Medicare's Least Bad Fix

Why RyanCare beats ObamaCare in a knockout


Let me say at the outset that I think both ObamaCare and RyanCare are a dog's breakfast, a hodgepodge of unappetizing ideas that won't cure the nation's core health care problem—out-of-control spending—ObamaCare because it is reckless and RyanCare because it is feckless. 

That said, if both were implemented as written, RyanCare would be far less injurious to seniors than ObamaCare or, for that matter, doing nothing.

That hasn't stopped Democrats from portraying RyanCare as the evil brainchild of Jeffery Dahmer. One ad by the Agenda Project, an allegedly progressive outfit, shows a look-alike of Rep. Paul Ryan, the Wisconsin Republican who authored RyanCare, pushing a wheelchair-bound old lady off a cliff. Not to be outdone, Secretary of Health and Human Services Kathleen Sebelius has opined that seniors would "die sooner" under RyanCare. 

And the president himself has said that RyanCare will "end Medicare as we know it." By that he presumably means that it won't give seniors limitless benefits forever at taxpayers' expense, no questions asked. But the truth is that there is no scenario that could give seniors that. 

Medicare recipients have historically received benefits worth several times what they have paid in payroll taxes. That was possible because there was a large worker-base supporting retirees. In 1965 there were 4.6 workers per beneficiary. With baby boomers retiring, by 2050 this number will be only 2.2. We can impose confiscatory taxes on these working stiffs or mortgage their entire incomes and still be unable to pay for all the benefits that seniors currently get. 

Given these fiscal realities, if we do nothing, there will come a point when Uncle Sam will have to slash Medicare coverage so severely that, for all but the rich, "dying sooner" will actually seem like the best coverage option. But ObamaCare will make matters worse. Much worse.

Official calculations show that Medicare has $34 trillion less than it needs to keep all its promises to seniors. Yet ObamaCare will take $500 billion out of Medicare over 10 years to cover 30 million uninsured Americans.

Basic arithmetic suggests that this would hasten the demise of the program. Not so, according to President Obama. He says he'll squeeze out savings by cutting reimbursement to providers. ObamaCare will create something called the Independent Payment Advisory Board, composed of 15 experts. Their job will be to hold down spending by identifying reimbursement cuts, and their recommendations will be binding on Congress. If this board recommends what many fear it will, Medicare's reimbursement rates will drop below Medicaid's, which will mean that doctors will turn away seniors like they do the poor. In effect, in addition to an early death option, ObamaCare offers seniors diminished access to quality care. If this is compassion, give me cruelty.

RyanCare is not perfect, but at least it won't rob Grandma Millie to buy Cousin Joe coverage. It will allow all those who are 55 or older right now to stay in the current Medicare program. But come 2022, everyone presently younger would get an average of $15,000—the amount Medicare would spend per beneficiary—in "premium support" to use toward a health plan of his or her choice. Low-income and sick seniors could get up to another $8,000 or so. 

This is hardly ungenerous. But liberals are still crying bloody murder. Why? Because RyanCare would raise the "voucher" amount annually based on general, not medical, inflation. And since medical inflation outpaces general inflation, with every passing year the voucher would buy less, and seniors would be on the hook for more.  

But this misses the point even worse than Dwyane Wade missed the tying free throw for the Miami Heat Tuesday night. RyanCare wants to give seniors control over their Medicare dollars precisely to unleash their market power to curb medical inflation. It might not fully succeed, because it won't let seniors buy coverage from wherever they like. Rather, it will limit their options to expensive plans, with all kinds of unnecessary bells and whistles, on a federal exchange. Still, it will cut inflation somewhat. And the savings that result would go directly into seniors' pockets, not skimmed off to pay for someone else's coverage. 

