04/12/2011 05:31 pm ET Updated Jun 12, 2011

Ryan Medicare Scheme Would Devastate Entrepreneurship, Jobs

When it comes to its Medicare scheme, the Republican (aka "Ryan") Budget is a total fraud, as will be explained in a more comprehensive article shortly.

But, it is also instructive to consider the Republican Medicare scheme's macro-effects beyond just the provision of health care for senior citizens alone.

It would devastate entrepreneurship (i.e., risk-taking) and, since new businesses are the primary source of new jobs, would kill job growth. If one believes Republicans' rhetoric and not their policies, these are the activities they claim to champion.

It is no accident that the era of entrepreneurship began soon after Medicare was passed. One of the primary drivers to passing Medicare in the first place was the potentially devastating financial impact on children (and thus on grandchildren) when a parent became ill. And that was in 1965 when the costs of health care were much lower because there was far less that medicine could do to manage illness, maintain wellness and reduce suffering. There were, for example, no MRI machines to search for potential causes of disease symptoms; there were no stents to keep clogged heart arteries open, and no bypass surgery to relieve angina (pain from inadequate oxygen to the heart). There were only a few drugs to treat cancer; bone marrow transplantation had not been invented.

That is, if the financial impact on his children of an elderly parent becoming ill were considered potentially devastating in 1965, imagine what it would be in 2011 when modern, but costly, technology is available to improve well-being and detect and treat diseases. Before the Bush Recession, had there been no Medicare, people might have considered a second mortgage on their homes as a hedge, but that second mortgage was already being used to fund college education, and buy 'big-ticket' items like an additional room, new appliances, new cars and so forth. Today, and probably for a very long time, one's home is at best a place to live, not a source of major cash.

The Ryan Medicare scheme would, after 2022, throw seniors out from a government guarantee and into the private health insurance system with vouchers to help pay premiums. The vouchers percentage of the premiums decline over time. What would premium costs be for a person previously covered under a spouse's employer's medical plan who has lung and heart problems? For a man who has prostate cancer, or a woman who has breast cancer? Could they even get insurance?

Since Ryan also wants to repeal President Obama's Affordable Health Care Act, there would be no prohibition against insurance companies denying insurance for pre-existing conditions or throwing a person off of coverage when they became ill, or re-impose annual or lifetime caps on coverage? Indeed, what would the impact be on insurance premiums in general if people over 65 were included in the coverage pool?

If the Ryan Medicare scheme became law, what would young families do, planning both for major financial obligations when their children were ready for college and their parents becoming ill? Risk-taking in one's career (working, say, for a start-up) or even pooling resources to do a start-up would not be high on the list. And, how would grandma feel about her illness costing her grandchildren their college educations?

Although a rise in the savings rate is usually good, it can also be overdone, and since the saved money is pre-ordained for future medical expenses, it is not "liquid", and thus not really available for investment or purchase of big-ticket items.

Although the Ryan Medicare Scheme is not the only place his budget raises society's insecurity and thus diminishes risk-taking, entrepreneurship and job growth, it is probably the single most threatening.