Proponents of Rep. Paul Ryan's Medicare proposal have said that people older than 55 would not be affected by his proposal to change Medicare into a voucher system. They forgot about the Medisplit Effect. My wife and I represent the perfect paradigm for this effect. I will be 55 before the end of the year, but my wife is younger. So, while I will get Medicare, my wife, under Ryan’s plan, will get a voucher to buy private insurance, and it will cost my family an extra $6,400 to $7,000 per year after 2022. This Medisplit Effect, depending on the age of someone's spouse, could still drastically affect people 55 and older. It is disingenuous for Ryan or anybody else to suggest otherwise.
Ryan’s plan of turning over Medicare to insurance companies is a bad idea for several reasons.
After the initial $6,400 hit, the plan’s severe impact on the economic health of future seniors, such as my spouse, just gets worse. Based on a report from the Congressional Budget Office, the Center for Economic and Policy Research calculated that in 2022, Ryan’s proposal would require that seniors pay 35 percent of their projected median income for health insurance. Since the proposal does not require the government to increase the subsidy enough to match inflation, the percentage of median income required per senior increases to 44 and 68 percent in 2030 and 2050, respectively. Medicare would be “saved” at the expense of seniors being unable to afford it.
The Medisplit Effect gets even worse. According to the CBO, “A private health insurance plan covering the standardized benefit would be more expensive currently than traditional Medicare.” So, instead of saving money, privatization is more expensive.
The CBO states that the higher cost of privatization would be partially offset by “lower utilization stemming from … greater utilization management than occurs in Medicare” and restricting the right of enrollees to “purchase supplemental insurance plans,” thus increasing enrollees’ costs. Insurance companies will attempt to mitigate their greater costs by more frequently denying treatment and making enrollees pay more from their own pockets. Seniors will pay more for less care.
The evidence proves that Medicare is a more efficient health care administrator than private insurance companies. Several studies have shown that Medicare’s administrative costs are anywhere from about 2 to 4 times less than private health insurance plans. These results have some interesting characteristics.
First, these studies compared the general population to Medicare’s population. Medicare’s older population would be expected to need more medical care, increasing administrative costs. Second, the Council for Affordable Health Insurance, which has insurance companies as members, and The Heritage Foundation, a think tank that supports Republican policy decisions, find Medicare more efficient than private companies do.
More apropos is comparing Medicare to Medicare Advantage since both cover the same population. Medicare Advantage’s administrative cost of 11 percent does not come close to rivaling Medicare’s administrative cost of 2 percent. The private Medicare Advantage policies cost 13 percent more than Medicare’s fee-for-service program.
If Ryan’s intent was to illustrate that private insurance plans are more efficient or cheaper than Medicare, scrutiny of his proposal showed the exact opposite.
The Medisplit Effect is about how some couples could be badly hurt by Ryan’s voucher system that would replace Medicare as we know it. Handing over Medicare to the private insurance companies will increase costs and deny care. It is time to split private companies from Medicare to reduce costs and provide needed care. The Medisplit Effect will drastically impact future seniors. These drastic consequences can only be avoided by working to maintain Medicare as we know it.
Joseph Sparks is master's candidate in journalism at MU. He is planning a career in public relations.