Posts Tagged ‘Voucher plan’

Trading Medicare for the National Debt

Wednesday, June 8th, 2011

Slashing the soaring national debt will require some hard choices, but our representatives in Washington, D.C., need to do the right thing.  Writing in the New Yorker, James Surowiecki says that “Multitrillion-dollar piles of debt have a way of making people nervous, so it’s not really surprising that Washington is now in the throes of budget-cutting hysteria.  Republicans risked a government shutdown over a few billion dollars in spending cuts, and are now threatening to refuse to raise the government’s debt ceiling.  The ratings agency Standard & Poor’s lowered its outlook on U.S. debt because of concerns about the long-term budget.

“And Barack Obama has been speaking of the need to eliminate two trillion dollars in federal spending in the next ten years.  Yet, strange as it may sound, the federal government does not have a spending problem per se.  What it has is a healthcare problem.  The cost of most budget items typically rises at a reasonable rate, if at all, but the cost of Medicare, Medicaid, and the tax subsidy for employer-provided insurance has been rising much faster than everything else: in the past forty years, Medicare costs increased 8.3 per cent annually.  If they’re not controlled, Medicare and Medicaid will eventually be by far our biggest expense.  Preventing that is the key to getting our fiscal house in order.”

Representative Paul Ryan (R-WI) has proposed replacing the popular Medicare program by giving seniors less money to cover their healthcare needs.  Ryan wants to replace Medicare with a voucher plan that they would use to purchase private insurance.  This plan saves money because the value of the vouchers would rise at a much slower pace than healthcare costs; the government’s payments to seniors’ healthcare spending would get smaller.  As a result, seniors would have to spend more of their incomes on private insurance and out-of-pocket expenses, or go without.  The Congressional Budget Office (CBO) estimates that Ryan’s plan would significantly increase how much Americans spend on healthcare, since private insurers don’t curb costs as effectively as Medicare.  The upside to the national debt is that taxpayers would foot less of the bill.

According to Surowiecki, “The healthcare bill that Congress passed last spring represents a different approach.  It trims more than four hundred billion dollars from Medicare spending, and contains a host of initiatives designed to make the healthcare system more efficient and effective. In line with that, it creates a body called the Independent Payment Advisory Board (IPAB), which determines how much Medicare will spend annually.  The American healthcare system is riddled with waste and unnecessary and ineffective procedures.  Relative to every other industrialized nation, we spend more and our health outcomes are no better (and often worse).  In American medicine, supply often creates its own demand, and paying doctors on a fee-for-service basis encourages more high-cost procedures.  The IPAB, in conjunction with other cost-cutting provisions in the bill, would look to fix the skewed incentives that lead to overtreatment, bargain for better prices, and insure that we’re spending our money more effectively.  The Affordable Care Act is far from a perfect law, but the CBO estimates that, if implemented as planned, it could cut the long-term deficit by more than a trillion dollars.”

A Wonkbook poll reported in the Washington Post found that 84 percent of Americans oppose the Ryan plan.

The prospect of replacing Medicare with a voucher plan to bring down the nation debt makes a lot of people uneasy.  Americans generally like and trust their doctors and hospitals.  Additionally they like the ability to choose their own doctors, and don’t want them to stop treating Medicare patients because the fees are too low.  Surowiecki concludes that “This is the fundamental dilemma: we’re unhappy about the rising cost of healthcare, but we’re also unhappy about what we would have to do to curb it.  The ideal system, for most voters, would guarantee all seniors reasonable healthcare, stop the debt from getting out of control, and keep paying healthcare providers as before.  The problem is that you can only do two of those things at once.  The debate between Ryan and Obama is a debate over which of the three we’re willing to give up.”

200 Economists Come Out in Favor of ObamaCare

Monday, April 25th, 2011

Approximately 200 healthcare economists are urging Congress to reject a premium support model for Medicare and instead “support vigorous implementation” of last year’s health reform law.  The economists – who are primarily academics – sent a letter to Congressional leadership saying there are two general strategies to Medicare spending and the “right” approach can be found in the Patient Protection and Affordable Care Act (ACA). “It supports research on identifying those procedures that work best,” according to the letter.  “It emphasizes payment reforms and new ways of organizing delivery of care to slow spending growth while improving care,” it said, adding that the Congressional Budget Office (CBO) projects that the Affordable Care Act will decelerate annual growth of per-person Medicare spending over the next 10 years below the rate of overall economic growth.

House Republicans recently released their fiscal year 2012 budget, which seeks to convert Medicare to a premium-support system.  Patients would be given a list of health plans from which to choose, and Medicare would subsidize the premiums.  In their letter to congressional leaders, the healthcare economists said the term “premium support” mislabels a voucher program, which they say will end up forcing consumers to pay more.  Citing CBO statistics, the economists expressed concern that current proposals link voucher payments to growth in the Consumer Price Index adjusted for population growth.  “Because medical care costs are rising much more rapidly than the CPI, this guarantees that the value of the proposed Medicare vouchers would erode over time,” according to the CBO.

Some believe that forcing people to pay more out-of-pocket expenses will make them better healthcare consumers.  Writing in The New Republic, Jonathan Cohn says that “The solution, as this argument goes, is to redesign insurance so that it forces people to pay more out-of-pocket expenses.  And, within reason, it’s not a bad idea.  Most economists, even those on the left, would agree that excessive coverage leads to higher health care spending.  But redesigning insurance in a way that actually lowers spending and, by the way, promotes good health, is a lot more complicated than merely giving people “more skin in the game,” as conservatives like to put it.  A new study by researchers affiliated with the Rand Corporation suggests why.

“The study, published in the American Journal of Managed Care, compares trends in medical spending by two groups of people — one group with traditional insurance and one with newly purchased high-deductible coverage,” Cohn notes.  “It appears to be the largest study of its kind, and the three authors did their best to adjust for factors like age, occupation and underlying medical conditions.  The result? People with high-deductible plans spent substantially less on their medical care.  That’s good news.  Or is it?  Giving people more skin in the game has distributional consequences.  It shifts the burden of medical expenses onto those people with the most serious medical problems, which is, arguably, what insurance is designed to prevent.  In addition, discriminating medical consumers are not always intelligent medical consumers.  People may decide to skimp on useful medical care rather than the superfluous kind.”

According to White House press secretary Jay Carney, healthcare savings are necessary to control the deficit. Carney said that the president would build on the work of his debt commission, whose recommendations he initially refrained from endorsing.  Carney also praised a small group of senators from both parties, known as the “Gang of Six”, which is establishing a framework where a sharply divided Congress can compromise on deficits.  “The president understands very well that healthcare spending is a major driver of our deficit and debt problem,” Carney said.  “He believes we can achieve those savings in ways that protect the people that these programs are supposed to, and were designed to, support and help.”