OK - Just What Is the Ryan Medicare Plan? Educate Yourselves and ignore the hype and rhetoric

Much chatter today centers on the Ryan Medicare Plan, a proposal to reform Medicare first proposed by Wisconsin congressman Paul Ryan as part of "A Roadmap for America's Future" to guide the House Budget Committee under Republican Party control. Though hype and rhetoric surround the subject, little real understanding has seeped down into the public at large. Let's try to sort it out.

To understand where Ryan is heading, one must first understand the basics of Medicare. The current Medicare program provides single-payer medical care insurance for people 65 and over as well as people under 65 with certain disabilities or special medical conditions. It is composed of four parts: Hospital Insurance (Part A) covering inpatient hospital and specified skilled care; Medical Insurance (Part B) covering doctor services, outpatient care, and certain preventive services reimbursed at Medicare-approved amounts; Advantage Plans (Part C) providing Medicare Part A and B benefits through approved private companies under contract with Medicare; and Prescription Drug Insurance (Part D) providing reimbursements for prescription drugs purchased through private companies approved by Medicare.

Under this four-part program, enrollees choose from two basic options.

(1) "Original Medicare" (also called fee-for-service Medicare) offers Parts A, B, and D benefits for those wishing to select their own doctors, hospitals, and care providers with the option to also purchase "Medigap" insurance coverage sold by private companies to augment caps in Medicare reimbursements.

(2) "Medicare Advantage" provides Parts A, B, and D benefits through privately-administered healthcare plans requiring use of specified doctors, hospitals, and other providers under plan-specific co-payments and additional premiums.

It is becoming increasingly clear that, with the ever-growing number of seniors becoming eligible for Medicare, payment of benefits at current levels will become unsustainable. To correct for this problem, the controversial Patient Protection and Affordable Care Act ("ObamaCare") establishes an Independent Payment Advisory Board (IPAB). This special 15-member panel, to be appointed by the president with Senate confirmation for 6-year terms beginning in 2013, is intended specifically to reduce the rate of future per-capita spending on Medicare.

According to analysis of the ObamaCare legislation, if the Actuary of the Centers for Medicare and Medicaid Services determines that Medicare expenditures will exceed the target rate of growth specified in the law, the IPAB must develop proposals to reduce those expenditures. While legislation states IPAB proposals cannot specifically ration medical care, IPAB can issue recommendations pertaining to Medicare payments to providers and suppliers which could not help but have the same effect. To make matters worse, Congress specifically inserted wording allowing IPAB recommendations to take effect without congressional approval -- thus exempting elected representatives from making the tough choices needed.

Congressman Ryan recognizes an entire generation of Americans have planned their lives around the current Medicare program and realizes that any radical change would not be well-received by seniors who vote in large numbers. He also recognizes that no marketplace competition in healthcare exists. Providers are rewarded by government-established reimbursement rates based more on the quantity of healthcare procedures provided than on their quality or provider costs involved. Patients have little or no financial constraints limiting their choice of care. Such a system can only continue until it exhausts the available money.

Ryan seeks to reverse this impending cost disaster by instituting a new program beginning no earlier than January 2021 affecting only those aged 55 and younger. The plan has the following major elements:

Part A and Part B trust funds are combined to create one unified trust fund. The new Medicare Program and the existing program continue to be financed by trust fund revenues, Medicare payroll taxes, and general revenue contributions as done now.
By January 2021, insurance companies must establish competing healthcare coverage plans with specified benefits and limitations. Some would provide only high-deductible catastrophic coverage. Others could provide more liberalized coverage. Medicare would establish categories of generalized coverage. All plans which met specified requirements would become "Medicare certified" and eligible for premium payment cost sharing.
Each patient would select from the approved list a plan best matching his or her expected healthcare needs for the coming year. Medicare would reimburse the health plan a fixed amount of money for each enrollee for premium payment support. If the Medicare-provided assistance exceeded the premium required for the selected plan, that excess would be credited to a "Medical Savings Account" (MSA) for the beneficiary's future use.
Ryan currently estimates the reimbursement amount at an average $11,000 -- with further adjustment determined by income level. Higher-income patients would receive less premium assistance. Beneficiaries with annual incomes below $80,000 ($160,000 for couples) would receive full standard payment amounts; beneficiaries with annual incomes between $80,000 and $200,000 ($160,000 to $400,000 for couples) would receive 50 percent of the standard; and beneficiaries with incomes above $200,000 ($400,000 for couples) would receive 30 percent.
After enrollment in a plan, all beneficiaries could, at their option, undergo an annual health "risk adjustment" examination. Results of this exam would be submitted to Medicare and become eligible for a higher risk-adjusted premium payment.
To further assist those individuals with incomes near or below the poverty level, Ryan proposes additional payments above just premium support. While any enrollee, regardless of income level, would be able to set up a tax-free MSA if desired, the new Medicare Program would specifically establish and fund an MSA for low-income beneficiaries to help them with deductible payments required for care procedures. The amount paid to those below the government-established poverty level would be equal to the deductible for the average Medicare high-deductible health plan. Those with incomes at or 50 percent above the poverty level would receive 75 percent of the full deposit.
Recognizing that Americans are becoming healthier than ever before and living much longer, Ryan further proposes that a phase-in of the start of the new Medicare program would, after 2021, be raised in a slow incremental fashion from the current age 65 to 69 years 6 months.

