The Flaw in the Medicare Voucher Concept

There are two huge flaws in the current Medicare plan as presented in the House budget and it might actually kill people. Yes, I said kill people. More to the point, the proposed voucher plan will cause some people to get sicker, stay sicker, go without care longer, and unfortunately … die at a higher rate. Changing the Medicare universal guarantee from the defined benefit elder-healthcare benefit to a premium assistance program with a $7,500 cap is the epitome of breaking a promise to Americans and eventually lowering the quality of care for our most vulnerable citizens.

The FLAW IN THE OINTMENT:

A. There is no free-standing private-sector universal medical insurance program for unhealthy 70 year olds therefore there is no confidence the voucher/subsidy allowance is a correct assumption and will either blow the House budget, increase the deficit or result in even lower benefits for future retirees.

B. Seniors will not hurt their kids. It is ludicrous to believe current seniors will be comfortable with the concept of keeping their benefits but taking them away from their children and their children’s, children. Seniors (aka parents) spend their entire lives trying to improve the lives of their kids. Why would any senior be comfortable kicking their kids to the curb?

I have seen nothing to give me confidence these 2 flaws are being addressed or can be overcome by the House.

Can I remind you, I do not consider Medicare an entitlement. I have been paying into Medicare since I was 16 years old. At close to 50, I will be paying into Medicare for at least another 15 years. I am not some loser expecting something for nothing and frankly with employment rates averaging over 93% for the last 50 years, there are a lot of Americans that paid into the system as well. Even folks earning $15k per year pay the same percentage as someone earning $150k. We are all in as Americans.

I understand the concept that I bought into at 16. I was actually paying into a program that would not benefit me dollar for dollar yet a promise was made that should I be fortunate enough to actually reach 65, I would have my basic healthcare provided until I die. I could purchase added security in the form of various investments to supplement my future care yet the base package promised will remain. All I know is I never agreed Medicare will not be there when I retire because we as Americans have committed our good faith and credit to take care of our elders. However, I constantly hear others making noises that they are going to end Medicare as we know it.

Let me talk to Congress for a moment.
“So imagine my anger when I heard some of you constantly stating the big-lie -“Medicare will be bankrupt so you will never see a dime worth of benefit” . Liar. I will not let you sit in your comfy chairs and act so helpless. You are the only people trying to end Medicare. You are the very people that WANT TO END MEDICARE. Why? Because you somehow think Medicare is some kind of welfare program losers think they are entitled to because they’re socialists. Bull. I am no loser and we had a deal, dammit. I paid into the program for 34 years and have another 16 to go. That’s 50 years of paying in so stop trying to kill it. You can not honestly believe killing the program in order to save the program is the best you can do? It sounds catchy and even somehow noble to pretend the only option is the kill it to save it but I assure you, all I hear is a bunch of lazy people looking for a simple solution to a serious problem. What I am really hearing from you is this: “How can we end a welfare entitlement program so we can use the dollars associated with the liability to reduce the deficit we participated in creating or to pay for programs we like better?”. Well guess what, I’m not having it!!”

Back to my fellow bloggers:
It’s hard to know exactly what the House Plan will be tomorrow or in a week however it seems logical to take them at their word. They seek to end the current promise of Medicare for all and replace it with a different theory. The House actually passed the Medicare plan of their liking and seem committed to pass it again after January 20, 2013. Now I am a fiscal conservative and clearly understand that any liability must be properly funded in order to pay out the correct future benefit. I also know that there is no way Americans would allow Medicare to fail without first doing what was necessary to fix the plan. Why? Because we never leave a man behind. The nation does not break promises to its people, especially the elderly. We just do not do that. We do not let our seniors simply fend for themselves because we’ve decided they’re simple too expensive. We take care of our elderly.

We surely do not pit current seniors against their children by saying any changes to Medicare will definitely and specifically screw their kids. I know some must think that by not impacting current seniors with their Medicare reform plans , they can curry favor and votes. However only a true ogre would think a current senior is so self-absorbed , greedy and so callous as to only care about themselves – even as they screw their kids. For God’s sake, my parents have spent their entire lives trying to make sure they gave their kids a BETTER LIFE, just as I work every day to give my kids a better life. Ending the most benevolent and selfless promise ever made in the history of America – Universal Medicare Healthcare for all of our seniors FOR LIFE – is not something my mom wants to do to me or my kids.

