Moving Backward

If you are a supporter of single payer who believes that change in the U. S. health care system will be gradual and incremental, you probably support the Affordable Care Act, and you probably think any policy changes that move us in the direction of single payer are progress, while you oppose any changes that move us toward privatization. Medicare is the largest single payer system we have in this country. The members of the Elephant Party are nearly unanimous in their support of Rep. Paul Ryan of Wisconsin's plan to privatize Medicare. Up until now, they have been unsuccessful in getting any Jackasses to sign onto the Ryan plan. That has all changed. Sen. Ron Wyden of Oregon, a member of the Jackass Party, has joined with Ryan to propose a “compromise” plan to “save” Medicare. While it stops short of privatizing Medicare, it is a major step in that direction.

When the Affordable Care Act was being debated, supporters of single payer favored a public option to compete with private health insurance plans. Our thinking was that if the public option proved more attractive to subscribers, it would move the country in the direction of single payer. The Ryan/Wyden plan offers seniors a “private option” as an alternative to the single-payer Medicare, possibly in the hope that competition from the private sector will eliminate Medicare from the U. S. health care system (although they deny that intention).

The Ryan/Wyden plan is a premium support program, similar to school vouchers. Seniors will be given a certain amount of money to spend on health care. They will choose among several alternatives, including traditional Medicare and various private health care plans, most of which will cost more than the amount they have been given.

Here is a simplified version of Austin Frakt's summary of the plan:

• Private medicare plans will compete with traditional Medicare in an exchange. Private plans must offer the “actuarial equivalent” of what is available from Medicare. In other words, the private plans don't have to offer the same coverage as Medicare, but the coverage they offer must be of equal value.
• The premium support citizens receive is equal to the cost of either the second cheapest private plan in the exchange or Medicare, whichever is lower. If you choose a more expensive plan, you pay the difference. If you choose the cheapest plan, you get a rebate.
• Private plans may not reject an applicant for any reason; that is, discrimination on the basis of pre-existing conditions is not permitted.
• If this price competition doesn't work to contain the cost of Medicare, the cost will be capped at a growth rate equal to the growth rate of the GDP, plus 1%. This will be done by reducing support for the sector or sectors (hospitals, drug companies, etc.) most responsible for the cost increase.
• Anyone now over 55 will not participate in the new plan, which will not be implemented before 2022.

There are several potentially serious problems with the Ryan/Wyden plan. Again, I am indebted to Frakt for his thoughtful posts about premium support programs (which he favors, by the way).

• Although private insurance companies will be forbidden to turn away people with pre-existing conditions, they will find all kinds of ways to enroll only the healthiest people, i.e., by directing their advertising at affluent citizens. Traditional Medicare will be left with the sickest people, who will pay the highest fees. A process called “risk adjustment” is supposed to deal with this problem by increasing the rebate to plans that cover less healthy people, but this is after-the-fact and it's not clear how it will work.
• Private insurance companies often treat their customers badly. The deny necessary care and provide poor customer service. This can also be used to drive away the least healthy people.
• When it comes time to design the plan, Medicare will have no money to spend on lobbying and campaign contributions, while the insurance companies will be stuffing Congress-critters' pockets with cash. This virtually guarantees that the playing field will be tilted in favor of the private plans.
• Since private plans don't have to offer the same coverage as Medicare, but only the actuarial equivalent, it will be hard for seniors to compare the plans. The insurance companies have almost unlimited advertising budgets with which to confuse and mislead consumers. Most seniors citizens do not have a friend with a Ph.D. to help them pick the best plan, so many of them will make bad choices.

The combined effect of these problems will be to leave Medicare with fewer and less healthy customers. This will increase Medicare's costs, while weakening its bargaining power when negotiating with hospitals or drug companies over the prices of goods and services. This could eventually lead to the demise of Medicare.

When Walmart goes into a new community, they offer consumers heavily advertised “sales” for the first couple of years. (Since they have thousands of outlets, they can afford to run some of them at a loss for a short time.) The purpose is to drive other local retail stores out of business. Once they have eliminated the competition, they quietly raise their prices. It's possible that the insurance companies will begin by setting their prices unrealistically low, in the hope of sending Medicare into a death spiral.

It's going to be difficult to oppose a premium support plan. Critics will ask: "What can be wrong with offering people more choices? If you are really confident that single payer is more cost effective, why do you worry that people will switch to private health insurance?"  Some of our objections will sound as if we oppose giving people more choices because we are afraid they will choose unwisely. This seems paternalistic, and conflicts with most Americans' mistaken view that they are too smart to be influenced by advertising.

I apologize for the length of this post, but I believe that premium support programs are a serious threat to move our health care system in the wrong direction. The New York Times has come out in favor of premium support. The insurance companies have almost unlimited funds with which to bribe Congress and the President to pass such a program. In fact, I'm afraid that dismantling Medicare is almost inevitable. If that happens, it will be nearly impossible to pass single-payer health care in this country. How can you demand Medicare for all when there is no Medicare?

Early news reports have suggested that Senator Wyden is seen by his fellow Jackasses as a traitor for breaking ranks and suggesting major changes to Medicare. (Paul Krugman refers to him as a "useful idiot.") My guess is that the reality is quite different. They are probably grateful to him for offering them cover while they quietly line up to follow his lead. The insurance companies have millions of dollars to pass out. Right now, the Elephant Party is getting most of that money. But the Jackasses want it, and if they signal a willingness to pass premium support, they are likely to get a lot more of it. The results will be disastrous for single payer, and possibly for the country.