The Truth About Privatizing Medicare

During the mid-term campaign Republicans railed against Obama’s health care plan.  One of their assertions was that Obama was going to reduce Medicare benefits and use the savings to pay for his health care plan.  Never mind that the reduction in Medicare the Democrats sought was not in the benefits paid to seniors but in the waste, fraud and abuse in providing those benefits.  Now that they are in the majority Republicans want to push forward their plans for privatizing Medicare. 

According to the plan authored by Representative Paul Ryan they want to scrap the current Medicare system in its entirety.  Instead of providing Medicare payments seniors would be given a coupon which they would use to purchase private health care coverage in the free marketplace.

First of all the hypocrisy in this plan is palpable.  Anyone who thinks that privatizing Medicare won’t drastically reduce the benefits that seniors receive doesn’t understand the basic principles of insurance or economics.  There is no way that a 65 year old individual is going to buy coverage equivalent to current Medicare benefits with a “coupon” UNLESS that coupon is for a sum of money in the tens thousands of dollars per year. The older you get the more health insurance products cost.  This is particularly true when you are buying the product as an individual rather than in a large group.  Large groups have the power of numbers when negotiating price with a prospective insurance company.  Medicare, for example has a great deal of leverage in negotiating coverage and price due to the huge number of people they represent.  A 65 year old individual does not.  Furthermore, it costs more to insure the elderly because they are far more apt to need and use health care benefits than younger healthier citizens.  Any insurance company willing to insure a pool of elderly customers is going to charge a unbelievably high price for the coverage because virtually all of them will use the coverage;  the majority of them many times over.

That brings us to the second point.  Who is going to insure these elderly people?  Who is going to insure a pool of elderly people, provide adequate benefits at a reasonable price and make money for their shareholders?

The Republicans are offering to provide seniors with a coupon to buy a product that doesn’t exist.

THAT plan will most certainly reduce costs.