According to the Insurance industry, There are 2 points in every persons life where we all experience similar medical costs – at birth and our in the last few years of life. Now imagine if some idiot said, “babies are costing us too much and since every woman could eventually become pregnant, we therefore have a massive unfunded liability with no money set aside in the BabyCare Trust Fund. Those babies simply have not paid enough of their insurance cost and the system is going bankrupt. We must do something right now.” Now ask yourself this question, would your solution be to create a new voucher plan that specifically will not cover the full cost of BabyCare? How in the heck are the babies going to pay the difference. Do they start earning money in the womb? They’re babies and at this stage of their lives, they actually are going to need some serious outside help.

I know I am being really silly but sometimes you have to extend to the ridiculous in order to understand exactly how crazy the other ideas really are.

Eldercare is the most expensive care we will ever incur. The last 3 years of our lives will require the most care we will ever require. We need a good plan to finance the liability as long as we accept the fact that people will continue to live and age.

Let me start by saying the logical way to extend the life of the current Medicare Guarantee Fund is to first have this vote :
“Does America still support the concept of universal medical coverage for people from age 62/65 to the end of their lives so no American will suffer medically or die specifically because they can not afford medical care ?”

Based on the answer, you can:

1. Adjust the age requirement upward 2 years. Extends Medicare by 20 years.
2. Means test Medicare so anyone earning over $500k per year or has $10M in net assets will not participate in the program. Adds 10 more years to Medicare.
3. Allow providers to receive payments on a sliding scale earning more for improving health outcomes and less for increasing negative outcomes. Exact fiscal impact is unknown but will be favorable.
4. Allow more Clinics and Medical groups to become/partner with Accountable Care Organizations which have demonstrated the ability to achieve 10% medical cost savings. Saves Medicare $500 billion.
5. Remove the restriction banning Medicare from taking advantage of volume drug procurement discounting and allow Medicare to mirror the Veterans Affairs bulk drug purchasing contracts. Saves Medicare $300 Billion over 10 years.
6. Create 2 million net new US jobs per year. We need as many workers paying into the system in order to return actuarial balance to the system.
7. Require individual life insurance policies provide 10% of any life benefit payment to the individuals Medicare Trust Fund, ( to offset a portion of any significant costs incurred in the last year of life).
8. Eliminate fraud , waste , and abuse.

Or you can do this:
1. Create a new individual premium cap of $7,500 per year. Changes the current program and funds the new smaller program at a fixed level for decades.
2. Allow individuals to access a new, yet to be created private-sector Medicare Part ??? which will be subsidized by taxpayer at $7,500 per year.
3. Allow individuals to stay on a as yet to be defined Medicare Insurance plan administered as is currently administered but will be capped at a new growth level.
4. Eliminate fraud, waste and abuse.

Why would the House select the laziest options possible?

Here is the big flaw. Insurance is about pricing risk. THERE IS NO INEXPENSIVE PRIVATE HEALTHCARE INSURANCE PRODUCT FOR INDIVIDUALS 65 AND OVER. Insurers do not want to price risk knowing full well that the demographic being covered is the demographic that will cost the most to care for. Without the young and healthy in the pool, no private elder plan could cost less. Any private insurance offered will be very expensive and vey exclusive -much more than the current cost of Medicare. In other words every single medical insurance product currently available for those 65 and over is a “supplement” to the current government administered Medicare Insurance Program. These supplemental programs “ride the coattails” of the current Medicare Program and would fail if there was no government administered Medicare Program.

Here is proof. Try to price a $200,000 , 40 year term life insurance program for a healthy 20 year old. Premium costs will be less than $75 per month. Now try to price a $200,000 , 10 year term life insurance policy for a “healthy” 65 year old. Good luck! If you could actually buy a policy, you would probably not even get $200k in coverage. If you did, you would probably pay $4,500 per month. Now try the same for an 85 year old. Right. For the House to even suggest a premium support allowance of less than $25,000 per year demonstrates their utter lack of seriousness and ignorance. They have no basis for the allowance they have included in their budget plan which does not balance for 35 years. This means their numbers are flights of fancy and fantastical pixie-dust.

