I've been thinking about the recommendation to privatize Medicare, recently announced by Paul Ryan as part of the Republican Party's 2012 federal budget proposal.
Representative Paul D. Ryan of Wisconsin was chosen as chairman of the House Budget Committee after the Republican victories in the 2010 midterm elections.
The proposed 2012 budget would reduce the amount currently budgeted for Medicare and change Medicare from a program that uses tax revenue to pay for the health care expenses of retired Americans into a government subsidy program that would provide "premium support" to retired Americans. The government subsidy would be paid directly to insurance companies and healthcare providers.
The Medicare reform proposal would not change Medicare for people over age 55 in 2012, but would only affect people under 55, who will presumably retire in the future. If you are in your 40's or 50s, and you have insurance coverage provided through your or your spouse's employer, this proposal would have direct impact on your health care insurance and health care choices upon retirement.
Why would retired Americans need government-subsidized "premium support?" Retired Americans would be expected to purchase health insurance as individuals on the open market, instead of signing up for the Medicare program upon retirement (when insurance provided through employers would stop).
At first, this sounds like a nifty idea that would provide power to you and other Americans and enable you to take responsibility for your own health insurance decisions. Republicans who have been promoting this program have also said that health insurance premiums would be reduced from current levels because eliminating the current Medicare program and increasing demand for private insurance would increase competition among insurance companies, which would drive premium costs down.
Remember how many times in the past we have been told that a proposal would increase competition and reduce costs to consumers? This has been used as a selling point by those in favor of industry deregulation and other reforms many times. But, how many times has the prediction that increased competition would reduce costs turned out to be true? Do numerous examples of this happening spring to mind? No.
There is another very important recommendation included in the Republican Party's proposed 2012 budget: it would repeal the health care reform act passed into law in 2010. That act requires more people to buy insurance and eliminates health insurance companies' ability to decline coverage of insurance applicants based on pre-existing medical conditions. This is because in order for any insurance program to work and remain financially solvent, there need to be enough dollars paid into the program in the form of premiums to cover the expenses the program bears to pay for health care of those who are ill. This is true of health insurance, and also true of auto insurance, or homeowners insurance, or any other form of insurance — premium revenue received must be great enough to cover benefit expenses and administrative costs.
Think about how repeal of 2010 health care reform and conversion of Medicare into a health insurance premium support program, bound together in Ryan's proposal, would work in tandem.
First, let's remember why Medicare was created. Medicare was signed into law in 1965 by President Johnson. It was part of the Social Security Act of 1965. Why? Because huge numbers of retired Americans who tried to purchase private insurance could not get health insurance coverage from insurance companies. In many cases, insurance companies considered these older Americans poor risks and they declined the applications. In other cases, insurance companies that decided to provide coverage to retired applicants required extremely high, unaffordable premiums in exchange for the insurance coverage, because the older applicants represented higher risk than young applicants.
Bottom line: Medicare was created because significant numbers of older Americans could not purchase or could not afford to buy health insurance coverage on the open market.
If the health insurance reform act is repealed, insurance companies will once again be able to decline applications from people with pre-existing conditions. The older you get, the more likely you are to develop a health condition that insurance companies would consider "pre-existing." And in cases where there are no pre-existing conditions and insurance companies agree to provide coverage to retired, older applicants, it is entirely logical to expect that the premiums charged would be unaffordably high for the majority of retired Americans.
Would the "premium support" provided by the reformed Medicare program be sufficient to make health insurance affordable to the retired Americans who could presumably purchase it (those without pre-existing conditions)? That is anyone's guess, and affordability depends entirely on your income level: the more money you have, the more affordable everything is. The reverse is also true.
Also, in order to accomplish the cost reductions projected in the proposed 2012 budget, the amounts of "premium support" provided by the reformed Medicare program would rise more slowly than health care costs, which means that the premium burden paid by individuals would grow and grow, to increasingly unaffordable levels.
Bottom line: it is entirely logical to expect that repealing the health insurance reform passed in 2010 and reforming Medicare the way it's been proposed would combine to bring about the same situation that created the need for the original Medicare program in 1965.