Critics have pointed out that the Republican plan to turn Medicare into vouchers would only save the government money by shifting healthcare costs to seniors. A new study from the Center for Economic and Policy Research quantifies that cost shift. For every dollar saved by government, they find, seniors would pay
more than seven dollars. Over the 75-year planning horizon for Medicare, that would amount to
$34 trillion additional costs for beneficiaries.
From the Center's press release:
"The Ryan plan does nothing to control private-sector waste in health care costs," said David Rosnick, an author of the report. "As a result of the waste in the private system, beneficiaries will end up paying substantially more for Medicare, in effect paying a hefty new tax on their health care."
The report, "Representative Ryan's $30 Trillion Medicare Waste Tax," documents the potential effects of replacing Medicare with a system of vouchers or premium supports and raising the age of eligibility from 65 to 67 as suggested in the Ryan plan, which was passed by the House of Representatives with almost unanimous support from Republicans and no votes from Democrats. The authors note that each voucher under the plan will initially be worth $6,600, but would be frozen at this amount over the program's 75-year planning window, paying less and less of a beneficiary's health care costs over time.
In addition to comparing the costs of Medicare to the government under the current system and under the Ryan plan, the authors also show the effects of raising the age of Medicare eligibility. The paper also demonstrates that while Ryan shifts $4.9 trillion in health care costs from the government to Medicare beneficiaries, this number is dwarfed by a $34 trillion increase in overall costs to beneficiaries that is projected based on the Congressional Budget Office's analysis.
How does that cost go up so dramatically? The Republican plan does to address the rising costs in healthcare or the large amount of waste in private health insurance, nor the profit motive. Private insurers are smaller than Medicare, and just don't have the efficiencies of scale that Medicare has. Thus, insurers would pass on ever increasing out-of-pocket expenses to beneficiaries. The voucher amount is frozen at $6,600, a sum that would purchase less and less over time.
CBO projects that private-sector inefficiency will grow over time. By 2030, the government would spend $7,200 on a 65-year-old in traditional Medicare. Since the cost of Ryan's plan remains fixed at $6,600, it would save the government $600.... But the total cost of insuring the beneficiary through the private sector would be $20,600, compared to $12,400 under traditional Medicare. For every dollar that the government would save on this beneficiary, it would generate more than $13 of waste.
Of course, looked at from the insurance company perspective, that's $8,200 per beneficiary going in their pocket. That's, of course, assuming that private insurance companies would actually provide plans for seniors, or that a Congress and White House some day would create a law forcing them to. Consider the current mandate under the Affordable Care Act for insurance companies to cover all children, regardless of pre-existing conditions. Rather than complying, some insurance companies are simply dropping their child-only policies. Given that, it seems likely there would be a restructuring of policies to exclude older people.
The more you look into the Republican the plan, the less "serious" it becomes, unless you're talking about how seriously it would destroy the lives of seniors.