You put the load right on me

Even the right wing -- or, at least not left wing -- Economist understands the the Ryan Plan to destroy Medicare is immoral.

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You put the load right on me

PAUL RYAN'S plan to replace Medicare with a system of vouchers for seniors to buy health care on the private market has only been vaguely described, as of this writing. But there is one thing about it that's fairly clear, regardless of what's in the details Mr Ryan will announce today: Mr Ryan's plan ends the guarantee that all American seniors will have health insurance. The Medicare system we've had in place for the past 45 years promises that once you reach 65, you will be covered by a government-financed health-insurance plan. Mr Ryan's plan promises that once you reach 65, you will receive a voucher for an amount that he thinks ought to be enough for individuals to purchase a private health-insurance plan. (Mr Ryan insists that his plan doesn't entail a "voucher", but there is no meaningful distinction between getting a voucher with which to pay for insurance, and having the government send a payment to the insurer you choose.) If that voucher isn't worth enough for some particular senior to buy insurance, and that particular senior isn't wealthy enough to top off the coverage, or is a bit forgetful and neglects to purchase insurance, there's no guarantee that that person will be insured. It's up to you; you carry the risk.

Mr Ryan thinks this is a good thing, because individuals who are responsible for paying for their own health insurance will be strongly motivated to seek better insurance at a lower price. I think this is a terrible thing, because the mechanism Mr Ryan is using to incentivise people to seek better coverage for the price is to expose them to the risk that they will suffer from disease for which their insurance doesn't cover them. The threat that you will suffer illness with inadequate treatment because you can't afford it and your insurance doesn't cover it is certainly a pretty strong motivator for most people to seek better insurance. But the purpose of insurance is to insulate people from risks like that. Furthermore, individuals do not have negotiating power when they go up against health-insurance companies. You and I don't know what the risks or costs of different illnesses and treatments are, and we don't have the time or expertise to evaluate the legal fine print of insurance agreements with the care and attention devoted to them by the insurance companies who write them.

The idea of making market forces work to bring down health-care and health-insurance costs is plausible. What's not plausible is the idea that average individuals are the best-placed people to be carrying out those negotiations. It's entirely possible to set up markets where powerful, well-informed organisations represent individuals in negotiations with insurers and providers in order to bring prices down, without putting those individuals at risk of losing their coverage or of having to go untreated. That's how the Affordable Care Act envisions saving money on Medicare, without running the risk that the elderly will lose their health-insurance coverage. Mr Ryan's proposal is to save money by capping the amount the government will spend on insurance, and letting individual seniors fight the rest out on their own.

When I say using market forces to bring down health-care expenditures is "plausible", I mean that while it seems like it ought to work, the evidence is telling us that it may not. As Uwe Reinhardt explains, insurance companies don't seem to be capable of holding down provider costs to anywhere near the rate of inflation, even though in theory you'd expect them to do so in order to bolster their profits. Austin Frakt writes that while private Medicare Advantage plans cost more than government-run fee-for-service Medicare, we've never really seen a level-playing-field contest between private and public Medicare, and we simply don't know which would cost more. And the CBO's analysis of the plan, as Mr Ryan articulated it with Alice Rivlin when both were serving on the president's deficit reduction commission last year, found that "Voucher recipients would probably have to purchase less extensive coverage or pay higher premiums than they would under current law," because "future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare."

Insurance is all about spreading risk. Guaranteeing health insurance for the elderly takes their risk of high health-care expenditures and spreads it out across the population. Unfortunately, with the risk so diffuse, there's insufficient incentive for anyone to control costs, so government expenditures on Medicare are becoming unacceptably high. Mr Ryan's proposal to privatise and voucherise Medicare attempts to reintroduce the incentive to cut costs by dumping that risk back onto individual seniors. And the greatest risks will fall on the poorest, sickest, or least savvy elderly; they will be the ones most at risk of going uncovered. I agree with Mr Ryan that the government needs to limit taxpayers' exposure to Medicare cost inflation. I think this plan is a fundamentally immoral way to do i