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  • The False Choice Between Existing Medicare and Ryan’s Proposal

    Yesterday, Washington Post columnist Ezra Klein used a recent poll to argue that Americans oppose House Budget Committee Chairman Paul Ryan’s (R–WI) proposal to transform Medicare into a defined-contribution system, where seniors choose the health plan that best suits their needs. But, as always, the devil is in the details.

    The Washington Post–ABC News poll gave respondents the following options: “Medicare should remain as it is today, with a defined set of benefits for people over 65, OR Medicare should be changed so that people over 65 would receive a check or voucher from the government each year for a fixed amount they can use to shop for their own private health insurance policy.”

    In response, 65 percent said Medicare should be left untouched, with 34 percent preferring a defined-contribution approach. When asked generally if they would support cutting spending on the Medicare program in order to reduce the national debt, 78 percent said they opposed it.

    The problem is, this represents a false choice between a feasible scenario and an impossible one. Experts on both sides of the aisle acknowledge that it is not possible to sustain Medicare in its current form.

    Due to an aging population and growth in health care costs, spending on the program is skyrocketing, representing a minimum of $30.8 trillion in long-term unfunded obligations. According to the Congressional Budget Office, in 2010, Medicare spending consumed 3.6 percent of gross domestic product (GDP). This will more than double to 7.6 percent of GDP by 2050 if current law is unchanged. If Congress continues to delay reductions to Medicare physician payments and the Obamacare cuts do not fully occur, as the Congressional Budget Office and Medicare Actuary warn, the outlook is even worse—the program would consume the same level of spending a decade sooner, and continue to climb from there. Even major tax increases would not be adequate to sustain this kind of spending.

    Studies show that across the board, Americans contribute far less to the Medicare program than they receive in benefits. This is because workers do not pay for their own future benefits—today’s payroll taxes cover benefits for the current retired population. As the number of workers relative to Medicare enrollees declines, it will be impossible for taxpayers to maintain current benefits for future seniors.

    Therefore, change to Medicare is not a choice—it is inevitable. It can take one of two paths: it can rely on top-down control of cost and utilization of services by empowering bureaucracy, or it can control costs by giving patients the purchasing power to seek the best value for their health care dollars. The ongoing debate over health care reform shows that Americans do not favor a stronger role for government in their health care. A Kaiser Family Foundation poll asked whether Obamacare would lead to too much government involvement in the health care system—54 percent of Americans said yes, compared to 32 percent who thought it was about right. A CNN/Opinion Research Corporation Poll asked if Congress should leave the health care overhaul as is, repeal and replace it, or increase the government’s involvement. Twice as many respondents choose to repeal and replace Obamacare rather than increase government involvement.

    If big government is the mode employed to control Medicare spending, Obamacare will pale in comparison. Given the alternative of a centralized, bureaucracy-focused approach, reforms like those proposed by Representative Ryan represent the best way to sustain the program for future generations.

    Posted in Economics [slideshow_deploy]

    9 Responses to The False Choice Between Existing Medicare and Ryan’s Proposal

    1. Leon Lundquist, Dura says:

      Katheryn Nix, your work continues to be excellent week after week. I think you said it all, quote "a false choice between a feasible scenario and an impossible one!" I was tickled by Rep. Herman Cain's SIN Strategy! Progressives S-Shift the Subject, I-Ignore the Facts and N-Namecall. I think it is wonderful how we create a whole dumpster full of Facts that the Democrats love to Ignore! You are right it is a Horrible Fact that so called 'serious' politicians pretend to save Medicare, when it won't be there for anybody after they drove it off the Cliff!

      What saddens me most in this discussion is how we always neglect the Fact that ever since Medicine became Over Regulated the Cost of Medicine has skyrocketed! I contend that we pay more to the Government Administrative Medical Complex than we pay to the Doctors and Nurses! So really, the whole discussion is False! Just cut out the Bull! Defund and Abolish HHS! Put that gigantic waste into Medicare funding instead of paying a bunch of bureaucrats for Bad Medical Policy!

    2. Joan, New Mexico says:

      The secret allies of Obamacare are the Health Insurers and merging hospital systems as well as their lobbyists–(see the Covert Health Rationing Blog) Massive merged hospital systems and health insurers are more hugely profitable than ever and seek to end independent physician practice through ACOs where physicians become employees. For nearly two decades, the CMS has systematically been one sided in its cuts of PHYSICIAN REIMBURSEMENT ONLY. Many procedures such as cardiac stress imaging cannot be done in private offices this year due to low reimbursement and are shifted to the hospital which charges and recieves up to three times the outpatient hospital amount from Medicare(at additional tax payer expense). Hospital systems and Insurers will seek to stealthily kill the Ryan Plan.

    3. Mike Bochert says:

      As with Medicare, also with Social Security. Anyone currently collecting who lives a normal lifespan will collect much more than they put in. Many who are collecting will receive the equivalent of their contributions in less than ten years. How can anyone imagine this tree will continue to grow to the sky?

      Another point which certainly applies to Social Security and probably Medicare and Medicaid is this. There is no defined set of objectives or goals. Instead, we just keep shoveling money to one group of citizens while taking money from another. How would we know if the benefits ever reached "enough" or the payroll taxes ever reached "too much" if there is no economic definition of program success?

