Ryan's proposal would cost MORE, not less, money

[kpete]

In a new Bloomberg column, http://www.bloomberg.com/news/2011-05-25/sharing-costs-is-no-way-to-fix-medicare.html?wpisrc= former OMB Director Peter Orszag explains how House Budget Committee Chairman Paul Ryan’s plan to privatize Medicare would increase total health care spending. I made the same point recently; below is the chart in my post.

To some extent, the Ryan plan would shift health care costs from Medicare to the program’s beneficiaries. But as Orszag’s column emphasizes, that’s only part of the story. The much bigger news is that Ryan’s plan would increase total health spending for the elderly — the beneficiaries’ share plus the government’s share — by upwards of 40 percent, according to the Congressional Budget Office (CBO).

There are two reasons why. First, private insurance plans have much higher administrative costs than Medicare. Second, private plans have less bargaining power with health care providers and are unable to negotiate payment rates that are as low as Medicare’s.

Orszag concludes with the following message to policymakers who initially supported the Ryan plan but are now reconsidering because of its unpopularity with voters: “If your goal is to reduce health care spending significantly, you can safely retreat from on its substance.”

MORE:
http://www.offthechartsblog.org/orszag-ryan-budget-would-increase-total-health-care-spending/

[madrchsod]

1. private companies handle the paper work for medicare....

[applegrove]

2. That is what I was trying to say the other day. With health care the private market fails

to cut costs. Is why all the OECD nations have some form of universal health care.... it is simply less expensive.

[elocs]

3. "Republican Truths and Un-Truths on Medicare and Their Proposed Plan"

An Objective Look at What’s Correct and What’s Incorrect

http://dismalpoliticaleconomist.blogspot.com/2011/05/republican-truths-and-un-truths-on.html

1. The Ryan proposal does not end Medicare:

Incorrect: Medicare is a single payer, government sponsored provider of health insurance program that everyone 65 and older participates in and obtains their health insurance from. The Ryan proposal would end this program and replace it with private insurance. This is not Medicare, as The Dismal Political Economist has previously shown, unless the Republicans take The Dismal Political Economist’s suggestion and trademark the name Medicare.

3. The Ryan proposal is just like the Federal Employees Health Insurance Plans.

Incorrect: The Republicans draw this conclusion based on the fact that the Federal government subsidizes Federal employees health care premiums (as does most employer provided/sponsored health insurance programs). However, those plans are Group Plans, and the premium is based on a risk pool of the Group as a whole. Everyone pays the same rate regardless of age, health condition or health history. The Ryan proposal would be for individual coverage and the premium would be based on the individual’s health care history and age and current health condition. This means every individual gets a different rate, and those who need health care coverage the most, the elderly with medical problems, would pay the highest rates if indeed they could get coverage at all.

8. The Ryan Proposal will reduce the growth of health care costs.

Incorrect: This claim is based on the premise that competition by private health care insurers will result in lower health care costs. Historical evidence shows just the opposite. For the non-elderly, private insurance companies provide the overwhelming amount of health care coverage in the U. S. through either group plans or individual coverage. In that environment health care costs have risen much faster than inflation. Based on this historical record there is simply no reason to expect private insurance for seniors to rein in costs any more effectively than private insurance has for the rest of the population.

Furthermore, the current Medicare program is non-profit. Private insurance companies will require a profit, and that cost will be in addition to health care costs. In other words, everything else being equal private insurance will cost more than government provided insurance. Additionally, the maximum savings in administrative costs is achieved with a single payer system. With private insurance companies, each company will have its own administrative costs, which will likely be much higher in total than current Medicare administrative costs.

Point 4 that Medicare will run out of money if nothing is done is stated as being correct as well as #5 which says that Democrats have no plan to address the Medicare problem. There's more at the link.