ADDRESSING THE PROBLEMS OF MEDICARE: MR. RYAN STAYS IN WASHINGTON

3/13/13

As regular readers know, I am no fan of Representative and former Vice-Presidential Paul Ryan.   (See my 1/2/13 post, PAUL RYAN:   MORE PAP AND PABULUM FROM THE MASTER OF HYPOCRISY, which is only my latest diatribe on the man who represents all that is wrong with American politics.)  My problems with Mr. Ryan have little to do with policy and everything to do with his background and his presumption that, as a lifelong public payroller, he has some sort of wisdom to impart to those of us who pay the bills for the lifelong ego trip he calls a career.   This, of course, makes him no different from just about any other politician in this age of politics as a “profession;” however, it is Mr. Ryan’s hypocrisy, his endless, vocal, and stentorian paeans to the private sector bellowed while he is comfortably ensconced at the public trough, that make him more grating than the rest of the barnacles on the ship of state that inhabit Washington, D.C.

Mr. Ryan’s latest budget, which purports to balance in ten years while providing so few specifics as to be laughable, is only the latest in his insults to the intellect of the American people, a collective intellect that is, after years of endless exposure to the vapidity of prime time television, rapidly reaching the point at which it is incapable of being insulted by anyone lacking the utter lack of shame and introspection that characterizes Mr. Ryan.   The budget, unlike most other things emanating from the Janus-faced GOP, does show a glimmer of common sense in tackling brobdingnagian expenditures on foreign adventures and proboscis insertion that the bi-partisan War Party insists on calling “defense.”   So never let it be said that I have never said anything nice about Mr. Ryan.  Further, he is, I understand from those few people I know who know Mr. Ryan, a nice guy, a wonderful family man, and a good Catholic. So there…more nice things to say about Mr. Ryan.  But I digress.

The major problem with Mr. Ryan’s budget lies at the intersection of his utter lack of experience with anything remotely resembling the real world and his desire to tackle the major problem facing our budget, health care spending and, specifically, Medicare spending.   As much as I don’t like to give President Obama many kudos, either, he was nearly right when he said something like (I can’t quote directly because I don’t have the quote in front of me.)

We don’t have a budget problem; we have a health care problem.

Even though Mr. Ryan would never admit it for fear of introducing even a jot or tittle of risk to his comfortable lifetime sinecure dispensing what he thinks is his wisdom to those of us who have never had the good fortune to spend our days suckling at the public mammary gland, he agrees with the President on this point; if we don’t solve our health care spending problem, we will never solve our budgetary problems.   And if we can some how control our health care spending, we will all but eliminate our budgetary problems.

So the problem with our budget is Medicare and, to a lesser extent, Medicaid.  Mr. Ryan, to his credit, tries to attack the problem of Medicare by applying free market principles, which almost always work, to the Sisyphean difficulties Medicare presents.  But Medicare’s problems are not amenable to free market solutions.   Why?

Medicare is a huge, expensive government program simply because it is impossible to insure the elderly population profitably and the elderly population is growing rapidly.  It is impossible to insure the elderly profitably because older people, on average, spend a lot more on health care than just about any of them could possibly afford to pay by themselves.  Health insurance is essentially cost and risk spreading and the elderly, as a group, incur more health care expenditures than they could pay even if those costs are spread across their peer group.  That is why in a world in which insurance companies seek to operate profitably, being old is a pre-existing condition.   No profit seeking health insurer would sell health insurance to elderly people at anything remotely resembling affordable premiums, and charging market premiums would so shrink the insured pool that realistic cost and risk spreading would be impossible.

This inability to insure elderly people profitably, and thus the inability of elderly people, and especially elderly retired people, to obtain health insurance is what spawned Medicare.   Medicare was simply a concession to reality.   Whether it’s been run well or not is subject to debate, but there is no one who is reasonable who would argue that some kind of government program to provide health insurance to the elderly was and is necessary.  Why?   Because the cost of insuring the elderly, which could never be carried by the elderly, has to be shared with the non-elderly, if you will.   If you can spread the risks and costs beyond the elderly population, then you can insure senior citizens.   That is what Medicare, or any health insurance plan for the elderly, is designed to do.   That is why, incidentally, there will be such resistance from the not yet elderly to tinkering with the problem…they have spent years on the paying end of the cost spreading system and understandably don’t want to be denied their turn on the receiving end.

To his credit, Mr. Ryan realizes that a subsidy is necessary to insure the elderly; thus his “premium support” plan that replaces a government program that transfers costs beyond the elderly with a  (don’t call it a ) voucher for the individual to buy his or her own insurance from a private purveyor.  Mr. Ryan expects the usually nearly miraculous powers of the free market to work to drive down costs by effectively and efficiently providing health insurance to seniors.   Mr. Ryan assures us that insurance companies who participate in the program will not be able to turn down potential customers due to pre-existing conditions.  He assumes that insurance companies will be lining up to provide health insurance to those they currently would deem uninsurable, i.e., any senior citizen.  

But why would insurers volunteer to decimate their bottom lines insuring the currently uninsurable and/or to pay claims that vastly exceed the premiums they collect?  Could insurance companies make money insuring the elderly at anything like the premium support level Mr. Ryan proposes without, or even with, cherry picking those least likely to bust their bottom lines?   It seems like they wouldn’t and couldn’t.…unless the government were to provide some kind of subsidy to the insurance companies or some kind of cap on the liabilities the insurers face, a feature inherent in current MediGap policies.   And if government provides subsidies to insurance companies, either directly or through capping their liabilities, how would the new system be much different, at least in cost, from the current system?   And how would our budget problems thus be solved?  (I first addressed this problem in a 4/6/11 post on The Insightful Pontificator entitled “I WISH YOU HEALTH, AND MORE THAN WEALTH, I WISH YOU LOVE…”)

It simply isn’t possible to insure the elderly population without either losing lots of money or requiring a massive subsidy from the not yet elderly.  The free market has very few limits, but this is one of them.  That is why virtually every country has a program to provide subsidized health insurance, or health care, to the elderly.  Ours is called Medicare.   It may not be the greatest program in the world and if we don’t get it under control, it will bankrupt our country as my generation becomes entitled to its subsidies.  Mr. Ryan’s program tries to address this issue, but ignores the inherent uninsurability of the elderly by the private sector.   This isn’t surprising, however, given that Mr. Ryan has spent his life on some sort of government health insurance program.