Mitt Romney has praised Rep. Paul Ryan’s (R-WI) plan to privatize Medicare for future enrollees as making “important strides in the right direction” and promised that his own proposal “will differ” but “share those objectives.” During a discussion with the editorial board of the Las Vegas Review Journal earlier this week, Romney revealed that he would give seniors “vouchers” to enroll in private managed care plans, but preserve the traditional CMS-sponsored coverage as an option:
ROMNEY: You have a program like Paul Ryan has proposed, which says we’re going to give people vouchers to let them choose among private plans. I would not at the same time would want to remove the option for people who have standard Medicare. But I would probably move to a more managed care approach even in Medicare itself.
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The proposal is a small tweak to the Ryan approach and will only save the federal government money by shifting costs to seniors rather than lowering national health care spending. Managed care — as it currently exists as an option through Medicare Advantage — lacks the bargaining power of the traditional Medicare program and has produced only limited savings. In fact, private plans are receiving a subsidy from the federal government to offer additional benefits, but are often less efficient and charge more for the same coverage. That means, as the Congressional Budget Office has concluded, “under the proposal, most elderly people would pay more for their health care than they would pay under the current Medicare system.” “[T]he beneficiary’s share in 2030 would be 68 percent under the proposal” but only “25 percent” under current law. Their share will only increase over time, since the “voucher” Romney is proposing will probably not keep up with health care costs.
Romney’s one modification — maintaining traditional Medicare as an option — is significant but also problematic. Analysts who have studied similar plans, argue that younger and healthier beneficiaries would be encouraged to leave the traditional program for managed care, creating a severe adverse selection spiral for seniors who remain in traditional Medicare. Henry Aaron — who developed the concept with Robert Reischauer in 1995 — has since walked away from the proposal, arguing that the Affordable Care Act may push Medicare to use its leverage to create much more substantial savings.
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