The Stanly News and Press (Albemarle, NC)

Opinion & Letters to the Editor

October 22, 2012

What’s the best approach to Medicare?

Monday, October 22, 2012 — I’m only a couple of years away from being eligible for Medicare, the federal government program to help senior citizens pay their medical bills. So as someone who will soon be using Medicare, I’m keenly interested in its future.

Unfortunately, according to most experts, Medicare’s future is in doubt. The reasons are simple. The number of seniors is growing rapidly, they are living longer and medical care costs have been rising faster than incomes.

The result: government spending for Medicare has been jumping off the charts and soon could comprise an unsustainable chunk of the federal budget. Therefore, all plans to slow the growth of government spending and borrowing have to address Medicare. The big question, of course, is how?

With the selection of Rep. Paul Ryan as a vice-presidential candidate, alternative approaches to restraining the rise in Medicare spending are now front and center in today’s political campaigns.

Ryan has developed a detailed plan for Medicare that is in sharp contrast to ideas outlined by President Obama and his administration.

Both approaches, the Ryan plan and the Obama plan, actually have the same goal of limiting the annual growth in Medicare spending to the growth rate in the total economy plus 0.5 percent. This is an ambitious goal, because it would cut Medicare’s growth rate of the past 20 years in half.

But the plans differ dramatically on how to accomplish this goal. The differences focus on the degree to which economics can or cannot be applied to our health care system.

The Ryan plan ultimately relies on the mainstay of economics, competition, to moderate the growth of Medicare. Following his ideas, Medicare recipients could choose among several private insurance plans for coverage of their medical costs. The government would financially assist seniors in the purchase of their plan.

The amount of subsidy would depend on the cost of the insurance plan chosen by the Medicare recipient. The government would establish a benchmark plan with certain features and reasonable costs. Seniors choosing a more costly plan would receive a smaller subsidy and likely have to pay more out of pocket, while seniors choosing a less costly plan would receive a larger subsidy and maybe even a cash rebate.

Additionally, all financial assistance would be calibrated to the medical condition of the senior, meaning the sickest seniors would receive higher subsidies.

The Ryan plan is placing a big bet that competition, one of the key features of economics, will keep Medicare costs in line.

For example, if insurance company A charges more for its policy than insurance company B does for the identical policy, then one of two things will happen. Either everyone will buy from B and A will go out of business, or A will reduce its price to be more in line with B.

So the essential idea of the Ryan plan is that seniors will now have a financial incentive to shop for the best insurance policy that meets their needs at the lowest cost, just like seniors and all consumers do with most products and services.

But not everyone thinks competitive economics works in the health care field, and this viewpoint is the basis of the administration’s proposal on controlling Medicare costs.

There are two potential issues that some analysts see in applying the traditional competitive model to health care. One issue is based on lack of information. Properly functioning competitive markets rely on consumers having enough knowledge and skill to evaluate alternative products and their prices and select the best one for their situation.

However, critics of applying the competitive model to health care say medical issues and medical insurance policies are simply too complicated for the average consumer to evaluate effectively.

Secondly, many say that health care — because it deals with life and death — should not be treated like other products and services and put in the hands of companies whose objective is to maximize profits.

Therefore, say these critics of the competitive plan, government needs to use its power to protect seniors by issuing regulations and promoting incentives to move the heath care system toward greater efficiency and improved outcomes.

Of course, supporters of the competitive approach have retorts to their critics, including that third parties as well as competing companies can provide the necessary information to seniors for competition to succeed.

But the larger point is that we now have a big debate about the best approach to Medicare. It’s one we all need to follow, because this is one of the biggest “you decides” we face today. As a senior citizen, I know I will be watching.


Text Only
Opinion & Letters to the Editor
  • Do White Castle prices tell us anything about the minimum wage?

    NEW YORK - Economists love hamburgers. Specifically fast-food burgers. This is partly because all right-thinking human beings love ground meat on a bun, but it's also because the sandwich makes a handy yardstick for international financial comparisons. The ingredients and labor involved in preparing a Big Mac are pretty much the same no matter where you are in the world, so by looking at how many hours of toiling it takes a worker to earn enough to purchase one, you can get a sense of how wages really stack up across countries. The Economist famously created the Big Mac index in 1986 to see which currencies were overvalued. It started as a joke. Now, as the magazine proudly notes, it's a subject of academic study.

    April 22, 2014

  • Can Hillary Clinton rock the cradle and the world?

    WASHINGTON - What's most interesting to contemplate is the effect becoming a grandmother will have on Hillary's ambition. It's one of life's unfairnesses that a woman's peak career years often coincide with her peak childbearing years.

    April 22, 2014

  • Doug Creamer All in the Family

    We had a family get-together at my brother’s house on Easter Sunday. It’s hard to get our family together because we are spread out, especially when you consider nieces and nephews. My parents and siblings all made the gathering this year. Some of my nieces and nephews are far away, but they all remember gathering at my brother’s house for the holidays. Easter is known for the Jell-O eggs and the famous Easter egg hunt.

    April 22, 2014 1 Photo

  • Victimized by the 'marriage penalty'

    In a few short months, I'll pass the milestone that every little girl dreams of: the day she swears - before family and God, in sickness and in health, all in the name of love - that she's willing to pay a much higher tax rate.

    April 19, 2014

  • The case for separate beds

    WASHINGTON - The other night I slept on a twin bed in the guest room of the house I share with my husband and our two kids.
    It was the best night's sleep I've had in years.

    April 19, 2014

  • taylor.armerding.jpg Obama's equal pay exaggeration leads us all into danger

    The president's claims of national shame over gender-based pay inequity spring from distorted calculations, as well as some convenient political math.

    April 12, 2014 1 Photo

  • Teens trading naked selfies for mugshots

    Will teenagers ever learn? You think yours will. Maybe so. But it's likely that was also the hope of the parents of children who were so shamed by nude photos of themselves that went south - how else can they go - that they killed themselves.

    April 12, 2014

  • Brent Laurenz If you want to vote in primary, you need to register to vote now

    RALEIGH – North Carolina voters will head to the polls on May 6 this year to cast ballots in important primary elections across the state.

    April 11, 2014 1 Photo

  • Scott Mooneyham Heeding the voter fraud call in N.C.

    RALEIGH – Legislators found the findings outrageous.

    April 11, 2014 1 Photo

  • Doug Creamer Roots

    I took a few minutes over the weekend to enjoy our yard and the arrival of spring. There seems to be so much work that needs to be done, it is hard to decide what to do first. I am excited that I got to run my tiller through the garden. I didn’t go very deep, but I did at least break up the soil. I have a couple of raised beds and the soil in them was in very good shape. I didn’t plant my peas and now after the big rain we got on Monday I realize that I missed a window of opportunity.

    April 11, 2014 1 Photo

House Ads
Seasonal Content