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Paul Ryan’s Medicare Roadmap, and What It Means

Posted by politicalpartypooper on February 13, 2010

I have been having a bit of back and forth with some of the commenter’s at Charlie Sykes (Milwaukee Talk Radio Host on WTMJ Radio) blog, regarding Congressman Paul Ryan’s (R) Road Map for America.  Specifically, we got into a discussion about “killing Grandma”, when I accused them of hypocrisy for not responding to Ryan’s Medicare cuts the way they did to the Democrat’s Medicare cuts in what Republicans call “Obamacare”.  There have been other discussions, and to be certain, this “killing of Grandma” isn’t the only issue we have argued over.  But for the purposes of brevity, I am limiting this post to Paul Ryan’s proposed changes to Medicare in his Roadmap.  This post will be long enough without a dissertation on his entire plan.

I have now read the sections pertaining to Health Care Reform and Medicare solvency in Paul Ryan’s Roadmap for America.  You can find his entire Roadmap for America here:  http://www.roadmap.republicans.budget.house.gov/plan/#Appendix1

To sum up Ryan’s changes, it is his intention to eliminate Medicare in its current form, and change it into an insurance product for which tax-credits and vouchers are issued.  Taken directly from Ryan’s Roadmap:

Medicare Payment. For future Medicare beneficiaries who are now under 55 or younger (those who first become eligible on or after 1 January 2021), the proposal creates a standard Medicare payment to be used for the purchase of private health coverage. Currently enrolled Medicare beneficiaries and those becoming eligible in the next 10 years (i.e. turning 65 by 1 January 2021) will see no changes in the current structure of their Medicare benefits. The payment will be made directly to the health plan designated by the beneficiary (similar to the administration of the refundable health care tax credit), with the beneficiary receiving any leftover amount as a payment from the health plan, or assuming financial responsibility for any difference in the payment and the total cost of the premium. This allows the Medicare beneficiary to invest the leftover amount in a Medical Savings Account [MSA] to pay for other medical expenses, or to purchase long-term care insurance.

Each Medicare beneficiary becomes eligible for the payment by enrolling in a health insurance plan. Medicare will publish an annual list of plans that are “Medicare certified.” Medicare enrollees are able to use their payment to pay for one of the Medicare certified plans, or any other plan, such as those offered by former employers or available from the private market.

Using language as fairly as I can muster, what this plan does is change Medicare from its current Fee-for-Services structure into a Private Insurance program, like every American under the age of 65 currently pursues.  What we know of these private policies is that few, if any, do what Medicare does, which is to guarantee that after an initial, minimal premium, all costs for services are paid for by Medicare.  I admit, knowing Paul Ryan as I do, that he would never allow the younger version of health insurance as a complete substitute for what Medicare is today.  In other words, Ryan would never go for introducing huge deductibles for care and drugs into a Senior Citizen’s budget.  But he might be forced to do such a thing if, in the end, it is proven that private insurers cannot control administrative costs effectively enough to minimize the additional increase in costs that their services will impose on “Medicare”.  Let me explain.

We know that currently, Medicare administrative costs hover around three percent.  That means for every dollar spent in Medicare, three cents is dedicated to administrative costs.  Ninety-seven cents goes for services and goods.  In the private insurance industry, administrative costs account for anywhere between eighteen and thirty percent, dependent upon the insurer.  We also know that private insurance has never been a Fee-for-Service system, but rather a risk-based system, meaning a certain “premium” is paid in exchange for the promise of payment for services, and that this “premium” is based solely on the risk of that type of service ever being required.  The simplest way to explain it is to use Life Insurance as an example.

Life Insurance premiums are based solely on the insurers’ belief that you will not die this year.  In other words, based on your age, medical history, and family history, what are the chances that the Life Insurer will have to pay a death benefit on you this year?  They then base the premium that you pay on this assessed risk.  As you get older, the risk that you will die this year increases, and thus, your premiums increase.  While health insurance premiums are far more complicated than that, they use the same basic risk assessment system to determine the cost of their policies, with the caveat that their risk is much higher than any life insurer’s.

