Romney On Entitlements

Nov 7 2011 @ 12:16pm

So we now have a clear Romney plan. It's essentially the Ryan Plan for Medicare with a hefty dose of reassurance, much vaguer results, and a small twist. In his own words:

First, Medicare should not change for anyone in the program or soon to be in it. We should honor our commitments to our seniors. Second, as with Social Security, tax hikes are not the solution. We couldn’t tax our way out of unfunded liabilities so large, even if we wanted to. Third, tomorrow’s seniors should have the freedom to choose what their health coverage looks like. Younger Americans today, when they turn 65, should have a choice between traditional Medicare and other private healthcare plans that provide at least the same level of benefits.

Competition will lower costs and increase the quality of healthcare for tomorrow’s seniors. The federal government will help seniors pay for the option they choose, with a level of support that ensures all can obtain the coverage they need. Those with lower incomes will receive more generous assistance. Beneficiaries can keep the savings from less expensive options, or they can choose to pay more for a costlier plan.

Ay, there's the rub. What are the chances that private insurance companies will be able to offer "the coverage seniors need" at lower prices than the government? Private insurance companies are much less efficient than the public sector, and their services costlier. And if the premiums for fee-for-service Medicare will be based on providing "the coverage [seniors] need," then which senior would pick a cheaper plan with fewer benefits or less personalized care? There's no there there, unless official Medicare is so ham-strung that private companies can compete. But that seems to push the cost curve in the wrong direction, no? Avik Roy suggests that the private companies can cut costs more easily than Medicare for one reason:

they are able to set up preferred provider networks, in which they steer their patients to the most cost-efficient hospitals and doctors. Traditional Medicare, on the other hand, is legally required to provide access to any health-care provider who accepts its fee schedule.

But even Roy acknowledges that the plan as-is cannot work outside urban areas with competitive hospitals and even if it did work, might shave costs by at most around 8 percent. We also don't have an actual dollar number to put on Romney's Medicare insurance "premium support," because what's guaranteed is not a money amount but a fixed level of care. So the great virtue of Ryan's plan – its brutal transparency about government's future liabilities – is erased. Roy concedes:

We simply don’t know how much we could save from competitive bidding.

So I remain skeptical about this scheme's ability to rein in costs, and find the reflexive view that markets can work well with the over 65s and healthcare to be more wishful thinking than reality. A seventy-year-old with faltering memory and a ruined hip is not likely to be the most ruthless consumer – if only because he has no expertise to judge the options for him. I feel lost half the time.

I'd also like to know how Romney, having repealed Obamacare, would help people with pre-existing conditions get coverage if they once lose it. And how his plans would bring insurance to 45 million currently without it. And how many young adults under 26 would lose coverage when Obamacare is repealed. But those are questions the GOP has just decided are irrelevant. For many of us, that is not an option.