Sunday, August 21, 2011

Medicare Report - Part II - The Republican Medicare Reform Plan

By: Dan Reed, American Citizen

It’s important to note that conservative Republicans have opposed Social Security, Medicare, and Medicaid since each program was established! Part two of this three part Medicare report reviews the major components of the Republican Medicare Reform Plan, provides analysis of the premium support proposal by the CBO and the Kaiser Family Health Foundation, and presents the Democrats argument.
The Republican plan to would make three fundamental Reforms to Medicare:

1. The Republicans plan would cap Medicare payments at a rate slightly above inflation, which is far less than the rate health care costs are rising – meaning seniors would be forced to pay rising medical costs out of their social security and retirement savings!

2. The Republicans plan would phase out the nonprofit FICA system, which directly reimburses doctors, hospitals, drug Corps, and medical equipment suppliers.

3. The Republicans plan would phase in direct federal payments to Private for-profit Insurance corporations, which seniors would be forced to choose from.

Republicans claim their “Medicare Reform Plan” would lower costs by making health care consumers more judicious about their health care consumption! However, most experts agree that health care is not a marketable product that people can bargain for when needed! Instead, they explain that health care is a necessity that people urgently need when they get sick! And, the most expensive care is generally not optional, predictable, or negotiable when demanded!

Here’s an example of judicious health care consumption: a person having a heart attack would judiciously interview a few doctors and hospitals to get the lowest cost before receiving treatment! If said person dies while being judicious about their health care consumption, said person successfully lowers their hospital costs and doctor fees! The moral: “DON’T GET SICK, AND IF YOU DO, BE JUDICIOUS AND DIE QUICKLY”! Economists call this market-based solutionDemand Shedding”.

Analysis by the CBO

Analysis by the Congressional Budget Office (CBO), which does budgetary analysis for both parties in Congress, concluded that Medicare beneficiaries coming into the Republicans Health Premium Support System after 2022 would spend significantly more for heath care under the Republicans private insurance plan:
  • Traditional nonprofit FICA Medicare costs much less than private health insurance premiums because private insurance companies have significantly higher administrative costs, pay higher hospital and doctor’s fees than Medicare, and need to make a profit. 
  • The Republicans proposed direct federal health premium support payments to private insurance corporations, would increase much more slowly than private insurance premium increases, leaving more for Medicare beneficiaries to pay out of their social security and pension savings.

The CBO estimates that net federal premium support payments for a typical 65-year old would be $8,000, or 39%. This means the total cost of providing health care benefits to a typical 65-year old in the Republican Medicare Reform Plan would be about $20,500 in 2022, which the Medicare beneficiary would pay $12,500 in out of pocket costs! THIS IS IMPORTANT, because most Medicare recipients live on a combined social security and pension of about $22,000 per year!

Analysis by Kaiser Family Health Foundation 

Using CBO projections, the Kaiser Family Health Foundation did the math and determined that if a person who turned 65 in 2022 were to remain in the traditional Medicare system, their out of pocket costs would be just $5,630 – a full $6,870 less than it would be under the Republican reform proposal. Kaiser explains it would cost more money to provide benefits under the Republican proposal because private health insurance plans traditionally pay higher fees to health care providers: hospitals and doctors, than FICA Medicare does”, and private health insurance plans have significantly higher administrative costs and profit requirements. 

Full Story:
 Democrats Argument 

Democrats argue that Republicans proposed “Health Insurance Premium Support” would not keep pace with rising health care costs because their health insurance support premiums would be linked to the consumer price index, which hasn’t grown nearly as fast as health care costs! Furthermore, Democrats argue the Republicans plan, which would make direct federal payments to private insurance corporations, amounts to a massive subsidy to private health insurance corporate profits!

The Republican Medicare Reform proposal would surely reduce federal spending for Medicare! However, the Republican plan leaves Medicare beneficiaries on the hook for significantly greater out-of-pocket insurance premiums and rising medical costs than they would pay under the existing FICA Medicare system. Furthermore, the Republican plan does absolutely nothing to solve the core problem: the enormously high cost of health care in the United States! 

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