According to Tim Ruttan writing in the LA Times, the GOP budget proposal authored by Congressman Paul Ryan would drive the elderly into poverty. After all, it would change the nature of Medicare from a payment for services mode to a voucher for medical insurance plan. The budget would also relate the size of the voucher in part to the size of the receipient's income. Oh, and it would not affect anyone who is currently 55 or older.
It is important to examine some of the errors in Ruttan's reasoning. the simple truth is that the budget proposal would not drive anyone into poverty.
1) Quick, right now, which age segment in the USA has by far the lowest level of poverty? That's right, the answer is seniors. The poverty rate for those over 65 is much lower than all other age segments. (The rate for children is the highest.) The average income level for seniors is not as high since there are most seniors are no longer working, but their level of wealth is also the highest of all the age groups. That is an important distinction that needs to be repeated and explained: the average annual income for seniors is not as high as for younger folks since those younger folks are still working, but the total net worth of seniors far exceeds the net worth of those same younger folks. So that means that Medicare is a plan to have those with higher poverty levels pay for the healthcare of those with lower poverty levels. It is a plan to have those with less accumulated wealth pay for the health care of those with much greater accumulated wealth. In short, the description of Medicare as rescuing indigent seniors by providing them with free healthcare is just plain wrong!
2) The use of a voucher system does not mean that seniors will suddenly go broke paying for their healthcare. Indeed, one would assume that the voucher size will be set in a way that will allow most seniors to have insurance which will cover them at least as well as medicare with no higher premium than is currently the case. But let's assume that the vouchers will not be enough and that seniors will need to pay $100 per month for their insurance. That change will cost the average senior $1200 per year. Based on the current 44 million people receiving Medicare payments, $100 per month translates into a savings by the federal government of over $50 billion per year. But how many seniors will be pushed into poverty by payments of such a small amount?
3) A shift to a voucher system will actually help the US economy by lowering health insurance costs for businesses. Think of it this way. right now, the Medicare system pays less to doctors and hospitals for services than the cost of those services. (I am ignoring for the moment the payments made for services not really performed submitted by less than scrupuous medical practices.) Hospitals make up for the inadequate Medicare reimbursement by chrging more to younger patients with private health insurance. As medicare funds get squeezed tighter, the cost of private insurance goes higher with alarming speed. Otherwise, the hospitals just go bankrupt. If everyone is on a private health insurance system, the cost will be spread more evenly and healthcare costs should rise more slowly. This means more jobs, higher incomes, mor ability to save for retirement and a better life for all Americans.
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