The Ryan-Wyden Medicare plan

A lot has been said about the Ryan-Wyden plan to reform Medicare.  Much of it is exaggerated, some just downright false.  It’s a voucher plan.  Seniors will have to pay $6,400 more for their health care.  The plan will make Medicare beneficiaries responsible for solving Medicare’s fiscal crisis.  Is all this true?  How could Ryan be so callous?

A limited number of factual studies have emerged analyzing the workings of a premium support system for Medicare.  (The best label for the Ryan-Wyden plan.)  One of the most recent (coauthored by Harvard economist and Obama healthcare adviser, David Cutler) looks at the competitive bidding in the Medicare Advantage program (in practice since 2006).  Plans across the country submit a premium they are willing to accept to cover seniors in a specific region.  Ranking premiums mirrors the results of a “reverse auction.”  Under the Ryan-Wyden plan, the second lowest premium establishes the “benchmark” payment rate.  Seniors could choose any plan they preferred and receive the benchmark amount to help them pay the premium.  If they choose the lowest cost plan, they keep the savings.  If they choose the benchmark plan, they pay nothing out-of-pocket for their insurance.  If they choose any other plan, they pay the difference.

Using data from Massachusetts, Cutler and his colleagues (“Potential consequences of reforming Medicare into a competitive bidding system,” Journal of the American Medical Association, August 1, 2012) found that in 2009, the benchmark plan bid was 9% below the cost of traditional Medicare.  In fact, traditional Medicare had the tenth-lowest bid.  Let’s be clear about this hidden nugget.  There were 9 private insuance plans available to Massassacusetts seniors that were cheaper than traditional Medicare.  Seniors choosing any one of these plans would have received the same benefits as traditional Medicare (and in some cases more benefits), and saved the taxpayer money.

Would such a plan force seniors to solve Medicare’s fiscal crisis?  As someone who reaches the magic threshhold of 65 within the year, I’m more than happy to do my part in helping to solve Medicare’s fiscal crisis.  What’s the alternative plan?  More on that tomorrow.