As proposed, the Ryan Medicare plan resembles the Federal Employees Health Benefits Program (FEHBP). In the FEHBP model the government provides a set financial contribution each year. Employees and retirees have a variety of options, including catastrophic coverage plans with high deductibles, health maintenance organizations, and high-end plans with many choices of doctors and other providers. Everyone has a choice of at least 10 fee-for-service plans, but the exact number varies by where an enrollee lives.

The Ryan plan also resembles the health insurance model developed over the years in Germany. Under the German system, seniors choose insurance coverage from among a list of approved, competing nongovernmental "sickness funds" (Krankenkassen). Those insurers, in turn, pay for healthcare provided by private physicians and hospitals with beneficiaries and the government each paying a share of healthcare premiums.

A comparison with the German system reveals Germany achieves satisfactory healthcare at about one-half the per capita cost presently experienced in the United States, but also highlights similarities and differences between the two approaches:

In contrast to the rhetoric of Ryan-plan supporters, the German system does not achieve its results primarily by unleashing the forces of competition. In fact, both the German system and the Ryan plan explicitly prohibit one of the main forms of competition among insurance companies, namely, the use of experience rating, that is, the practice of differentiating premiums according to demographics, health status, past health care use, and similar factors. Experience rating in health insurance leads to "cherry picking," in which insurers compete to lower their premiums by excluding all but the healthiest customers. Under such a system, the very elderly and those with chronic illnesses are likely to find that insurance is unaffordable or completely unavailable.

A major difference between the two plans, however, is that Ryan Medicare provides a fixed payment toward insurance premium reimbursement which increases with the cost of living as measured by the general consumer price index (CPI). To the extent that healthcare costs exceed the CPI, that excess must be borne by the individual. Thus, as the economy grows faster than inflation, the government's share of healthcare costs as a fraction of GDP decreases, but the portion of a senior's income devoted to healthcare would rise unless healthcare as a fraction of the GDP also went down -- something that has never happened in any developed country. By contrast, the German system caps the individual's share as a percentage of his or her income with the excess of healthcare costs relative to the CPI or GDP borne by the government.

Further, Germany has been forced over the years to enact top-down proactive cost control regulations not presently part of the Ryan plan. These include budgets capping healthcare outlays, reimbursing hospitals for general diagnosis-related care rather than paying for each test or procedure, heavy emphasis on use of generic drugs, and mandated protocols for chronic disease management.

Each one of the bullet points in this article is wrong, a lie, or a lie of omission in at least one way.

To start, this isn’t a good article to try to talk about Ryan’s plan.

Quote:
Ryan currently estimates the reimbursement amount at an average $11,000 — with further adjustment determined by income level. Higher-income patients would receive less premium assistance. Beneficiaries with annual incomes below $80,000 ($160,000 for couples) would receive full standard payment amounts; beneficiaries with annual incomes between $80,000 and $200,000 ($160,000 to $400,000 for couples) would receive 50 percent of the standard; and beneficiaries with incomes above $200,000 ($400,000 for couples) would receive 30 percent.
END QUOTE:

So, for much of the last decade, the cost of senior care has been between 2.5 and 3 times the CPI inflation rate. Compound that by 10 years to get us to the proposed 2021. 11,000 won’t seem like much when your yearly medical expenses are closer to $30k. ON top of that, the median income today is 44k or so nationwide, in ten years it should be nearly double that as inflation creates wage inflation at some point in QE5000, and just like the Alternative Minimum Tax, Congress will purposefully refuse to raise the cap at a realistic Inflation Index, steadily shrinking the number of households that receive subisidies at each tier.

This was done by design at the Heritage Foundation using fantasy scenario projections that make Michael Mann’s hockey stick graph look like a reasonable prediction for the submergence of Tuvalu by 2021. Ryan’s plan is specifically designed to erode Medicare purchasing power through manipulation of the basket of goods in the CPI.

THen, after the nation realises they will be losing the purchasing power of their Medicare coverage each of their remaining golden years, Ryan’s plan forces them to play Russian roulette with their own lives, empty chamber you lose, loaded chamber the Federal government wins.

QUOTE:
Each patient would select from the approved list a plan best matching his or her expected healthcare needs for the coming year. Medicare would reimburse the health plan a fixed amount of money for each enrollee for premium payment support. If the Medicare-provided assistance exceeded the premium required for the selected plan, that excess would be credited to a “Medical Savings Account” (MSA) for the beneficiary’s future use.
END QUOTE:

This is just insane...$11k NPV 2011, will be something like $5k or $6k (present discounted value 2011) in 2021, no matter how many years you are healthy on Medicare, your first hospital stay will wipe out your MSA, the hospitals and insurers will lobby to make withdrawals from MSAs as difficult as possible for non-hospital expenses, If the MSA is given the same regulations as HSAs under ObamaCare (or Obamacare’s replacement), you’ll need a doctor’s prescription to deduct OTC medicines and medical equipment purchases against your MSA.

