You put the load right on me, Democracy in America: Paul Ryan's plan to replace Medicare with a system of vouchers for seniors to buy health care on the private market ... ends the guarantee that all American seniors will ... be covered by a government-financed health-insurance plan. Mr. Ryan's plan promises that once you reach 65, you will receive a voucher for an amount that he thinks ought to be enough for individuals to purchase a private health-insurance plan. ... If that voucher isn't worth enough for some particular senior to buy insurance, and that particular senior isn't wealthy enough to top off the coverage, or is a bit forgetful and neglects to purchase insurance, there's no guarantee that that person will be insured. It's up to you; you carry the risk.
Mr. Ryan thinks this is a good thing, because individuals who are responsible for paying for their own health insurance will be strongly motivated to seek better insurance at a lower price. I think this is a terrible thing... You and I don't know what the risks or costs of different illnesses and treatments are, and we don't have the time or expertise to evaluate the legal fine print of insurance agreements...
The idea of making market forces work to bring down health-care and health-insurance costs is plausible. What's not plausible is the idea that average individuals are the best-placed people to be carrying out those negotiations. It's entirely possible to set up markets where powerful, well-informed organizations represent individuals in negotiations..., without putting those individuals at risk of losing their coverage or of having to go untreated. That's how the Affordable Care Act envisions saving money on Medicare...
Mr. Ryan's proposal to privatize and voucherize Medicare attempts to reintroduce the incentive to cut costs by dumping that risk back onto individual seniors. And the greatest risks will fall on the poorest, sickest, or least savvy elderly; they will be the ones most at risk of going uncovered. I agree with Mr. Ryan that the government needs to limit taxpayers' exposure to Medicare cost inflation. I think this plan is a fundamentally immoral way to do it.It may be that increased competition would, in fact, lower health care costs. But for that to work the conditions for competitive markets to thrive must be present, and one important condition is that people are fully informed about the price and quality of the products they purchase. There are other problems in these markets as well, but the inability of individuals to evaluate "the risks or costs of different illnesses and treatments" as well as their effectiveness means that these basic conditions aren't met. Thus, there's no reason to expect that this will work.
However, as pointed out above, that doesn't mean that market-based solutions cannot work. Organizations working on behalf of groups of individuals can, with the right invectives, overcome the information problem and bargain effectively on their behalf.
As also noted above, we already have something like that in the works, it's in the Affordable Care Act, and we'd be much better off focusing on making this program function effectively than dreaming that somehow individual vouchers are the answer. They're not, and "the greatest risks will fall on the poorest, sickest, or least savvy."
We need to find a way to control rising health care costs. It is the main factor behind the rise in the deficit. And it's not just a government problem. In the private sector -- independent of government involvement -- increasing health care costs will begin to squeeze household budgets even more than have already. However, the Ryan plan is not the way to lower costs, or insure our seniors against health risks. The Affordable Care Act does attempt to control costs, the CBO estimates it will save 2 percent of GDP over the next 75 years. That's not enough, but it's a start, and it's about the best we could expect with Republicans inventing death panels to oppose the cost reduction policies in the ACA. Our best hope is to build upon the foundation the ACA provides instead of tearing it down and rebuilding on much shakier ground as the Ryan plan would have us do.