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RyanCare Would Raise Premium Costs by $30 Trillion

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Rep. Paul Ryan (R - WI)In an editorial on Huffington Post, Dean Baker, co-director of the Center for Economic and Policy Research, points out some facts in Medicare’s history which the media and politicians failed to note. It’s worthwhile to review the fiscal lessons learned from previous experiments with privatizing Medicare.

The basic story is that the Medicare system is far more efficient than the private insurance sector in delivering health care and holding down costs. This has nothing to do with whether we prefer the government or the private sector. It just happens to be true.

We know this because we have tested it. The government first opened up Medicare in a big way to private insurers in the mid-’90s when the Gingrich Congress pushed through Medicare Plus Choice. It turned out that Medicare Plus Choice raised costs. Beneficiaries with comparable histories cost about 10 percent more to treat in the private program than in the traditional Medicare program.

We tested the private-sector route a second time when President Bush pushed through his Medicare Advantage plan along with the Medicare prescription drug benefit in 2003. The nonpartisan Congressional Budget Office (CBO) concluded that Medicare Advantage also raised costs.

This is why the CBO calculated that Representative Ryan’s voucher system would raise costs compared with the existing Medicare system. The CBO’s projections imply that switching to the Ryan voucher system would raise the cost of buying Medicare equivalent policies by $30 trillion over Medicare’s 75-year planning period.

This amount is approximately six times the size of the projected shortfall in Social Security over its 75-year planning period. It comes to almost $100,000 for every man, woman and child in the country. In other words, even in Washington, the burden of the Ryan plan is real money.

It is important to recognize that this $30 trillion figure is simply the increase in the cost to the economy of providing health care. This number does not include the shift in costs from the government to beneficiaries. The $30 trillion represents higher payments that would go to insurers, pharmaceutical companies, medical supply companies, doctors and other health care providers because the private system put in place under Ryan’s plan is less efficient than the Medicare program.

This enormous waste, and the resulting transfer of income from taxpayers and beneficiaries to insurers and providers, has absolutely nothing to do with whether our preference is for big or small government. The relevant question is whether we want ordinary workers and retirees to pay tens of trillions more for their health care in the decades ahead in order to enrich the insurers and health care industry.

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Written by Valerie Curl

April 26, 2011 at 9:25 AM

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