If Americans who are embracing Rep. Paul Ryan's "Path to
Prosperity" -- and that now includes Mitt Romney -- spent a few minutes
reviewing a few recent research reports, they just might conclude that
the Wisconsin Republican's plan to reduce the deficit might better be
renamed the "Path to the Poorhouse" because of what it would mean to the
Medicare program and many senior citizens.
Ryan's proposal, which will get new scrutiny now that Romney has made
him his running mate, would end the current Medicare program for
everyone born after 1956. It would replace Medicare with a system in
which beneficiaries would receive a set amount of money from the
government every year to buy coverage from private insurers. That money
would go straight into insurance companies' bank accounts, which would
make them far richer and even more in control of our health care system
than they already are.
While the amount of money beneficiaries would receive would depend on
their health status, the average 65-year-old would get $8,000 under the
Ryan plan in 2022, the year it would take effect. That's the amount the
current Medicare program is expected to spend on the average
65-year-old that year. After 2022, the annual increase in the "premium
support" payments would be based on the consumer price index (CPI). And
therein lies one of the biggest problems for anyone hoping to live long
enough to enroll in Medicare and stay alive for a few years.
Last month the government reported that the consumer price index had
increased 1.7 percent between June 2011 and June 2012, meaning we've
been paying on average 1.7 percent more this year than last year for
goods and services. The cost of medical care, however, shot up 4.3
percent -- more than two and a half times the CPI. And that was not an
aberration. The cost of medical care has been rising faster than the
cost of just about everything else in this country for years. That's one
of the reasons why private health insurance premiums have been
increasing so rapidly. That and the fact that insurance corporations
have to report a big enough profit every quarter to satisfy their
shareholders and Wall Street analysts.
Health insurance premiums rose nine percent in 2011 to an average of
$15,073 for an employer-subsidized family plan, according to the Kaiser
Family Foundation. Over the past 10 years, premiums have increased a
"whopping" (Kaiser's word) 113 percent, much faster than wage increases
and general inflation. So you can see what almost certainly would happen
to Medicare beneficiaries beginning in 2022: They would have to shell
out more and more money out of their own pockets every year just to
cover the premiums their private insurers would charge them.
That's bad enough, but consider this: Health insurers began
implementing a strategy several years ago to move all of us into
high-deductible plans, meaning every one of us will soon be paying (if
we're not already) thousands of dollars of our own money for medical
care before our insurance company will pay a dime. Insurers adopted this
strategy because they have failed miserably at controlling health care
costs. If you can't control those costs, the only way you can make Wall
Street-pleasing profits if you're an insurer is to keep hiking premiums
and shifting more of the cost of care to policyholders.
Under the privatized Medicare program Ryan envisions, the effect of
that cost-shifting strategy would be disastrous for the growing number
of senior citizens who are finding that every year they have less and
less money to make ends meet.
Almost half of Americans now die with virtually no financial assets,
according to a recent study by economics professors at Harvard, MIT and
Dartmouth. They found that 46.1 percent of Americans are now dying with
less than $10,000 (19 percent die with no financial assets at all) and
that many rely almost entirely on Social Security benefits for support.
Not surprisingly, those people are disproportionally in poor health.
"With such low asset levels, they would have little capacity to pay
for unanticipated needs such as health expenses or other financial
shocks or to pay for entertainment, travel, or other activities," the
Those findings are not so surprising when you look at other recent
measures of Americans' wealth and our ability -- actually, our inability
-- to save money. The Federal Reserve reported in June that, after
adjusting for inflation, median family income fell to $45,800 in 2010
from $49,600 in 2007. The recent economic crisis also took a big toll on
median home equity, which fell during the same period from $110,000 to
$75,000, and family net worth, which plummeted 40 percent from $126,400
For the relatively wealthy Americans lucky enough to have a 401(k),
most of their account balances are not nearly high enough to be of
significant help when they retire. According to Fidelity Investments,
the country's largest 401(k) administrator, the average account balance
among its customers at the end of June was $72,800, which is down 2.4
percent from March and about the same as it was in June 2011. And
balances in Health Savings Accounts are also low -- averaging just
$1,494 in 2010, according to J.P. Morgan.
So one has to wonder how Messrs Ryan and Romney think making our
senior citizens pay a lot more for care under a privatized Medicare
program could even remotely be a Path to Prosperity for most of us.
Could it be that they're not thinking -- or even caring -- about most of
us but about people who, like them, have such big 401(k) accounts
they'll be able to do just fine in their golden years regardless of how
Medicare is structured?
© 2012 The Huffington Post
is former Vice President of corporate communications at CIGNA, one of
the United States' largest health insurance companies. In June 2009, he
testified against the HMO industry in the U.S. Senate as a
whistleblower. He is now the Senior Fellow on Health Care for the Center for Media and Democracy
in Madison, Wisconsin.
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