You may have noticed a partially buried new story these past couple of weeks. In a nutshell, House Speaker Paul Ryan has since 2011 been pushing for an overhaul of Medicare that would privatize the 50-year-old government-run system. So far, the Ryan plan has been blocked, but with a Republican in the White House and both the House and Senate under Republican control, privatized Medicare could become a reality.
Would Donald Trump sign the Ryan plan into law? During his campaign, the Republican nominee promised not to touch Medicare, but commentators point out that the president-elect’s transition website calls for “modernization” of Medicare, and his recent nomination of congressman Tom Price, a supporter of the Ryan plan, as Secretary of Health and Human Services suggests Trump might go along with it. (Read more on the chances of the Ryan plan being signed into law.)
Here’s what you need to know. The information is culled from several news and commentary websites that have done their homework.
What’s the Plan?
Under the Ryan plan, seniors eligible for Medicare would be provided with subsidies or vouchers to buy insurance from private insurance companies and help defray healthcare costs. The government would pay the subsidy on behalf of the enrollee to the insurance company rather than to hospitals or doctors. If the payments were not enough to cover services, the enrollee would have to cover the difference. So, by offering vouchers rather than covering expenses through a single-payer system, Medicare would effectively cap spending per enrollee, and some costs would shift from the government to the Medicare beneficiary. At the same time, the Ryan plan would bar Medicap providers from covering “first dollar” costs, imposing a deductible that, the theory goes, would make seniors more careful consumers of healthcare.
Ryan’s most recent version of his plan, “A Better Way,” would keep Medicare Advantage and allow MA providers to come up with their own packages rather than impose uniform requirements.
Some not insignificant details:
- Medigap plans
- Insurers would be barred from charging sicker people higher premiums, but would be allowed to vary premiums by age, charging higher premiums to older people.
- Government contributions would be lower for higher-income Medicare beneficiaries — so those earning more would pay higher premiums.
- Subsidies would increase annually based on the Consumer Price index, which has generally been lower than the annual increase in healthcare and drug costs.
- It’s unlikely that companies would be required to provide a defined set of benefits. It’s also unlikely that the Ryan plan would mandate the free health screenings for cancer and other illnesses that seniors now receive under the Affordable Health Act.
- Seniors would pick a plan from a Medicare Exchange — not unlike today’s somewhat confusing Marketplaces. These plans would likely have deductibles and out-of-pocket expenses.
- Premiums paid to insurers would include drug benefits (part D). The Part D coverage gap or “donut hole” would be re-opened, leaving seniors responsible for drug costs.
- The age of Medicare eligibility would rise to 67.
- “Grandfathered” seniors — those who already were enrolled in traditional Medicare at the time the new system comes into effect — could chose to stay in traditional Medicare. But many commentators believe that the system would end up limiting Medicare’s bargaining power, and traditional Medicare would end up serving older and possibly sicker seniors, so premiums would rise exponentially.
Other changes would affect some Medicare patients through changes in the Medicaid program.
What’s the Analysis?
- In 2011, when Ryan released version 1 of his plan (subsequent version are not substantially different), the Kaiser Foundation conducted an analysis and came to these conclusions:
- The Congressional Budget Office has calculated that individual out-of-pocket-costs paid by a 65-year-old beneficiary in year one of such a plan would be about twice as much as under traditional Medicare. These out-of-pocket healthcare expenses for a 65-year-old, the CBO said, “would consume nearly half of their Social Security income that year.”
- The CBO also calculated that total Medicare spending would be higher under the Ryan plan, because private companies have higher administrative costs, and by covering 55 million Americans, Medicare has the power to negotiate prices, a power that private insurers would probably not be able to equal. This rise in total spending would increase over time. However, federal spending on medicare would decrease because beneficiaries would pay more.
- Medicare’s role in providing funding to teaching hospitals, promoting quality of care and encouraging medical research would fall by the wayside unless it were picked up by the government outside of Medicare.
What are the Arguments
Those for the plan: According to proponents of the Ryan plan, Medicare is going to go broke if no changes are made. Under the Ryan plan, Medicare spending by the federal government would decrease, because insurance companies would compete for business by offering better and cheaper plans. Seniors would have an incentive to chose a plan that met their needs.
Those against the plan: According to the nonpartisan Center on Budget and Policy Priorities, Medicare is not about to go broke, though it will continue to eat a growing percentage of the federal budget. Opponents of the Ryan plan say not only would beneficiaries pay more (and possibly much more) than under traditional Medicare, but insurers might refuse to cover costly drugs that people with certain medical conditions need. The insurance companies’ networks would likely be narrow, meaning seniors might have to switch doctors, possibly more than once as networks change. Seniors might chose the cheapest plan and then get sick or injured, and end up with high out-of-pocket costs. And some seniors might not be able to afford insurance, or might pay premiums but not be able to afford care.
- Social Security Works currently has a petition, “Don’t Touch My Medicare,” opposing any plan that drives up costs of Medicare. Click here to see the petition.
- Read a recap of the 2016 version of Paul Ryan’s plan, “A Better Way,” at Forbes.com
- Read Phil Moeller’s column on Medicare reform at PBS.org
- Read Paul Ryan’ case for “A Better Way.”
What do you think?