Oh, lest I forget, the pre-2014 private health insurance plans never cover anyone over 65 and we can see how expensive they for consumers to purchase. After 2014, the Affordable Care Act also assumes Medicare is still there to provide even some additional benefits to the elderly. No private healthcare plan currently include the added risk of covering the elderly. In other words, the House Medicare Plan will increase the cost of all healthcare insurance because traditional Medicare’s large pool will be drastically changed. If the Affordable Care Act is repealed, health insurance costs for the elderly would absolutely explode if it was available at all.

The current Medicare program therefore acts as a captured-market risk pool -picking up the cost of the most basic , expensive and frequently utilized care. This program currently operates at a cost of less than 3% and has no provision for profit. This program also includes 100% of all seniors making it one of the largest group plans in history. The current plan has mass and significant buying power which keeps costs lower. Split the group by taking the wealthiest and healthiest out of the group – leaving the poorest and sickest in the new group and what do you get? More expensive Medicare cost for those least able to opt-out and a new subsidy for those most able to opt-out to a new boutique plan. You get the crazy expensive outcomes of the regular Private Health Insurance products available in the markets prior to 2014. How does it make sense to change Medicare by making it a new private-sector government subsidized boutique insurance program that is more expensive than the current program. I thought conservatives hated subsidies? How would it make sense to invent a new program that kills a program which has benefitted millions of Americans while creating new risk for poor seniors? How we could call this a conservative fiscal plan escapes me.

The flaws in the Medicare Voucher proposal are too great a risk for America to consider acceptable. It’s time for the House to go back to the drawing board and work harder on a plan that does not assume a flawed theory. The concept that current seniors will sell out their kids is embarrassing. The theory a new private sector elder care universal insurance product will be inexpensive is just plain silly and defies the logic of writing insurance risk.

C’mon, boys and girls. Get it right.

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6 Responses to The Flaw in the Medicare Voucher Concept

  1. janspencley says:

    Well done Vince. Shared on our SDHCC page and on our personal pages.

    • vincentmudd says:

      Thanks, Jan. I have a hard time believing working class people actually believe the Medicare voucher or premium assistance was designed to benefit them. It’s time for regular Americans to vote their individual self-interest as well as the interesta of their family by not allowing themselves to be taken advantage of. The House plan hurts current seniors by being threatening to repeal ACA and therefore eliminating current benefits like preventative care and screening plus the prescription drug gap. How can regular folks ever trust anyone eliminating their benefits right in front of their faces?

      The voucher is a crock. I get so bored listening to a person say they want me to keep the same level of benefit but turn around and change the benefit. Americans can now see the flaws and should punish anyone that tries to end an American promise to our current and future seniors so irresponsibly.

  2. btg5885 says:

    Vincent, well said. The voucher approach is similar to the defined dollar approach corporations that had retiree medical benefits went to in the early 1990’s when FAS 106 was implemented to require them to annually expense the cost while actively employed. The premise was to put the risk of medical inflation on the retiree by defining the employer’s commitment in a fixed annual allowance. This resulted in a much lower FAS 106 expense on the books. The idea was the company would periodically change the allowance, but few did and the premiums went up on the retirees, I do agree with Ryan that we need to address Medicare, but this is not the most ideal solution for the public. My main concern with Ryan as it is with all Tea partiers and Grover Norquist is we must put tax increases on the table or the math won’t work on solving our budget problem. We are one of the least taxed countries in the world (32nd out of 34 countries per the Paris based Organization for Economic Cooperation and Development). We must step forward and be willing to pay for something – that is what a business person would do – decrease expenses as well as trying to raise revenue. The fact Ryan voted against Simpson-Bowles speaks volumes to me as to his lack of sincerity and stewardship. Well done. BTG

    • vincentmudd says:

      Right on, my friend. There are fixes available however we are going to have to wake the 60% of Americans that did not vote in 2010. The House needs to be populated with 50 different members focused on balanced and effective solutions. As long as you and I refuse to keep quiet, we have a chance to intercept this plague of stupidity.

      Sent from my iPad

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