A question I’m amazed hasn’t already been asked

Paul Ryan’s radical plan to eliminate Medicare as we know it has already passed the Republican-controlled House, but finally someone is asking the fundamental question about the plan to give seniors vouchers to buy private insurance rather than have the government pay directly for their care: Would any private insurers even want into this market?

I touched on it briefly – too briefly – in a post last week when I noted that private insurance companies “aren’t very likely to embrace the segment of the health care marketplace that is practically guaranteed to need lots of expensive health care.”

But TPM’s Benjy Sarlin went to the source and asked insurance company representatives what they thought about the idea. They seemed pretty cool:

Dan Boston, a veteran lobbyist for health care providers and co-owner of Health Policy Source, said in an interview with TPM that he was taking a “wait and see” approach on the GOP budget before judging its value. (The American Hospital Association opposes the plan). But he cautioned that a major concern would be whether hospitals and private insurers would be left on the hook for low-income seniors eligible for both Medicare and Medicaid, who could run up significant costs with little hope of ever paying them off.

“I think everyone is going to be looking at the viability of the funding,” he said.

The vouchers won’t be enough to cover currently projected costs of care for seniors – which is how the Ryan budget saves money. The vouchers certainly will not, then, cover profit and overhead for insurance companies. For all the knocks against it, Medicare is an amazingly efficient health care delivery device. About 98 percent of the money it spends goes to paying for health care with only 2 percent taken up by administrative costs. Private insurers, on the other hand, have overhead ranging from 12 percent to 30 percent.

The vouchers alone, in other words, won’t come close to paying for insurance policies for the oldest, sickest and least profitable insurance demographic that need the coverage. Seniors would have to pay enormous out-of-pocket expenses or pay large premiums in addition to the vouchers. Almost inevitably, seniors would need more care can they can afford – which could be why the American Hospital Association opposes the plan.

Ryan’s plan is radical and immoral; it is also impractical and unworkable. Insurance companies don’t want the senior market. When they “competed” with Medicare with the Medicare Advantage program, it cost taxpayers 14 percent more than the regular system.

This plan should be wholeheartedly rejected by the American people.

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