Should Medicare Be Privatized?

I think Medicare Part D is a big success.  It brought a long-desired prescription drug benefit to Medicare for the first time, at less cost than if the government had paid for it—and indeed, for less money than its own projected budget (last time I checked).  It is very popular with seniors—yes, I know about the donut hole—but that is detail, not concept (and the reality is all of us will need to pay for more of our own medical care as the system goes broke).  And this has been accomplished purely through private plans, with the premiums subsidized by government.

Could this kind of plan work also for Medicare generally?  I’m not sure, but since Medicare is going broke, and we don’t want to end up with the kind of cruel Medicaid rationing we are now seeing because they are single payer approaches, I think it is worth exploring.  Apparently some Republicans are thinking about it too.  From the story:

House Budget Committee Chairman Paul Ryan, R-Wis., is testing support for his idea to replace Medicare with a fixed payment to buy a private medical plan from a menu of coverage options. Party leaders will determine if the so-called voucher plan will be part of the budget Republicans put forward in the spring. “No decisions have been made on the details of our House GOP budget.” Michael Steel, a spokesman for Speaker John Boehner, R-Ohio, said Thursday. “There are a lot of ideas out there, and we’re going to listen to our members and the American people.”

Medicare was one of the most highly charged issues during last year’s congressional elections, which put the House back in GOP control. Republicans slammed Democrats for cutting Medicare by about 6 percent over 10 years to finance President Barack Obama’s health overhaul.

But replacing Medicare’s open-ended benefit with a fixed payment would cut projected spending much more deeply. “Anyone who doesn’t think privatization will mean severe cuts to Medicare benefits, I have a bridge I’d like to sell them,” said Sen. Chuck Schumer, D-N.Y. “Privatization will make the cuts previously proposed by either party look tame.” Republicans say it may be the only way to preserve taxpayer-funded health care for seniors in an aging society. The Congressional Budget Office reported this week that the government will borrow 40 cents of every dollar it spends this year, as the deficit hits a staggering $1.5 trillion. Over the long term, health care costs that keep growing more rapidly than the economy are the biggest challenge to the budget.

Rock and a hard place, folks.  And it isn’t open-ended, particularly. Right now, Medicare only pays for about half of covered expenses, which is why many people buy private Medigap policies or sign up for HMOs under Medicare.  (My mother is in Kaiser via Medicare Advantage, and pays a little less than $100 a month.  Frankly, given the economics, she should pay more.  Obamacare will see to that.)  And, the government capitates hospital payments under the diagnosis related group system, just like any HMO.

I don’t agree with Senator Schumer, because there would be many private options from which to choose with companies competing for the business. It’s worked with Part D.  And given the success of Part D and the very real threat of invidious rationing under the current trends, I think full or greater-reliance-on-the-private-sector than we do now should be among the options explored—not necessarily chosen—as we try to deal with the impending Baby Boomer (yes, that would be me!) benefit tsunami.