Medicare Reform: Battling the Myths

September 19, 2012

As the political hunting season begins, the Obama campaign is quick to misinform the public about the Republicans' plan for Medicare, arguing it would eliminate the program as we know it. Specifically in regard to Rep. Paul Ryan's (R-Wisc.) proposed reform to Medicare, opponents are calling it a voucher system that would put seniors at the mercy of insurance providers. But a look at the facts shows that this is not the case, says Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute.

It is worth noting that Ryan's first proposal for reform is vastly different from his second one. The first one, proposed in 2010, is a voucher system that gives beneficiaries a set amount of money to use for a particular purpose, like the Supplemental Nutritional Assistance Program.  The problem with this is that vouchers may not offer enough funds for seniors to purchase adequate health care.

Because of this, Ryan proposed a new plan in 2012 known as "premium support." Some features of this plan are:

  • Seniors who retire in 2023 or later choose from competing, government-approved health care plans at different prices and services, including the traditional fee-for-service Medicare.
  • Seniors are not permitted to purchase a plan with less protection than Medicare, unlike the voucher system.
  • And again, unlike vouchers, seniors can't put the money in things like health savings accounts -- they must choose a preapproved plan.

This plan is similar to the Federal Employee Health Benefits program, which allows government workers to choose the best health insurance plan for them and keep it during their retirement. As competition grows among government plans, there will be lower costs for people as goods and services will be offered at cheaper prices.

The Congressional Budget Office projects that Medicare will rise from 3.7 percent of gross domestic product in 2013 to 4.3 percent in 2022 to 14 percent in 2085. Medicare in the status quo is unsustainable and without action the nation could face dire consequences.

Source: Diana Furchtgott-Roth, "Medicare Reform: Battling the Myths," MarketWatch, September 13, 2012.

 

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