COLUMN: Paul Ryan's Medicare proposal bad for seniors, couples

Tuesday, June 7, 2011 | 3:03 p.m. CDT; updated 7:12 p.m. CDT, Sunday, July 3, 2011

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.

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James Krewson June 7, 2011 | 4:00 p.m.

What is your proposal then to keep Medicare from going belly up? It is easy to criticize a plan that will save Medicare yet I want to hear alternate solutions. When Medicare finally does go insolvent, people will be begging for the Paul Ryan solution or some plan that would have saved it.

(Report Comment)
Tony Black June 7, 2011 | 5:28 p.m.

I believe, according to the CBO and Mitt, that universal health care is the most cost effective plan. It works for the military, and fire and police services are universal. Everybody pays, everybody benefits. Why not have a base universal health care plan for everyone, and if you want better coverage, you pay for it. Wellness care, vaccinations, certain required medicines provided at no cost. No Viagra. You want that, you pay for it. something simple like that. Big pharma wouldn't like it, but I'd bet most everyone else would. And why would you be against it? No one gets anything that everyone else doesn't get.

(Report Comment)
Jimmy Bearfield June 7, 2011 | 6:24 p.m.

The key to universal health care is that each person's premium must fully reflect the cost of his/her lifestyle choices. Under Obamacare, or whatever you want to call it, only a fraction (35%?) of the premium can be based on lifestyle choices. A person who chooses to be obese, for example, should be required to pay all of the extra $2K or so annually that it costs, on average, to treat obesity-related maladies.

(Report Comment)
Brad Naksuthin June 7, 2011 | 7:48 p.m.

As a Thai who has used both the US health care system and the Thai health care system I have to say that the Thai private health care system runs circles around the US system.
The problem in the US isn't Medicare. It's skyrocketing medical costs. Medical care in the US is more expensive than any other nation on earth.
Yet the care and quality of many Thai private hospitals far exceeds what you find in the US.

I just came back from Thailand in January where, for the fifth year in a row, I got a complete physical: Blood work, EKG, carotid echography test, Upper and Lower abdominal ultrasound, chest Xray, Cardio Stress Test, Urinalysis, Stool Examination...all for $400!!!
Just the Stress Test alone would have cost $3000-$4000 in the US. The blood work alonge would have eaten up the $400

Americans are getting ripped off by the health care profession and the sad part about it is that they are blissfully ignorant about how expensive their "free market" health care system is. Everyone in health care here wants to make a bundle: Doctors, Insurance Companies, Drug Companies, hospitals. It's all about protecting their own industry and overcharging to increase profits.

In Thailand hospitals post their costs for everything from a colonoscopy to heart bypass surgery so you can compare the cost at different hospitals. That's how the free market is suppose to work. Competition

But here in the US You won't ever find a price list by any doctor or hospital in the US. Go ahead. call your local hospital and see if you can get a price list for a colonoscopy, and EKG, an X-ray, even the daily cost of a hospital room. Good luck. It's all very secret. You can't compare or shop for better rates. The US medical profession doesn't want any comparison shopping that would force doctors and hospitals to compete with each other on price. And no price advertising PLEASE!!!

In Thailand they have the option of a public health care system that is free for everyone and a private system that provides better service and more options if you are willing to pay for it. The private option is still ten to fifteen times cheaper than in the US because the public option forces it to be competitive in order to woo patients. In the US there's no choice. No public. Only and overly expensive private system.

Two years ago I had a condition called Esophageal dysphagia. The throat doctor in my hometown in California said he could fix the problem for $2500 in his office. I went to a Thai PUBLIC HOSPITAL (used my US passport as ID) and had the surgery done for $100...including the doctor and the anesthesiologist and a biopsy. Try to find that in the USA!!!!

Want to prove me wrong. Go ahead, google any Thai hospital in Bangkok , email them and ask them to tell you how much it would cost to have, say, heart bypass surgery. They will be more than happy to email you a quote. Now try that with your local hospital and watch them give you the run around.

(Report Comment)
Jimmy Bearfield June 7, 2011 | 8:37 p.m.

I'm self-pay, and I'd love to have price lists.

(Report Comment)
Michael Williams June 7, 2011 | 10:53 p.m.

Brad Naksuthin:

If a Thai doctor got his/her medical education in the US, how long would it take for them to pay off their debts if they practiced in Thailand?

I'm just trying to get a better understanding of the differences. What are the "annual salary" differences?

Certainly your post gave many reasons self-pay folks travel to Asia for their major medical care.

As for the US, it is my observation that prices generally reflect how much money the government spends. That is, prices expand to fit the available money. Put more gov't money into health care, prices go up. It's inevitable.

Same thing for scholarship dollars versus tuition. The more money available from outside sources, the higher the tuition.

Happens all over the place. On a national scale, it's called inflation...the art of too many dollars chasing too few goods. We've got the "too many dollars" part down pat. Once we start feeling better (a decade?) and chasing goods....guess what happens?

(Report Comment)
Bob Stern July 1, 2011 | 7:56 a.m.

It is clear from the CBO analyses of the Ryan Plan that it would not preserve Medicare as a functioning senior program, and cost wise would put health insurance out of reach for the vast majority of seniors. The CBO cost impact results for a 65 year old are summarized in the Table below. As seen in the first two columns, total health care costs for a 65 year old under the Ryan Plan would increase by almost 40% or about $6400 a year, all of that borne by the senior. By 2030 the increased cost to seniors would be about $12,000.

Costs under Traditional Medicare and the Ryan Plan-2022.
65 year old 65 year old Avg. Age Sr Age Age Sr
Medicare Ryan Medicare Ryan
Government Cost
$8600 8000 15,000 11,000
Senior Cost
6100 12,500 10,700 24,720
Total Cost
14,700 20,500 25,700 35,720

In addition, the out of pocket cost impacts get far worse for older seniors because their health care costs and insurance rates rise significantly. Using CBO data, the out of pocket cost for an “average age” senior (between 65 and end of life) under the Ryan Plan would increase by about $14,000 a year to $24,720. Since about 50% of seniors have incomes less than that it is obvious that health insurance would become unaffordable for the vast majority of seniors.

(Report Comment)

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