Returning, then, to the problem of profit and administrative costs in a private insurer system for Medicare, just knowing that the current Medicare system costs only three percent for administration, while private insurers costs as little as eighteen percent means an already significant increase in costs for the average senior citizen, and we haven’t even begun to discuss the cost differences between Fee-for-Service and Risk based health care.

Fee-for-Service is simple.  You pay for the services that are actually used.  Conservative arguments against this type of system are many, and in some cases, justified.  Such a system could be easy to manipulate and scam.  In truth, Medicare is already beset with these problems, and any discussion of changes to Medicare must necessarily include a plan on how to reduce or eliminate Medicare fraud, which some groups say already costs the Federal Government over $80 Billion per year.  That’s a lot of fraud.  Paul Ryan believes he accomplishes reducing fraud by putting the risk of fraud onto the private sector.  In other words, let the private insurers chase down the criminals, rather than the government.

Conservatives would also argue that a Fee-for-Services system means the government controls the discussion on what services will be paid for.  In all certainty, this is true, because it follows the golden rule; He who has the gold makes the rules.  But a private insurer system for Medicare would not at all change this dynamic; it simply shifts the role of rule maker from the Federal government to a for-profit private industry.  That private industry has the gold; they make the rules.  So much of the debate over the recent HCR proposals focused on “Death Panels”, and many Conservatives bought into the idea that if the government controlled a larger portion of health care, they would institute panels that would make decisions about certain procedures that could lead to a life and death decision for an individual. But the truth of the matter is that we find this type of decision making already present in for-profit private insurers.   I have to be honest here; if I were running an insurance company that was answerable to shareholders, I’d do everything I could do to ensure profit, too.  That would probably mean that, at some point, I have to make a decision that is going to kill someone.  You may not like that, but it is an inescapable truth of any type of health care system, no matter who makes the decisions.

So I find this accusation of Death Panels to be insincere at best, factually inaccurate, and tiring.  If you cannot see the truth of the fact that private insurers are already in the business of killing people for profit, then I have to say to you, that you are blind.  The very nature of their business demands that at some point, for profit’s sake, they must cut off the gravy train.  This is absolutely unavoidable, and will, and currently does lead to the death of individuals.  So to say that a “Government Takeover” of the health care industry will lead to “Death Panels” is to be altogether missing the fact that these “Death Panels” already exist in our current system.  If you are unwilling to yield to this very simple, and very evident truth, you probably should stop reading this post right now, because there will be no point at which we can agree on anything further.  I put it to you this way:  Both private insurers AND Government programs NECESSARILY make decisions that will lead to the deaths of individuals.  On that one point, we all should be agreed. There is simply no avoiding those kinds of decisions eventually.

What is arguable is which system will lead to more deaths.  I believe that a for-profit system will be the greater culprit, and I base that on the fact that in the end, that private company must do everything within its power to turn a profit over to its shareholders, or it will be bankrupt.  Profit is required for that insurer’s very existence, and the only place profit is available is in cuts to administrative costs, and cuts to payments for services.  Private insurers are not charities.  And it is for the reason that they must turn a profit that I also argue that such a system will by necessity be more costly to the individual AND the American taxpayer.

We can discuss competition and what it means to lowering costs within a certain sector, but no amount of competition is going to reduce administrative costs by eighteen to thirty percent and also eliminate the need for profit, two things that are already in our current form of Medicare’s favor.

And then there is the fact that as Americans get older, the risk of their need for certain types of services moves closer to certainty, which again, means that private insurers must jack up their rates to mitigate the risk that they will not collect enough premium payments to cover the costs of actual services.  Remember that the closer a risk-based system of healthcare moves to the certainty of services being needed, the more expensive the premiums for those services will become.  That’s not an ideological dissertation; it is simply a plain, unavoidable fact of risk-based pricing.  Going back to the life insurance example, the closer you get to the certainty of death, the more expensive your life insurance premium becomes.  That is the risk based system in a nutshell, and there is no changing these facts.