There is one thing, however, that Rep. Ryan could—and should—do that would prevent Democrats from strangling RyanCare. He modeled his idea of giving seniors a fixed sum to use toward a private plan around the Federal Employee Health Benefits Plan that members of Congress use. But the formula to adjust Congress' annual allowance is based on the average premiums charged by private plans, not general inflation. He should give Congress the same treatment that he is proposing for seniors to demonstrate his confidence—and build everyone else's—that RyanCare would cut costs, not shirk its responsibility to seniors.

ObamaCare is the worst thing that could happen to seniors in their old age; inaction is the next and RyanCare is the least bad. As a senior in the making, if those were my only options, I would ignore Democratic demagoguery and take RyanCare in a heartbeat.

ObamaCare, however, I'd avoid like the plague.

Shikha Dalmia is a senior analyst at Reason Foundation and a columnist at The Daily, America's first iPad newspaper, where this column originally appeared.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

29 responses to “Medicare's Least Bad Fix

  1. “It might not fully succeed, because it won’t let seniors buy coverage from wherever they like. Rather, it will limit their options to expensive plans, with all kinds of unnecessary bells and whistles, on a federal exchange.”

    Everyone is government is just terrified of people spending their own money as they choose. We are doomed.

  2. I see a tragic lack of morning links today.

    1. Nine a.m. and no morning links. Reason clearly do not properly beat their interns.

      1. You know who else didn’t properly beat their interns?

        1. I truly, truly hope Congressmen Weiner was an intern in his youth, so that we can say that representative so and so beat his weiner…

    2. Everyone ignores the links anyway and posts his own. No point in compiling an official list when Commentator Link Fest? makes it superfluous.

      1. I think “an official list” is worthwhile. ML is news you can trust and revel in. A (week-)day without ML is like a day without orange juice … victory!

        1. And to be fair, most readers are not commentators (or serial linkers).

  3. I wish I had the resources to start a company that charters medical tourists from the US to India. Then I could make enough money to get some good private insurance.

  4. President Barack Obama has said that Rep. Paul Ryan’s plan for Medicare will “end Medicare as we know it.”

    Of course, pretty much *any* plan for Medicare will “end Medicare as we know it.”

  5. I’ve got an idea — how about ending Medicare entirely and absolutely?

    Barack’s chances of reelection are getting slimmer and slimmer. I wouldn’t be surprised if somebody replaces him in the Democratic nomination spot.

    1. It’s possible, but highly unlikely. The last serious challenge to a sitting president from his own party was Kennedy vs. Carter in 1980. Obama isn’t Carter. Yet.

      1. “Obama isn’t Carter. Yet.”

        I agree as he is worse that Carter. Still time to bring his level UP to Carter’s.

        1. Does anyone really think the moronic GOP candidates have a shot at winning?

  6. Notice the terms Obamacare, Ryancare, Medicare. While they are convenient handles, I think they also reveal a fundamental obstacle to meaningful change: the political problem is that this isn’t about medicine at all. It’s about medicine as a proxy for (emotional) caring. (I wish I could recall who first made this point: it’s not my own.)

    So all the talk about outcomes and so forth (which is where the discussion should be) is besides the point in the level of public discourse. This has never been about the best medicine, it has been about showing people that politicians “care” about them. So it doesn’t matter if less medical intervention is actually better for you, giving less of it means that you don’t care as much. Sadly, that also means that reform attempts are probably doomed since, no matter how good they are, they will be seen as giving less care.

    We also run into the problem of the “gift” (per Marcel Mauss). If you are given something of value, you are obligated to reciprocate. That’s why charity please send you address labels: giving someone something (even small) means they want to reciprocate. So for a politician to “give” medical care means that he will be seen as compassionate and many people will feel an obligation to vote for him, even if they otherwise disagree with him. So the “giving” of “care,” even if it is really extorting money from the population to give something that doesn’t help them runs into a powerful response from people.

    Here we, as libertarians, often make the mistake of talking about policy points and outcomes, trusting that people care about what is best for them and about logic. We, however, need to be able to speak at the more emotional level that proponents of whatever brand of CrapCare? are hitting to show that we are giving something (freedom) as well. Too bad freedom is so abstract when compared to “paying my doctor’s bill”.

