When the private sector attempts to compete with Medicare, there are so many negative factors that it makes that option not only undesirable...but untenable.
Congressman Paul Ryan has prepared a widely discussed menu of health care plans for seniors (and yet to be seniors) – and frankly the proposals would be disastrous. As a senior 78 years old, such a plan if now in effect would scare the hell out of me; and I pray it will never come into being for those younger folks who follow me.
Health care is a complex subject, so perhaps I can simplify and synthesize his plan – and why it is not only undesirable, but untenable as well.
Ryan’s plan, in its simplest form, would eventually do away with Medicare completely, and turn health care insurance back to the private sector, with the representation that this will “save the government money” and also “save health care” for the elderly. This kind of salvation I do not need. By any statistic you wish to employ, private health insurance cannot possibly be more affordable than Medicare.
Recently it was reported in the Minneapolis Star Tribune, that: “UnitedHealth Group Inc. CEO Stephen Hemsley took home $48.8 million in total compensation last year, or about half as much as he took home in 2009, according to the company's proxy statement filed Wednesday.” It added: “an external pay analysis done for the company showed that Hemsley's compensation for 2010 was below the median level for CEOs in UnitedHealth's peer group. The compensation committee and Hemsley agree that his compensation plan ‘is sufficient to motivate and retain him’," according to the proxy. I would imagine so – but remember those are your premiums and my premiums folks, being used to properly “motivate” Mr. Hemsley.
It was further reported that: “Annual revenue for UnitedHealth increased 8 percent to $94.2 billion in 2010, making it the largest public company in Minnesota by revenue. Operating income increased 24 percent to $7.9 Billion and net earnings increased 21 percent to $4.6 Billion”. These billions in profit again are your premiums and my premiums – and I fail to see how private insurance striving for such profits, can compete with Medicare. In fact, it can’t.
UnitedHealth is not alone in sucking massive profits from the health care business. Medical Economics, a respected publication in the field, reccently published the following: “Profits for the 10 largest U.S. insurance companies jumped 250% between 2000 and 2009, according to a report released by the U.S. Department of Health and Human Services. The report found that the five biggest insurance companies -- WellPoint, Cigna, UnitedHealth Group, Aetna and Humana -- saw their profits increase 56% in 2009, a year in which 2.7 million people (also) lost their private coverage”.
What's more, the report found that the companies combined earned a total of $12.2 billion last year… and the CEO’s average compensation of the top five was $24 million in 2008 (no doubt much more now). All of this would be added and non-health care improvement costs in Ryan’s privitization plan.
It has been widely reported that Medicare administrative costs are only about 2%. Healthcare Economist, an industry magazine, disputed that in a lengthy examination. Their conclusion, adding all the “hidden” costs of government support, the actual cost was 5.2%. OK, I concede that. But the same study acknowledged that private health insurers spend 16.7% in administrative costs (other estimates have ranged to over 20%). That figure, and even more, has never been disputed by the industry. Again, how can the private sector even come close to competing with Medicare given the profits…executive compensation…and higher administrative costs all noted above? It can’t – because the private sector is motivated (and properly so) by profit!
Back to the Ryan plan, the Congressional Budget Office did an analysis of the plan and reiterated: “The age of eligibility for Medicare would increase incrementally from 65 (for
people born before 1956), as it is under current law, to 69 years and 6 months for
people born in 2022 and later. Starting in 2021, new enrollees would no longer
receive coverage through the current program but, instead, would be given a
voucher with which to purchase private health insurance. In 2021, when enrollees would first receive the voucher, the average voucher for 65-year-olds would be worth $5,900 (in 2010 dollars), as specified by your (Ryan’s) staff”.
Coincidentally, American Health Insurance Plans (the health insurance national industry organization) did a study of 2.6 million health insurance policy holders in 2009, and determined that the average annual policy costs for persons 60-64 (remember Medicare cuts in at 65 now) was $9252. While conceding there are many variables in policies, future rates, and so on – clearly the Ryan plan falls far short of the coverage seniors now enjoy under the Medicare plan; and the potential for a premium shortfall for seniors of over $3000 per year.
Moreover, the last thing I want to do at my age is run around town with my little voucher hoping some congenial health insurance vendor will even allow me to be covered at a much greater out of pocket cost than an excellent public program Medicare now affords me. As stated in my headline, “Ryan’s Medicare plan is a disaster for seniors. Like me!”