The Magazine

More Mediscare

Aug 20, 2012, Vol. 17, No. 45 • By JAMES C. CAPRETTA and YUVAL LEVIN
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The authors try to spin this finding into a criticism of premium support by suggesting that the lower cost of private options would somehow increase premiums for many seniors. But they leave out some very pertinent facts.

For starters, the Wyden-Ryan plan would apply only to entrants into the program after 2023. No current senior, and no one under 55 today, would be affected by it. So there is no way for the reform to increase the premiums of any current beneficiaries.

Moreover, even the Harvard scholars’ own analysis shows that no senior would necessarily pay any more for Medicare coverage under the proposed reform. The point of premium support is to bring more efficiency into the program. If competition introduced new ways of providing and structuring coverage and care that significantly reduced costs, presumably the fee-for-service Medicare plan (which would remain an option under Ryan’s proposal) would learn from some of these and reduce its own costs too. If it didn’t, it would lose customers, and it would deserve to.

Finally, because the JAMA study is based on the existing Medicare Advantage program, which is dominated by a regulated payment system instead of true competition, it likely understates the potential savings. Under premium support, the competition (in terms of both price and quality) would be significantly more intense, which would drive costs down further. Thus, taxpayers and the program’s beneficiaries would almost certainly save even more than the significant amount the JAMA study unwittingly implies.

The authors of the study simply ignore all that. They also fail to note that all the insurance plans in the system proposed by the Ryan budget would have to provide at least the same comprehensive coverage available now, and that the Medicare system we now have grows more expensive every year at a thoroughly unsustainable pace that threatens to destroy the program and bankrupt the government.

Their actual reasoning, believe it or not, is that because a premium-support system would provide cheaper coverage than fee-for-service Medicare, it would increase costs for those seniors who opt for more expensive coverage. That’s not an argument against the idea—it is the argument for it.

It won’t be easy to build another round of Mediscare politics on this new study’s flimsy foundations, but we can surely expect President Obama and his party to do their best—treating savings as costs, and blithely advancing the opposite of the argument they made against the Ryan plan last year.

While it fails to support the argument its authors seem eager to make, this latest bit of convenient scholarship does prove one thing: that the case against reforming Medicare in order to save it (and to avert fiscal catastrophe) grows weaker every day.

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