Friday, October 05, 2012

MEDICARE PART lll Better read all ! Vouchers ?

Medicare 101: What's a Voucher ?

Part 3 in a Series   

Vouchers have been called: the end of Medicare as we know it, a rhetorical bit of ideological hogwash and a Medicare killer.  Today we look at why health advocates, senior associations and the American people are increasingly concerned about this proposal and the implications it can have for your retirement.

Background In 2011, Rep. Paul Ryan included a proposal in his budget that would shift Medicare from a program in which the government provides universal access to essential care to one where individuals would be responsible for payment.  To make the payments to insurance providers, vouchers would be given out to help offset costs.  Any difference between the amount of the voucher and the cost of decent insurance would be the responsibility of the individual.  The plan would apply to those under 55 and also include an increase in the eligibility age from 65 to 67.  Ryan’s budget proposals have passed in the U.S. House for the last two years, but have gotten no traction in the Senate.

Will Vouchers Reduce Costs? Proponents say that the power of the marketplace will introduce competition to reduce costs.  As Nobel Prize-winning economist Paul Krugman argues, there are significant problems with that argument:

“All, and I mean all, the evidence says that public systems like Medicare and Medicaid, which have less bureaucracy than private insurers (if you can’t believe this, you’ve never had to deal with an insurance company) and greater bargaining power, are better than the private sector at controlling costs. . . You can see this fact in the history of Medicare Advantage, which is run through private insurers and has consistently had higher costs than traditional Medicare. You can see it from comparisons between Medicaid and private insurance: Medicaid costs much less. And you can see it in international comparisons: The United States has the most privatized health system in the advanced world and, by far, the highest health costs.”

How Much Could a Voucher Plan Cost You?The Center for American Progress released a report in August that looked at long-term impacts of a voucher plan.  Voucher amounts will increase based on the rate of growth of gross domestic product plus 0.5 percent – slower than projections for healthcare costs.  Looking at just this one cost-shifting  factor will mean:
If you turn 65 in 2023 (today’s 54 year olds), you’d pay $32,900 more in retirement.
If you turn 66 in 2030 (today’s 48 year olds), you’d pay $73,600 more in retirement.
If you turn 67 in 2040 (today’s 39 year olds) you’d pay $139,100 more in retirement.

The Bottom Line Vouchers would fundamentally change how Medicare operates, moving from a system of shared risk and guaranteed benefits to one where risk is placed on our shoulders at a time when we need security the most.  Polling shows that Americans are not sold on the idea – and for good reason.
Sources: The Medicare Killers, Paul Krugman, New York Times, 8/30/12; Increased Costs During Retirement Under the Romney-Ryan Medicare Plan, Center for American Progress Action Fund, 8/24/12.

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