What Paul Ryan is proposing is a system that will line the pockets of private insurers, and increase the costs of health care for seniors, while paying for fewer services.  There is no way to avoid that eventuality.  What I see happening in such a system is the exact thing that is happening in the private insurance sector today; uncontrolled rising premiums (costs to Americans), rising deductibles, and reduced benefits.  Furthermore, I see Seniors being harassed by insurers for their services, offering products that are at best difficult to understand, and at worst, scams.  I see that, at a time when most Seniors want to simplify their lives, instead, they will be forced to make difficult decisions that will leave them uncertain of what they purchased. As a result, they will often be surprised by what is or is not “covered” in their policy, just as normal Americans everywhere already experience.  This is what Paul Ryan proposes.

I have read a decent portion of the rest of his Roadmap, and will finish it.  There are many ideas that he has that I agree with, and some of his health care proposal is just good, common sense that will save billions.  Likewise, his address of our nation’s debt goes a long way toward laying the groundwork for a workable system of reducing the budget, paying down the debt, and bringing America back to fiscal glory.  I see many areas in his Roadmap where Democrats and Republicans should agree, and where these areas are, Americans should demand that our elected officials work towards implementation.

At the very least, what we have in Paul Ryan is the Republican version of President Obama.  To be certain, you may not like the guy if you are a Democrat, and you won’t agree with everything, but these two guys are doing something that no other elected officials are doing; drawing up a plan, and dropping the ideology in order to do what is right for America.  If Liberals would stop attacking Ryan and just read his Roadmap open-mindedly, they would see that what I am saying is the truth.  And if Conservatives would stop attacking President Obama, and listen and read his plans, they would see that he is far more concerned with fixing the problems that America faces than with being tied to any, old ideology.

If you ask me where the evidence of that is, I would point to the fact that of old, President Obama is a Single-Payer Health Care advocate, and yet the bill he supports isn’t even close to single-payer.  In fact, it goes a long way toward perpetuating the private insurance sector.  President Obama stands somewhere between the lies of Democrats and the lies of Republicans; meaning he stands somewhere in the middle.

As an Independent, I can honestly say that I fully support a Single-Payer health care system, and I don’t care what you call me for believing that.  I believe I have made a strong case that no matter how you slice things up, a Risk-Based, for profit, private insurance system will ALWAYS cost more than a Fee-for-Service system, and it will ALWAYS provide fewer benefits to Americans, meaning Americans will ALWAYS get less bang for their buck.  In a Capitalistic society, the only thing that matters is VALUE; what you pay versus what you get for your money.  That’s why in certain, very rare cases, no matter how hard it is to swallow, a Government system will be less costly than a private system, and more reliable; a greater value to the American taxpayer.

The American Government isn’t about partisan ideologies, no matter how hard the two opposing parties try to make it so.  It’s about the Rights and Freedoms of individuals, and the best, most economical way to achieve and ensure those Freedoms and Rights.  Independents are now fond of saying, “We don’t give a shit about your ideology; just do the right thing.”  Our Elected Officials need to learn what that means, and we will continuously vote out of power any Party that refuses to learn.

I have argued with Conservatives and Liberals for a long time, and one of the most discouraging things about engaging with these people is their unwillingness to step away from Partisan talking-points and ideology.  I understand the necessity for them to be able to identify with a group of people and with a certain way of thinking that gives meaning to their beliefs.  But what I do not understand is their unwillingness to even consider different ideas and, as is often the case, their willingness to demonize those ideas and the people who bring them forth.

As an Independent, I realized long ago that no one way of thinking, no singular ideology is able to meet the demands of a changing nation and world.  That is why I stopped being a staunch conservative.  I realized that my ideology couldn’t address everything, and because it couldn’t, rather than facing those challenges, I ran away from them, leaving them unsolved.

Our current group of Partisan elected officials is repeatedly acting in the same manner.  And their Party faithful support them wholeheartedly in that endeavor, making my generation guilty of passing America’s unsolved problems onto future generations with the same, tired, black-and-white ideologies in place.  We need to change, become more flexible, or we will do greater harm to our children and grandchildren than we can even today imagine.  So I say, step away from that tired, old ideology, and at the very least, consider the other side’s ideas, and maybe we can build a place in the middle where problems get solved, and the States of America are more United.

