The Ryan Medicare Plan Could Work Under the Right Circumstances

Congressman Paul Ryan (R-Wisconsin) has proposed that Medicare be replaced by a subsidy paid to seniors to purchase health care insurance. Medical care would be paid by insurance companies instead of the federal government. Ryan has been excoriated by seniors for this proposal. He has been accused of throwing Grandma under the bus. In fact, this radical restructuring of Medicare could work if several conditions were true. These involve availability and affordability.

Firstly, plans need to be available to all seniors. Even a 92 year old Alzheimer's patient with end stage lung cancer who smokes should be able to purchase a policy. Currently, Medicare covers everyone over 65.

Secondly, the subsidy should be high enough that the part seniors would have to pay out of pocket for premiums would be about the same as they do today. Under Medicare seniors pay a portion of their premiums and these policies should be similar. Additionally, this subsidy should be indexed so that medical inflation does not make the policies unaffordable.

Thirdly, the level of coverage under these policies should be similar to that presently covered by Medicare. If the coverage is less, these plans would not provide the necessary value.

Fourthly, the copays for procedures and doctor visits should be similar to what Medicare requires now. Otherwise, seniors would not be able to afford these. These copays, should be indexed as the premiums should.

Unfortunately, it is unlikely that these four conditions would occur. What financial incentive is there to cover those seniors who are near death and whose conditions cost millions to treat? The problem is that seniors are the most expensive medical population; they have more serious conditions that need the most expensive treatments than any other population. Even if the government required policies to be available, how could they keep the price of these policies in check?

It is seductive to have a policy where private enterprise provides and pays for the services instead of the government. Unfortunately, competition alone will not make insurance companies cover the expensive aged infirm nor will it make these policies affordable; the problem of medical inflation still needs to be addressed and this proposal doesn't. Insurance companies must make money to stay in business and that means that medical care would have to be rationed in some manner.

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