GDP (adjusted for inflation and population growth) plus 0.5%.
- The "premium support" would be risk adjusted - meaning that there would be some mechanism would be in place to discourage adverse selection. [But risk adjustment without guaranteed issue and community rating is essentially meaningless.]
The first part - repealing the ACA - is the key to everything else that happens in the Ryan plan. It is the holy grail to killing Medicare.
Paul Ryan and the GOP promise that first of all, people currently enrolled in Medicare have nothing to fear; nothing changes for them. The Ryan plan belies that promise.
Repealing the ACA does have
consequences with current retirees. "Obamacare" reduces Medicare Part D prescription drug prices. If it is repealed today, seniors on average can expect to pay $517 more each year in prescription drug costs
right now. And if you are a senior that reaches the "donut hole", Ryan's plan will helpfully open the coverage gap back up for you, and will cost you an additional $16,000 over the next decade
Going beyond that, what else does repealing "ObamaCare" mean for Medicare beneficiaries? It means that insurance companies will be free to spend as little of the premium dollars on actually providing care as they wish. It means that they will be free to jack up their rates based on pre-existing conditions, including in this "Medicare exchange." Wait a minute, you say. Isn't there risk adjustment
? Sure. Risk adjustment, however, only determines how premium support dollars are distributed, and does not directly regulate whether companies can pick off healthier people.
For seniors especially, insurance companies are almost guaranteed to cherrypick healthier and younger seniors, despite the fact that they may get lower payments from Medicare for that. Why? Because they would rather have a smaller premium than get stuck with relatively much larger health care bills for older and sicker seniors.
There is also absolutely nothing in the Ryan plan to prevent insurance companies, after they cherrypick these healthy seniors, from dropping them when they get sick and throwing them back into the traditional Medicare system. There is less than nothing, actually. By repealing the ACA, Ryan pro-actively gives insurance companies the right to do just that.
In both of these ways, seniors who are sicker and those who get sick are thrown into the traditional Medicare system while private companies are allowed to cherrypick healthier people for their plans. The consequence is that traditional Medicare is loaded with higher costs for sicker and older seniors, raided the premiums of healthier seniors, and thus left to starve to death. It should be noted that this is in marked contrast with today's Medicare choice program, known as Medicare Advantage, where private plans are legally bound to accept all applicants
But wait, there is more. Ryan's plan to end Medicare does not stop merely at starving it. It also strangles it at the same time. This is the first part of Ryan's plan - the per capita spending growth cap of GDP plus a half per cent. Ryan's argument is that "competitive bidding" - that these private plans would have to compete in an open exchange - would drive down the cost. For one thing, if Ryan really believes that having people purchase plans from an exchange would drive down the cost of health insurance, then why does the very same plan repeal the ACA and along with it, the exchanges it sets up in 2014 for non-seniors? Is there something magical about Medicare that exchanges will drive down the cost there but not in non-senior markets?
For that matter, if Ryan is so much for choices in an exchange to include a traditional Medicare option for seniors, just what is his beef about giving ACA's exchanges the same ability - that is, giving people participating in those exchanges the ability to buy into Medicare? Which, incidentally, would be a great way to save Medicare - having younger, healthier people buy into it. Is Paul Ryan afraid that in a truly free market, people will vote with their wallets to choose a single payer system?
Leaving aside the hypocrisy, Ryan is actually pretty damn sure himself that his plan will not work in bringing down actual cost. That's why he "backs it up" with a cap on the spending growth. the actual savings realized from competitive bidding to the aforementioned GDP plus 0.5% per capita. After all, if he were so confident that this exchange - without any other consumer protections in the market (such as requirements to accept all comers, protections against higher premiums based on health status, and requiring insurance companies to spend premiums in providing health care), all of which are part of the ACA and would be repealed by the Ryan Path to Poverty - would lower costs anyway, there would be no need to cap growth.
The CBO has projected what would happen under premium support to Medicare spending by the government. Here is what they found.
By 2040, the average 67-year old beneficiary will get $5,000 less in Medicare premium spending than under current law (in 2011 dollars). And that's just the younger seniors. Who makes up this difference? You do.
So here is what Ryan's plan boils down to on Medicare: make people wait two additional years for Medicare while making sure that they cannot take advantage of the ACA to get private coverage for those years, strip all the consumer protections and insurance regulations that would actually lower costs for patients, and load up traditional Medicare with older, sicker patients to make Medicare go bankrupt.
If Ryan were serious about reforming Medicare or to make health care costs more sustainable, his starting point wouldn't be to repeal patient protections and market regulations offered by the Affordable Care Act. If he were serious about market based reforms, he would enthusiastically impose common sense regulations on the insurance companies that would participate in his "exchanges." Regulations like guaranteed issue, community rating, and Medical Loss Ratio requirements. In the absence of regulating forces in the market - which Ryan's plan is - simply saying that Medicare will cap spending growth does not reduce cost growth. Instead, it simply shifts the costs from the social compact to the individual patient.
And that's what the GOP plan is. There is no plan to reduce costs. There is only a plan to shift the costs. And the key to ending Medicare, while looking like you are only trying to reform it to lower costs, is to simultaneously repeal "Obamacare" - the one thing that protects consumers and regulates insurance companies. You see, you cannot both have consumer protections in the health insurance market and screw patients at the same time. If your goal is to end Medicare once and for all and throw the entire health care market to the wolves of an unregulated private insurance market, you would do exactly what Paul Ryan is doing.