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12 Responses to “Paul Ryan’s Medicare Roadmap, and What It Means”

  1. Jonah said

    An analysis of almost 10,000,000 insurance claims by the AMA to seven private insurance companies and Medicare between March 2007 and March 2008 reveals that more than half a million (574,591) claims were denied, and the chart above displays the percentage of claims denied by each insurer during that period. Medicare led the group with the greatest percentage of insurance claims denied (6.85%), more than double the denial rate for private insurers like UHC (2.7%), Coventry (2.9%), Humana (2.9%) and CIGNA (3.4%).

    So much for your thoughts.

  2. politicalpartypooper said

    Nice try, Jonah. I’d like to see the link for that paragraph, first. Second, without any indication as to what types of claims were denied, it would be difficult to ascertain what was life threatening and what wasn’t. If this is your evidence for death panels, it’s pretty weak. What I don’t see here is the number of successful claims after review or second submission, which, I am sure you know, is often the case with Medicare, Medicaid, and Social Security. Also, the type of care required for seniors is much different than for younger people, not only in the amount of care required, but in the length of care as well. And let’s not forget the number one cost bugaboos with private insurers; namely that they collect vast sums of premiums, require deductibles to be met (which are always getting larger, far larger than Medicare), require co-pays, have lifetime limits, drop insured’s because they get sick, and deny coverage based on pre-existing conditions.

    In other words, Jonah, when they are allowed to cherry pick the best group of clients, wouldn’t you think it would be natural for the amount of their claims denied to be much lower? That paragraph shows very little depth, and proves nothing. Not that I ever want to see it, but I think it would be a truly scary thought as to how high their “claims denied” rate would go up if they were forced to carry EVERYONE, like Medicare does.

  3. Jonah said

    C’mon PPP you want to claim UHC drops people when they get sick? Prove it. I know people that have chronic deseases that have coverage through them, at a cost of $50K a year in rheumatic procedures. Talk about fear mongering. Medicare wouldn’t cover near the cost.

    • politicalpartypooper said

      Jonah, Although I obviously cannot reveal their names, I have three different clients who were dropped by United Health Care once they got “sick”. This doesn’t happen in group insurance provided by employers. It is happening to small business owners who are forced to buy crap private insurance. And Jonah, it IS crap. I sell it, I hate it, and I waste more of my time dealing with health insurers and their garbage than on any other sector of my business.

      The inefficiencies of their systems are astounding. I thought trying to reach an actual person for Medicare was hard; you should try doing it with a private insurer. The paperwork alone is indication of their vast inefficiencies, and their “quiet” effort at inundating people with so much repeat requested paperwork in their hopes that clients will get frustrated and give up on their claims. It is sickening, Jonah, and I deal with it every single day.

      • Jonah said

        So you’re talking about 9% of the population.
        Yep, charge me a couple trillion to fix that….

        Nobody will EVER convince me that something is more inefficient than the government.

      • politicalpartypooper said

        Jonah,

        I know it’s hard to believe. I find it hard myself. But insurers admin costs are far higher than Medicare’s, by anywhere from 15-27%. Jonah, if you dealt with them as I do daily, you’d probably be just as anti-insurer as I am. The trouble is, I think much of their inefficiency is done on purpose, to discourage people from following through on their claims. When I have clients showing me copies of the same forms they filled out and sent in three times for the same claim, and that this happens to me as well, what other conclusion can I come to?

      • Jonah said

        Yes PPP, believe it or not I do sympathize with unfair situations.

        But some people like to capitalize on them, and try to pass $2 Trillion,
        2,000 page bills as fast as possible, without reading them, because
        it’s an ’emergency’.

        Social Security’s looking great these days huh….? pure ponzi.

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  5. Tammy said

    Many Medicare recipients prefer the Medicare Advantage plans offered through private insurance, as indicated by enrollment at PlanPrescriber.com. That’s because many of these plans offer more comprehensive benefits, such as dental and vision coverage. However, I am concerned about the amount of payment Medicare recipients will receive towards a private insurance plan outlined in the Roadmap for America. I fear it will fall significantly short of the amount Medicare recipients need to pay for the plan.

    • politicalpartypooper said

      Tammy, I couldn’t agree with you more. Also, Medicare Advantage is still just a supplement to Medicare. The holder of an Advantage plan still has to have Part A and Part B, which are not administered or paid for by the insurance company, but rather by Medicare itself.

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