    1. err, ?charity pleas?

    2. I think you have a pretty good analysis.
      But to be uncharacteristically optimistic, we are reaching a crossing of the quality and cost lines. At some point, as Sinic pointed out, you may be able to travel to India (and Mexico) for BETTER and cheapter care.
      I see in a few years the big debate NOT interstate buying of health insurance, but wheather private or public insurance will pay for medical care from India or Thailand.
      Does anybody know if their own health insurance will cover scheduled operations performed overseas???

      1. From what I’ve been told, the current Mexican president is trying to move Mexico to a US-style, insurance-based system. If so, that just continues to limit our options.

  7. All ponzi scams fail sooner or later.S.S. and Medicare just had a bigger pool of suckers.

    1. And the full faith and credit of the U.S. government. Which makes them technically not Ponzi schemes, as the money need not ever run out. They can just inflate costs away. Even more dangerous than a Ponzi scheme – at least Madoff only screwed those stupid enough to trust him.

  8. if bamacare was any good, all the unions would not have opted out.

    Ryan Paul is cute. something about the eyes.

  9. I do not want any participation of the government in any form of health care,
    because all the government wants is control. They do not deserve the power to control. They will only screw it up.

  10. I’m actually more comfortable with Obamacare than the other systems. Robbing the young to give to the old (and relatively well off) is despicable. It also drains the productivity from society, but for some reason that makes it seem less sinister to me (age based class warfare due to voting habits is just… ugh).

  11. An article by Saving & Goodman (WSJ, 5/27/11) reaches a different conclusion regarding RyanCare vs. ObamaCare. According to Saving & Goodman, the Ryan budget proposal “…largely matches the new law’s Medicare cuts for the next 10 years…” Also, “…for everyone over the age of 55, there is no difference between the amount of money House Republicans voted to spend on Medicare and the amount that the Democrats who support the health-reform law voted to spend.” If their claim is correct, RyanCare would be just as “…injurious to seniors…” as ObamaCare it seems to me.

    RyanCare has been sold in part by the claim that it “…will allow those who are 55 and older right now to stay in the current Medicare program.” But the current Medicare program’s expenditures have been growing at GDP per capita plus 2%; RyanCare’s expenditures are indexed to the Consumer Price Index, a huge cut for those 55 and older.

  12. Ryancare will fail b/c it injects no competition between health care providers (HCPs). Insurance companies negotiate prices with the big hospitals and doctors groups, then pay everyone the same rate. For a free market to work, the health care provider (HCPs) must be subjected to free market forces. Instead, we have a system in which HCPs are allowed to band together to negotiate for the highest prices they can!

    Imagine if consumers purchased gasoline through this model, buying vouchers for gas. Rather than compete against each other, the major gas companies band together to negotiate prices with the various voucher companies. The only competition is between voucher companies. With no price competition, the gas stations would compete instead on services, having extra pumps to minimize waiting, offering attendants to pump your gas, wash windows, perhaps offer free snacks. Does anyone really believe this would result in lower gas prices? Yet this is the model we have for our health care system.

    We need HCPs competing on cost! One way to do that would be to require:
    (1) HCPs must charge all patients the same price for the same service regardless of insurance status (BCBS, Aetna, Medicare, none);
    (2) HCPs must post prices on-line and in their waiting rooms;
    (3) insurance companies must post what they pay for each service.
    I could then decide if Dr. X is worth the extra $30 I would have to pay for a checkup compared to Dr. Y. This would give HCPs incentive to keep costs down, which is absent in our current system.

  13. And the president himself has said that RyanCare will “end Medicare as we know it.” By that he presumably means that it won’t give seniors limitless benefits forever at taxpayers’ expense, http://www.petwinkel.com/pet-f1-c-32.html no questions asked. But the truth is that there is no scenario that could give seniors that.

Please to post comments

Comments are closed.