So what is the MSA?
it’s a carrot for retards.

We lived in Germany under the German health system, with our federal health benefits plan. The German system works very well, even though it had to undergo major changes after the Berlin wall fell and the east and west German sectors were reunited. As “private pay” customers, our rates were VERY good and we submitted for reimbursement after the visit. MRIs are very inexpensive there, as are many things. Office visits were about $50, but often included some form of treatment, such as a sonogram for my thyroid, etc. EKGs were inexpensive and done in the GP’s office. You could wait a couple hours sometimes to be seen, but you’d be seen. As a school nurse, I often sent my military parents to the local KinderKlinik as they had superior care and never turned anybody away. They were not able to be seen at the Army clinic if they called after a certain time, anyway, so most of them waited so they could then do a walk-in at the Kinderklinik. Germany has certain rates they pay to all doctors and elective things are either a co-pay or you totally pay for yourself, if it is not a health issue, but a cosmetic one. To me, this makes sense. WHy should an insurance company (and all their constituents) pay for someone’s sex change or face lift? I think that under Ryan’s plan, all doctors would see an increase in their take home pay, if we can also bring tort reform. I’d love it if the Supreme Court put a cap on awards. I know there are always that one case that should be different, but for the most part, settlements are way over and above what is reasonable. You cannot afford that much in liability insurance, and many doctors and nurses who are NOT guilty, settle out of court in order to keep the cost lower and protect your reputation. Doctors and nurses who merit several complaints in their files should have their licenses revoked or put on probation. The “bad eggs” make the cost of doing business high for everyone. IN Germany, it is difficult to sue a doctor. There are no frivolous lawsuits, just because you didn’t like what the doctor said, or the doctor used 3 stitches to sew you up instead of 6, etc. That keeps the cost of health care down. Doctors who get in trouble there do not continue to practice. Period.

Health Issues

May 27, 2011
Mediscare: The Surprising Truth

The Obama administration has repeatedly claimed that the health reform bill it passed last year improved Medicare’s finances. This claim is true only because ObamaCare explicitly commits to cutting health care spending for the elderly and the disabled in future years, say Thomas R. Saving, a senior fellow, and John C. Goodman, president, at the National Center for Policy Analysis.

Almost no one familiar with the numbers thinks that the planned cuts are politically feasible. But suppose the law is implemented just as it’s written. In that case, according to the Medicare Trustees, Medicare’s long-term unfunded liability fell by $53 trillion on the day ObamaCare was signed.

But at what cost to the elderly?

* Under the new law, the average amount spent on people reaching age 65 this year over the remainder of their lives will fall by about $36,000 at today’s prices; equivalent to about three years of benefits.
* For 55-year-olds, the spending decrease is about $62,000 — or the equivalent of six years of benefits.
* For 45-year-olds, the loss is more than $105,000, or nine years of benefits.

In terms of the sheer dollars involved, the law’s reduction in future Medicare payments is the equivalent of raising the eligibility age for Medicare to age 68 for today’s 65-year-olds, to age 71 for 55-year-olds and to age 74 for 45-year-olds.

Are there better ways of solving the problem? Yes, say Saving and Goodman.

* First, there must be general system reform.
* Second, if federal spending is to be contained, young people need to be able to save in tax-free accounts during their working years in order to replace the dollars they will not be getting from Medicare.
* Finally, providers need to be able to repackage and reprice their services under Medicare in ways that lower costs and improve quality.

Source: Thomas R. Saving and John C. Goodman, “Mediscare: The Surprising Truth,” Wall Street Journal, May 27, 2011.

For text:

http://online.wsj.com/article/SB10001424052702304066504576345732775990392.html?mod=googlenews_wsj

What does this mean in terms of access to health care? No one knows for sure, but it almost certainly means that seniors will have difficulty finding doctors who will see them and hospitals who will admit them. Once admitted, they will enjoy fewer amenities such as private rooms and probably a lower quality of care as well.

Mediscare: The Surprising Truth

http://online.wsj.com/article/SB10001424052702304066504576345732775990392.html

Of greater political interest is the House Republican budget proposal, sponsored by Mr. Ryan. This proposal largely matches the new law’s Medicare cuts for the next 10 years and then provides new enrollees with a sum of money to apply to private insurance (premium support).
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All right went through these, only the Heritage report (middle one) is worth the effort to read. They address the red tape problem for the medical system, but not the problems the patient faces because of Medicare red tape/regs.

http://blogs.wsj.com/washwire/2011/05/10/heritage-foundation-takes-ryan-plan-a-step-further/

http://www.heritage.org/research/reports/2011/05/ten-myths-of-ryans-house-budget-plan

http://blog.heritage.org/?p=58005

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