Last week the Republican National Convention officially adopted Rep. Paul Ryan’s plan for “premium support” for future Medicare beneficiaries – that is, the government would give each senior citizen a fixed sum to buy private insurance, instead of paying directly for comprehensive health services.
During the Vietnam War, an Army officer once explained, “We destroyed the village to save it.” That strategy did not work in Vietnam, and it will not work for Medicare.
But a village can be rebuilt. A universal health care system, once dismantled, with the healthy allowed to separate from the sick, may be irreparable.
Everyone understands that the present course of Medicare is unsustainable: If we cannot get the cost of health care under control, Medicare and Medicaid eventually will consume the entire federal budget. (This problem is not unique to the federal government: The cost of health care in the private sector is growing even faster.)
Republicans and, alas, many Democrats believe the problem results from a market defect: People “demand” excessive health care because when they are insured, they pay less than the true cost. So patients, economists believe, feast at an all-you-can-eat health care buffet, heedless of expense. And studies do show that a given patient may receive far more care in one city than another, with no difference in outcome. This means, experts say, that there is waste in the system that can be eliminated without compromising patients’ health.
How? “Encourage” people to choose insurance policies with limited coverage (by taxing the policies, for instance). That way, individuals save money on premiums up front, and when they need care, they will not just take whatever is offered but shop prudently, seek less expensive options or forgo care they can manage without. Just like buying clothes. Payers and patients save money – for policy experts, a win-win.
This take on health care is bipartisan. So Ryan’s Medicare plan, which would give seniors a fixed payment to buy private insurance, actually resembles President Obama’s Affordable Care Act, which requires those under 65 to buy private insurance, just stripped of consumer protections.
The trouble is, people don’t buy health care like they buy clothes. Families have bankrupted themselves trying to save the lives of loved ones – a child, a mother – even when the odds were grim. Arthritis is seldom life-threatening, but would you put Grandma on a walker and a pain pill to save the cost of a new hip?
Former Vice President Dick Cheney would have died at 71 without a heart transplant. Of course, he could have paid the $1 million charge out of pocket. But would an ordinary Ryan-type policy for an ordinary senior have covered a heart transplant for a 71-year-old retiree? Indeed, would anyone sell a 71-year-old man with a failing heart a policy covering heart transplants? Capitalism is one thing, but do we want these decisions made by the free market?
Health insurance is a fairly recent invention. Insurance is old; it developed centuries ago, in business. Merchants insured one another against losses at sea, spreading the risk. Today, insurance is all about estimating and balancing risk, then calculating premiums and investments to cover the anticipated losses, with something left over. It is highly rational, performed by actuaries and algorithms.
But risk-based insurance wreaks havoc in health care. Insurers must charge higher-risk individuals higher premiums in order to cover their costs. (If the insurer spreads the cost to low-risk customers, they will switch to a competitor that doesn’t.) Since disease is chronic and treatment is expensive, it means once people get sick, they often cannot find insurance at any price – even if they were insured when they got ill. The only customers companies want are healthy people unlikely to use their insurance.
Medicare was passed precisely because seniors could not get insurance.
And that is why the rest of the developed world adopted, instead of private insurance plans, variations on national health care. There is no need to calculate risk; everyone is in the same pool, everything is covered. In most countries, people are taxed for this care according to their income – so everyone can afford it. Finally, these countries control their health care costs, not by reducing benefits a la Ryan/Obama, but by reducing prices. Americans pay the highest prices for health care in the world. Only a national government has sufficient leverage to reduce these.
The other advanced democracies get better health care outcomes for a fraction of what we pay.
Medicare is national health insurance. Everyone is covered for everything, premiums depend on income, and Medicare is cheaper than the private sector. But once healthy seniors in Ryancare find they no longer need to pay for the sick, many will resist going back, Medicare will be lost, and sick people – like Cheney but without the money – will die.
As Abraham Lincoln said, through our government we do together what we cannot do as well by ourselves.