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Thursday, March 28, 2013

The House Republican Plan Would Transform Medicare into a Shrinking Voucher System

Marc Steinberg

Deputy Director of Health Policy

For the third year in a row, the Republican majority in the House of Representatives has passed a budget proposal authored by Congressman Paul Ryan that transforms Medicare into a voucher system (also known as premium support). Starting in 2024, people born after 1958 would get a voucher to use toward either private insurance or traditional Medicare coverage. If the voucher is too small to buy adequate coverage, those who rely on Medicare will have to make up the difference with money out of their own pockets.

According to the Congressional Budget Office, the value of these vouchers would shrink over time. In their first year, they’d be worth $700 less per person than what Medicare covers today. Seven years later, vouchers would be worth $2,200 less. And by 2050, they would be worth $8,000 less per person, per year.

Proponents of the voucher system assert that turning Medicare over to private insurance companies will generate efficiencies. But the facts are not on their side. Private plans in Medicare have, on average, always cost more, not less, than traditional Medicare to deliver the same care. Insurance companies have expenses like marketing, salaries, advertising, and profits that Medicare doesn’t. And Medicare actually does a better job than private insurers at controlling costs.

The plan’s supporters also say coverage won’t change for current beneficiaries. But in fact, the budget seeks to repeal the Affordable Care Act’s closure of the Part D doughnut hole, which would expose people with Medicare to up to $6,000 in additional prescription drug costs by 2020.

Moreover, even though the plan puts off the bigger changes to Medicare for 10 years, those changes will increase costs for people who stay in traditional Medicare, including today’s seniors. That’s because private insurance companies will be able to attract younger and healthier people with perks like gym memberships and free basic office visits, while discouraging older, sicker enrollees by charging more for things sick people need, such as chemotherapy. Without younger, healthier people coming into traditional Medicare, premiums will rise. What’s more, as traditional Medicare shrinks, it will become harder to find a doctor who accepts Medicare.             

Medicare cost growth has slowed substantially in recent years—a trend we need to build on as baby boomers age and place increasing demands on Medicare. But instead of taking this challenge seriously, the Republican budget plan is once again driven by ideology instead of evidence. If there’s any surprise, it’s this: After last year’s campaign in which Ryan had a national stage to promote his ideas for Medicare as the vice-presidential candidate, and after an election in which voters soundly rejected these ideas, this Medicare proposal is virtually unchanged.