The Future of Medicare?

Congressman Paul Ryan of Wisconsin has given a lot of thought to the future of Medicare and how this program, which takes up 13% of the federal budget, should be shaped in the future.  Ryan is one of the Republican “Young Guns” who will take leadership roles on key committees in 2011.

An article in Kaiser Health News provided an overview of Congressman Ryan’s proposal for Medicare:

Current Medicare beneficiaries, and those nearing retirement (55 and older), would get Medicare as it exists today. For everyone else, eligibility would begin at 69 and a half, and there would be a “standard Medicare payment” for the purchase of private health coverage.

At the beginning, Medicare vouchers would cover $11,000 of the cost of a health plan, which the proposal lists as the average amount of money that Medicare currently spends on a beneficiary. The total would increase with inflation, based on a combination of the consumer price index and its medical care component. If the payment exceeds the cost of a plan, the beneficiary could invest the leftover money in a medical savings account to pay for other medical needs, or buy long-term care insurance.

Government payments would vary depending on an individual’s income, health status, and initially region. Individuals with incomes less than $80,000 would receive the full amount, those between $80,000 and $200,000 would get half, and those above $200,000 would receive 30 percent. The government also would fully fund medical savings accounts for low-income beneficiaries.

Ryan is the top Republican on the House Budget Committee and a senior member of the Ways and Means committee which has jurisdiction over Medicare and Social Security.

From my perspective (as I’m over 55), Ryan’s plan has some interesting ideas.  But unless the under-65 insurance market changes – and Republicans say they will repeal the recent health insurance changes  – the idea of raising the Medicare eligibility age to 69 is …frightening.

The idea of the government giving people money to buy their health insurance sounds interesting to me.  But the problem is that insurance companies will be making a profit from that money. Is it fiscally conservative to add 15%-20% administrative costs (which include profit) to the cost of delivering Medicare, costing the government billions of dollars?

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