      Instead of economic measurements, we get rhetorical pap like (for Social Security) "ensuring that every senior can retire with dignity." And, cleverly, we accomplish this by giving money to all, whether they have achieved "dignity" on their own or not. Nonsensical, economically damaging to working families ( whatever that means) and another sad example of politicians' willingness to avoid hard thinking in favor of catchy phrasemaking.


    4. joan new mexico says:

      You have systematically refused to analyze the role of eternally profitable health insurers and the hospital lobby in their covert support of Obamacare and tageting of independent practice physicians as well as the Ryan Plan. What's the matter Ms. Nix? Are you afraid of the truth?

    5. Elizabeth Farrar says:

      As a recipient of Medicare I fully support Rep. Ryan's proposed plan for the program. When I chose the Medicare Advantage program in 2009 it was because of the choices it provided. I would go so far as to support a transition to the program for those of us in the program currently rather than wait until 2022. The choices being the same as proffered by Ryan. Either govt pays a fixed amount and you (the Medicare enrollee) pays the rest for your choice of health insurance plans offered or stay in the same old, same system.

    6. Jeanne Stotler,Woodb says:

      When I went back to work in 1979 as a nurse, I was making less than the Trash collector in NYC, Todays nurses still make less than a lot of less educated people. You can complain about the cost of MD's, well look at the facts, they have to pay rent and util. which have skyrocketed, and because of all the Gov't. requirements, they have to have more office help which they pay salaries, health care and ins., soc. sec. etc. Than there is the office nurse, she also gets a salary and all the above. The MD pays dues to local Med. assoc., has to take CEC to maintain his Lic., these are not cheap and must be renewed every two yrs. Nurses have to renew their lic. as well. MostDrs. have families and also have to pay the same bills you and I pay, I forgot, due to all the rules and leg. he also has to have an accountant. Now if he has Medicaid Pts. he has to wait for a meager payment from the gov't. same for the medicare, my supplement , which pays the most of my bill, pays him first. And Ken, between what is taken out of my check and what I pay out of pocket for a supplement I pay 3600 a year, I also pay for part D and a co-pay on Rx's, it's the ones who never paid in to the plan, some illegals who are draining the system, Medicare and Social security was never intended to be charity, there are families getting SSI who can well afford to take care of a handicapped child but still collect this "FREE" money, the abus of the system is rampant as is the fraud.

    7. Always Controversial says:

      this article assumes that the only choice we have is either the ryan plan or the current broken plan; that is erroneous.

      the choices are not limited to either keeping the exit model or the ryan plan (which just transfers the rising costs on to individuals who need the care the most).

      there are alternatives, for instance, rather than medicare and social security starting at 65,they could kick in at 70 instead (raised in minor steps over the next 5 to 10 years). both these programs began when the ratio of younger workers to old retirees was much greater and people did not live as long as they do now. actuarially, it worked back then. now, the ratio has changed and people live longer, and therefore the eligibility age should rise so the plans have a chance to work actuarially.

      also, currently, the only the first $100,000 (approx.) of earned income is taxed, and no dividend, interest or capital gain, royalty, rent income is social security or medicare/medicaid taxed. this not only results in underfunding, but makes the taxes that support those programs very, very regressive. foreign corporations and individuals who profit from our system do not contribute at all.

      neither plan really gets to the nub of rising health care costs, a lot of which i suspect are administrative in nature and driven by profit imperatives. there was a time when health care was a pursuit one choose b/c it was a virtuous pursuit, not just because of the money.

      no system is perfect, but we should study social net systems that cost less and deliver better results and try to improve upon them, before we assume we have only two choices.

    8. Leapin Lou says:

      Always controversial NY, NY..Comment right on target !

    9. Karl Stecher Centenn says:

      "If Congress continues to delay reductions to physician payments.." Are you serious? Ms. Nix, I must question how much (little) you believe physicians are paid for what they do by Medicare currently. If I may (and I will) make an analogy: It's like having a "Gasicare" card and going into a service station and getting gas for 88 cents per gallon…and the station owner may charge no more, as that is the government regulated amount. How soon would he go out of business?

      Brain surgery for tumor: 4 to 10 hours of surgery, taking care of the patient roughly 5 days in the ICU, 9 more days in the hospital, then all the care for a total of 90 days postop: Medicare allows $1,760, pays only 80% of that, calls what it pays a "usual and customary fee." Absurd. Congress (and the Pres, now Obama) continually cheat doctors as noted. Realize that the overhead for a neurosurgeon is $130-175 per hour.

      Note also that Obama, with the passed (currently unconstitutional) Abysmalcare, has cut $500 billion from Medicare funding!

      Over 30% of physicians will not see any Medicare patient, as the reimbursement is below overhead.

      And you, as author of this article, push for further reduction to physicians? Why?

      In terms of what we have put into Medicare…say 40 years of contributions mandated by govt to age 65. The money has not been put in a lock box…that's not the fault of seniors who were told they were insured. And how about the interest (even at 3-4%, which wouldn't have been unreasonable) which should have been collected in a lock box. Further, seniors must continue to pay insurance premiums as they receive Medicare…roughly $120 per month, currently. And they must also pay for supplemental insurance, due to the failure of Medicare to cover the last 20%. Premiums for this are in the $1500-2000 per year range, unless Medicare advantage is used. But that's being discontinued with Abysmalcare.

      It's not the fault of seniors that their money was wasted, so that current beneficiaries have to depend upon current workers.

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