Maybe it was on Meet the Press that I saw Paul Ryan explain his Medicare replacement plan. It would be a lot like the Federal Employees Health Benefit Plan (FEHB) that I had before I retired and then in retirement until I was eligible for Medicare. Each year I was offered a menu of plans to select from that included Blue Cross, Government Employees Health Association (GEHA), Kaiser and a host of others. Once I had chosen GEHA, I just stayed with that and kept it as a supplemental after I had Medicare. USDA paid about 75% of my GEHA premium and continues to pay that now. The balance is taken out of my monthly retirement payments as it was taken out of my salary before I retired. It was and is very nice insurance and works very well for me and my spouse.
If it worked as well for the population at large as it does for federal employees, it would be a workable replacement plan for Medicare, but I have my doubts:
1. The percentage of the premium that the government pays for FEHB plans doesn’t decline. All beneficiaries of the plan are on salary or have a known retirement annuity and the additional amount paid for health insurance is an acknowledged part of employee and retiree compensation. This is not what Ryan has in mind for his Medicare replacement. The amount the government would pay would be tied to an index and grow at the same rate as the index. So far all suggestions have been for indexes that would grow more slowly than medical costs, so retirees would pay an ever increasing share of their insurance premium. I have difficulty thinking of that as insurance.
2. The admin cost of private insurance is greater than the admin cost for Medicare. Medicare administrative expenses are generally thought to be around 2%. If one factors in costs borne by other agencies such as the IRS that can be attributed back to Medicare, then the admin cost is probably 5% . The admin costs for private plans are about 17% when commissions and profits are included. More is spent per Medicare patient than per non-Medicare patient, $6,600 vs. $2,700. The numbers are from “Medicare vs. Private Insurance: The Cost of Administration,” January 6, 2006:
The disparity in costs per patient may be accounted for by the fact that Medicare recipients are older and less healthy and by the extreme cost of end of life treatment, but I don’t know for sure and would appreciate some help on this point.
3. It’s hard to take seriously a proposal from a politician who opposes any kind of revenue enhancement and offers Medicare reform as part of a plan to balance the budget no sooner than 2040. Warning bells.
4. Ryan defends his plan by saying that premium support would be greater for poor people and the wealthy would pay more. This introduces an element of progressivity, a concept which he and his Republican colleagues are trying to reduce or eliminate in the general revenue system. More warning bells.
5. Proposals to reduce Medicare costs are waived off by Ryan and others as wishful thinking. I was impressed by the suggested reforms ticked off by Senator Schumer later on that same edition of “Meet the Press.” Still more warning bells.
Among developed countries, the US spends a higher percentage on health care than any other country, 13.9%. The next highest is Switzerland, 10.9%. All or almost all of these countries cover everyone and get better results in terms of life expectancy, infant mortality and so on. The US does not cover everyone and its results in terms of life expectancy etc. are poor by comparison. The US is to developed countries what Mississippi is to the other states. When John Boehner stands up and says we have the best health care system in the world, he’s talking about what he gets at Walter Reed, not what a coal miner gets in Kentucky.
My conclusion: Fiscal sanity and social justice demand that we hold the line on Medicare and work on it to bring down costs. Eventually we need to get to a single payer system like what has been adopted in all other developed countries. It would be cheaper and more effective and would reach everyone. I’m not too hopeful, because I don’t think we can ever get enough voters to understand the issues and vote their own interests. If we have to scare the hell out of seniors to get election results like in the 26th District in New York, then perhaps we should back off and do nothing.