Saturday, October 20th, 2012
The endless bickering over Medicare between our two political parties often focuses on vouchers. Republicans want to turn Medicare into a system that provides “premium support” — or vouchers — to help seniors buy insurance from private companies.
Democrats disagree with this idea and want to find ways to sustain the current Medicare program. They warn that the Republican Medicare “voucher” program will result in seniors paying more money for their health care.
Now the independent Kaiser Family Foundation has issued an in-depth analysis saying — yep, the vouchers will cost seniors more money. Kaiser estimates that if this program were in effect now, 59 percent of seniors would have to pay more for the same benefits. (See Sarah Kliff at the Washington Post for a simplified explanation of the analysis.)
In fact, the Romney plan would not go into effect right away but would begin ten years after a bill establishing the plan became law. (This enables Mr. Romney to promise current seniors that their Medicare won’t change as he campaigns for president; as far as anyone can tell, that’s the only reason for the ten-year delay.) The Kaiser study looks at how the plan might work right now, because we know what the state and cost of health care is right now, and we don’t know what it will be ten years from now. The study presumes that if the program would raise cost now, it probably will in the future, too.
The Kaiser analysis is our best indication yet that the voucher plan is a bad idea. It could leave seniors — especially those with serious conditions such as mesothelioma — digging deeper into their own pockets for medical care.
The Republican “voucher” program saves the federal government money by putting tight restrictions on future increases in the amount of the fixed allowance, or voucher. For this reason, other studies have projected that the gap between the amount of the “voucher” benefit and the actual cost of health care will grow wider over time. In 20 years, the gap could run into thousands of dollars for some seniors.
Voucher advocates disagree. They place great faith in the ability of private insurance companies and free market competition to keep the system efficient and hold down cost. That might happen, but keep in mind that the cost of private insurance generally has been rising faster than the cost of Medicare. And for years, the private Medicare Advantage policies have been costing more than regular Medicare.
Essentially, the Republicans want to “save” money by adding a middle man — private insurance companies — to the system instead of paying providers directly. This makes sense, how?
As explained on Republican presidential nominee Mitt Romney’s website, under his plan “existing spending is repackaged as a fixed-amount benefit to each senior that he or she can use to purchase an insurance plan.” This means seniors are put on an allowance they can use to purchase insurance. If your insurance costs more than your allowance, you pay the difference. If your insurance costs less than your allowance, you can apply that difference to co-pays and deductibles.
This will reduce the cost of Medicare, he says. “With insurers competing against each other to provide the best value to customers, efficiency and quality will improve and costs will decline.” As explained above, this proposition may turn out to be true, but right now it has to be accepted on faith alone. There is little real-world evidence to support it.
One twist with the Romney version of the voucher system is that he would not eliminate traditional Medicare. however, the website says, “if it costs the government more to provide that service than it costs private plans to offer their versions, then the premiums charged by the government will have to be higher and seniors will have to pay the difference to enroll in the traditional Medicare option.”
Mr. Romney leaves out a lot of details that could make a difference in how the program might work. One big concern is that if the private insurance companies accepting the vouchers are allowed to “cherry pick” customers, they will lure healthier seniors into lower-cost plans and expect the “government” Medicare to accept sicker seniors who have bigger medical bills. This would turn regular Medicare into a high-risk pool, which is very expensive. And, as Mr. Romney just said, seniors will have to pay the difference.