Monday, August 13, 2012


The National Review has released an editorial supporting the plan for Medicare released by Romney and Ryan.  It describes the plan exceedingly accurately.  The piece, entitled "The Return of Mediscare" is below:

On CNN yesterday, Obama strategist David Axelrod claimed that “most of the experts who have looked at this” have said that Paul Ryan’s plan to reform Medicare would put the program “in a death spiral” and “would raise costs on seniors by thousands of dollars.” A day earlier — as Representative Ryan was preparing to accept Mitt Romney’s offer to join his ticket — Obama Campaign Manager Jim Messina had said the plan involved “shifting thousands of dollars in health-care costs to seniors.”

None of this is true. Any expert who looks at Ryan’s plan — any intelligent and fair-minded person, really — can tell you the actual worst-case scenario for how much more it could make beneficiaries pay: $0.
The claim Axelrod and Messina are making is based on a hostile interpretation of an earlier version of Ryan’s proposal. Ryan has changed the proposal over the last year, however, and Romney has endorsed the new version. The Democratic criticism, applied to the new plan, is indisputably false.

The Romney-Ryan proposal — which has the support of liberal Democratic senator Ron Wyden of Oregon — would let senior citizens choose a coverage plan provided either by the federal government or by a private company. The government would defray the cost of purchasing the plan selected. The providers would submit bids showing the premiums they would charge to cover the benefits Medicare has traditionally offered. The second-lowest bid would set the amount the government would provide for each beneficiary

Seniors who picked the second-cheapest provider would have their entire premium paid by the government, and seniors who picked the cheapest would get a check for the difference. Seniors who picked a more expensive plan would have to pay the difference out of pocket.

We have reason to be confident that this arrangement would restrain the growth of costs. A study has just shown that applying the second-cheapest-bidder approach to even the much less robust form of competition in Medicare Advantage would have resulted in a 9 percent reduction in Medicare costs in one year alone. The savings from years of real competition could be enormous.

If, however, competition does not restrain costs, the growth of government spending per beneficiary will be capped at a level a bit above the growth rate of the economy plus inflation. That is the exact level that the Obama administration envisions as well. The administration, however, hopes to reach the target by setting low prices for medical providers and otherwise micromanaging medical markets. There have been many past efforts along these lines, and they have always failed.

Under a worst-case scenario, then, the Romney-Ryan plan costs senior citizens no more than current law. It offers the hope of doing considerably better: of reining in the costs of Medicare, the principal cause of long-term debt disaster, without sacrificing patient choice, the quality of health care, or medical innovation.
Republicans should explain that they have found a promising strategy to stave off national bankruptcy while improving senior citizens’ health care, and explain also the alternative of bureaucratic rationing Obama has in store for them. If Obama and his aides persist in claiming that the Romney-Ryan plan will increase costs for senior citizens or shift risks to them, Republicans and fair-minded observers should not hesitate to call these charges what they are: lies.


Andrew Champ-Doran said...

Mr Cahill,

What's missing in this examination is that the rates for healthcare costs and premiums has been rising at a much faster rate than, "a level a bit above the growth rate of the economy plus inflation." I believe the actual rate of rise in those expenses to be somewhere in the 7% -15% range annually.

The capping of government spending at the quoted rate is where Ryan agrees his plan derives the savings, private or public plan. He does not intend to limit the free market rate, just what is paid by the government.

His insistence that this does not change coverage anyone currently getting medicare benefits is mostly true, according to his plan. Both versions of his proposed budget "Grandfather in" (I wonder if the pun was intended) anyone 55 or older, so we logically see little or no savings from this provision for 10 years after passage. The catch here, though, is that calculating the rates and increases start soon after passage of the budget bill. And, guess who foots the bill for the difference during the first ten years. This would have to increase the "donut hole" in coverage, wouldn't it? I would think so, unless drug manufacturers roll back their prices for the nest ten years.

I believe the trade-off for the 10 years is easier passage with less resistance from seniors and their powerful lobby, the AARP. What worries me is that my bride and I are 51. Through no fault of yours or the Federal Government's, we got a rather late start on marriage, family, and home, so our Mortgage won't be paid until we are 74. Paying our mortgage is not your job, or the government's, but it will take quite a bite of our budget after retirement age, to the point where we will continue working well after the magic 65 or 67. This budget also takes away my deduction for mortgage payments and child tax credits, effectively raising my taxes, even though it claims to lower my rate (What do you suppose Grover Norquist has had to say about that?).

I don't think that privatization of Medicare or Social Security is the answer to our budget deficit.

What if we agree that we truly let the market set the rate for health insurance, medications, and payments. As the largest purchaser of those goods and services, the federal government negotiates those rates, just like any purchasing agent at any consumer does. The larger the consumer, the better the price break. Unfortunately, negotiation for those services is strictly prohibited by federal law. Pharma made the best deal for their own when lobbying for and writing prescription drug coverage into the MMA law back in late 2003.

I do not entirely blame President Bush for that. He gets credit for pushing and signing the bill, but I also blame both houses of a Democratic-controlled Congress, and their self-interested legally exempt insider trading for that. (Sen. John Kerry was the worst, but far from the only one.)

But now that we have a chance to right that wrong, why shouldn't we? It seems better than throwing the baby out with the bathwater, even if the baby costs a lot to keep around.

-Andrew Champ-Doran

Richard T. Cahill Jr. said...

Mr. Champ-Doran,

The Romney-Ryan plan is NOT privatization. Under the plan, each person has the option of staying with Medicare exactly the way it is now. One can choose the voucher to pay for a private insurance plan, but only if they desire to do so.

Privatization would involve a mandatory elimination of the governmental side of the equation. That is not part of their plan.

I think you are correct regarding the motivation for the 10 year provision. Look at the gnashing and grinding of teeth over this plan. Imagine if it was to start immediately.

The bottom line is that any plan to fix the real problems facing the country could have some pain. One cannot wave a magic wand and expect everything to be better overnight.

Certainly, the plan is not perfect. It beats the tar out of Obamacare though.

Andrew Champ-Doran said...

Mr. Cahill,

To quote you, "The bottom line is that any plan to fix the real problems facing the country could have some pain. One cannot wave a magic wand and expect everything to be better overnight."

Well said. We may disagree on the bulk of this, but I wholeheartedly endorse the statement above.

I think we can both agree that changing the way Medicare is funded will alter the program, making it much smaller, eventually making it irrelevant. Where we diverge is whether or not we think that's a good thing.

I think it's bad. Doctors currently have the option of refusing Medicare, but many don't because all patients of a certain age are on it. If, in a few years after the start of the Ryan Budget, patients are still on Medicare because that is all they can afford, they can be turned away by doctors everywhere but the emergency room. Remember, we won't have the protections of the current law to prevent this.

Since there are no price controls built into the Ryan Budget, private insurers will continue to have the ability to charge whatever they want. Nothing in insurance industry history suggests they might try to keep premium rates in line with the cost of living or inflation. A smart business model would say to crush the competition by paying the doctors a little more than Medicare reimbursement rates. That might cost them a little more in the short run, but, since they are for-profit companies, they can absorb the costs until they can effectively put Medicare out of business, and all bets are off after that.

Without some compromise in Washington, though, I fear nothing good will happen. Right now, it seems that they can't even agree about what they agree on.

Andrew Champ-Doran

Richard T. Cahill Jr. said...

I doubt highly that Medicare will ever be irrelevant regardless of whether the Romney-Ryan plan is implemented.

The plan is designed to make Medicare more efficient and less expensive, not eliminate it.

I do agree with your analysis of the gridlock in Washington though.