12/15/2011 10:13 am ET Updated Feb 14, 2012

New Ryan Proposal Still Aims to Eliminate Medicare, Replace With Voucher Plan

Today, Republican House Budget Chairman Paul Ryan will present his new "bi-partisan compromise" plan to a meeting of an outfit known as the "Bipartisan Policy Center."

Ryan's latest proposal would allow individuals to choose between traditional Medicare or vouchers that provide "premium support" for private insurance plans.

Here's what you need to know about the Ryan's latest attempt to repackage his hugely unpopular proposal to eliminate Medicare and replace it with vouchers for private insurance:

1) The only thing "bipartisan" about his latest proposal is that Ryan has apparently convinced Oregon Democratic Senator Ron Wyden to support it. The content of this plan is based on pure right wing privatization dogma. In fact it has much the same structure as the Bush plan to privatize Social Security.

2) Ryan admits that his latest proposal would not save any money compared with the current system. So why do it?

The real goal of Ryan's plan is the same goal of his original plan: to allow Wall Street and huge private insurance companies to get their hands on the Medicare Trust Fund. Both plans are about nothing more than allowing insurance companies to make more money.

Since the plan would not save the government money compared with the current system, it really has nothing to do with demonstrating "that there is an emerging consensus developing on how to preserve Medicare," as Ryan claims.

3) Don't be fooled by the apparent "choice" the plan offers between Medicare and so called "premium support" (vouchers) for private insurance. Serious analysts like the Center on Budget and Policy have concluded that the plan would allow private insurers to skim off healthy seniors and leave sicker, older seniors in the traditional Medicare plan. The effect would be to raise the costs of the traditional program and increase economic pressure to eliminate traditional Medicare -- that provides guaranteed benefits -- and replace it with vouchers for everyone.

In other words the plan is nothing but a two-step to get to Ryan's primary goal: eliminating Medicare, and eliminate guaranteed benefits. It's an attempt to achieve the goal that Newt Gingrich famously proposed two decades ago: "to make Medicare wither on the vine."

4). The reason that none of Ryan's plans would cut overall health care costs is simple. Private insurance plans have higher costs than Medicare. Private plans have much higher administrative and sales costs than Medicare. Twenty-five to thirty percent of every private health insurance dollar often goes to administration, marketing and profit whereas the cost of administering Medicare is only about 3%.

Some years ago the private health insurance companies convinced Congress to allow seniors the choice of "Medicare Advantage" plans run by private insurers. They were supposed to save lots of money through "competition." Instead they ended up getting subsidies of about 20% above the cost of providing Medicare directly. Those are exactly the subsidies that were cut by health care reform. Ryan's plans are basically about how the private insurers can get that money back -- and a lot more.

The Kaiser Family Foundation did a study of the effect on overall health care costs of raising the eligibility age for Medicare from 65 to 67 years old. Such a proposal would, in effect, move millions of seniors off Medicare and keep them in private insurance.

The study found that such a proposal would raise overall health care spending in the economy by about $5.7 billion per year, since private insurance companies (if sixty-five-year-olds could get insurance at all) simply cost more than Medicare. That, by the way, was true even assuming the implementation of the Affordable Care Act that would guarantee some form of coverage for everyone.

5) In order to cut Medicare health care delivery costs, you have to slow down the increases in health care costs throughout the economy. That requires:

  • Ending "fee for service" medicine. Instead of paying providers when people get sick, you need to pay them to keep people healthy. Instead of paying by the service, you pay providers per person -- adjusting the for the population's age and health status.

"Fee for service" medicine drives up costs because it does not benefit from any of the normal competitive forces that usually control costs. That's because consumers don't make most health care purchase decisions. Health care providers like doctors do.

In the current system if new medical device is introduced that costs more, but generates a higher margin for doctors and hospitals, you see its use go up -- regardless of its relative effectiveness -- even though it is more expensive. That's because the doctors and hospitals make the decisions about its efficacy and use -- not the ultimate consumer. There is a perverse incentive in the current system to use more expensive services that generate higher profits because the providers themselves make decisions for consumers -- and they always will. Sick patients rely on experts to recommend therapies. It is good to involve patients in those decisions, but in the end patients must depend on Medical professionals to advise them.

The normal elements of competitive markets do not characterize the health care market place -- they never have and never will.

You don't come home one day and say -- "guess what, honey... I just got a raise, now I can have cancer."

In a system where doctors and hospitals are paid fixed amounts per patient to keep people well, their incentives are to keep costs under control -- simple as that.

  • Allow Medicare to negotiate with pharmaceutical companies for lower prices so Americans stop paying massively higher prices for prescription drugs than anyone else in the world. This was banned by the Republicans when theycrafted their Medicare Part D plan under George Bush -- which, incidentally, they did not bother to pay for with new revenue in the budget.
  • Allow anyone of any age to opt to buy into Medicare. Medicare is the most efficient way to deliver health insurance. Encourage more people to use Medicare, not fewer -- the exact opposite of the Ryan plan. In other words, we need a public option that would put competitive pressure on all insurers to keep premiums low, and can use its size to negotiate for lower prices from providers.

There has never been a Republican plan to control costs by reforming the way health care is provided.

Every Republican proposal to "control costs" is really a plan to shift costs off of Medicare or Medicaid, and onto individuals and small businesses.

In order for the latest Ryan plan to save the government money, it would have to do just that -- shift the cost to seniors. Remember, his original plan -- that was supported by all but 14 Republicans in the House -- increased out of pocket costs for seniors by $6,000 per person, per year.

Buying health care is not like buying a new car. Health care should be a right that is provided for all of us - by our society. And it is in all of our interests to prevent economic interests of big insurance and pharmaceutical companies, -- or hospitals, -- or group practices, to stand in the way of achieving that goal.

The bottom line is simple. The latest Ryan plan is nothing but a "two-step" to achieve exactly the same goal as the original Ryan plan: end the guaranteed benefit of Medicare and replace it with a system of vouchers for private insurance.

Once people understand it, it will receive about the same level of public support as the original Ryan plan -- or its ideological twin, the wildly unpopular Bush plan to allow individuals to "choose" private accounts that was aimed at ending the guaranteed benefits of Social Security.

Americans don't want to privatize Social Security -- and they don't want to privatize Medicare.

You can put lipstick on a pig, but it's still a pig.

And as for the endorsement of this plan by Senator Ron Wyden? What was he thinking?

Robert Creamer is a long-time political organizer and strategist, and author of the book: Stand Up Straight: How Progressives Can Win, available on He is a partner in Democracy Partners and a Senior Strategist for Americans United for Change. Follow him on Twitter @rbcreamer.