Medicare debate reminds us: Empowering people is great, but protect them first

April 14, 2011

Beware of magical solutions — and one-size-fits-all ideological agendas — like the idea that free markets can solve all our problems. When you think about it, it’s just as silly as the idea that government can fix everything. Take the proposal by one of Washington’s shining stars, Rep. Paul Ryan (R-Wis.), to “reform” Medicare by having recipients pick among insurance company plans rather than having basic benefits and costs set by the government.

“Medicare beneficiaries will be able to choose a plan the same way members of Congress do,” Ryan says in his 2012 budget proposal. It sure sounds wonderful. But the analogy between members of Congress and Medicare beneficiaries just doesn’t compute. And as anyone who’s had to deal with health insurance companies will tell you, the average “free market” Medicare beneficiary would have roughly the same chance against insurers that retail investors have trading against Goldman Sachs. But members of Congress are a lot better equipped to choose a health plan than Medicare recipients are. Congress members are surrounded by helpful staff and have ready access to experts. Most important, Congress members as a group are much more affluent than Medicare beneficiaries and don’t feel compelled to pick the lowest-premium, lowest-coverage policy because they can’t afford anything better.

By contrast, Medicare recipients tend to be old (the minimum age for coverage is 65) and sick (the older a group is, the sicker its members tend to be). As a group, they don’t have much access to people with the time and competence to help them sort through choices. Finally, you can bet that many Medicare beneficiaries, worried about their month-to-month finances, will opt for the lowest-cost plan and hope for the best, rather than buy a higher-cost, higher-coverage plan that might better suit their circumstances. If anything goes wrong — and things tend to go wrong as you get older — they’re toast.

I’m not denigrating Medicare beneficiaries — heck, I’d be one myself if my employer’s health insurance didn’t offer me a better deal. I’m just being realistic about how things are for people who aren’t financially comfortable. I’ve seen people, including some family members, suffer the consequences of picking the wrong — i.e., the cheapest — policy. I hate the idea of that happening to millions more citizens, especially older ones.

It’s wonderful to talk about “empowering” people — but you also have to protect them, especially when their abilities, health and finances are less than optimal. It’s hard enough for young, healthy people to pick among health insurance policies. The idea of old, sick and financially stressed people being able to competently sort through pages and pages of Medicare options is ludicrous.

I’m a believer in markets and freedom of choice. But for free markets to function efficiently, players need to have enough information to make informed decisions. That’s simply not the case with health insurance. Even picking a Medicare supplement policy and prescription-drug plan is far from simple, as you’d know if you’d ever tried to do it.

I’m no fan of President Obama’s health-care “reform,” which is long on regulations and short on common sense. It assumes that the plan will magically hold down the growth in health-care costs. It is also based on “the rich,” insurance companies, drug companies and people with “Cadillac care” subsidizing everyone else. Obamacare doesn’t surcharge people such as smokers or mega-fatties, who increase costs for everyone, and does nothing useful about the malpractice mess.

But Ryan’s Medicare proposal is even more skewed than Obamacare. Ryan wants future Medicare beneficiaries (starting in 2022) to suck it up, but doesn’t inflict any pain on the likes of me — 66 and well enough off to tolerate reduced benefits. Yeah, Ryan is a smart guy — but his plan’s ridiculous. In Washington’s elite world, Ryan’s Medicare proposal is getting lots of buzz, instead of getting what anyone painfully familiar with the real world would have given it from the start: a big Bronx cheer.

Allan Sloan is Fortune magazine’s senior editor at large.

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