Speaker Paul Ryan intends to begin privatizing Medicare at the same time he repeals the Affordable Care Act (ACA). How will Medicare change?
THE REPUBLICAN MEDICARE PLAN
According to Ryan, the ACA is causing Medicare to go broke. Interesting to note, therefore, that Ryan’s Medicare plan strongly resembles the ACA. He intends to create “Medicare exchanges” where private insurance companies would compete with traditional, government-run Medicare for customers. Customers would get “premium support” subsidies from the government to pay for their insurance.
Ryan’s proposal ties each subsidy to the price of a specific plan offered by an insurer on the exchange, the same way the ACA subsidy is tied to the second-cheapest “silver” ACA plan. The payment amount would be linked to the recipient’s income; lower-income people would get a bigger subsidy. As beneficiaries get sicker, their subsidies would rise to ensure that Medicare’s sickest and highest-cost beneficiaries continue to receive coverage. As with the ACA, people who choose plans that cost more than the government subsidy would have to pay the balance. Ryan’s changes would take effect in 2024.
Note: Ryan’s statement about the financial viability of Medicare may not be true. It is not shared by the Medicare trustees. Their 2016 report states that the program would now be able to pay all its bills through 2028—a full 11 years longer than the 2009 forecast. The trustees attribute this improvement in part to changes in Medicare called for in the Affordable Care Act, and to other economic factors (which are expected to continue).
CURRENT MEDICARE ADVANTAGE PLANS
Medicare already has a plan where care is provided by private insurance companies. It’s called Medicare Advantage, and is chosen by about 30% of all retirees. Medical Advantage plans are purchased from private insurers, and often provide one-stop medical services. Some include extras like dental and vision coverage. The catch has been in cost-sharing, which can be unpredictable. In 2015, for example, cost-sharing expenses for enrollees capped out at an out-of-pocket limit of $6,700 for in-network service!
Ryan’s proposal aims to move almost all seniors into Medicare Advantage-style insurance by making traditional Medicare too expensive for most consumers.
Millions of people on Medicare are also eligible for Medicaid—meaning that they are poor and vulnerable. Many have serious disabilities. About 8 million Social Security beneficiaries have been declared financially incompetent and have a representative assigned to manage their money. These people are unlikely to be able to cope with a complex health care marketplace and would be better off under plain Medicare.
Older people in general prefer traditional Medicare. Researchers at Brown University last year found that as people get older and sicker, they tend to drop Medicare Advantage and go back to traditional Medicare. This would not be an option under Ryan’s plan.