This is an old argument from Republicans, one they also use to justify attacks on Social Security: the program is doomed anyway, so we should go ahead and privatize it. The argument is completely wrong with regard to Social Security, and the truth about Medicare is that the program’s future is looking brighter and brighter — in no small part because of the Affordable Care Act. The argument Bush is making is ten years out of date.
Bush did try to walk back his statement a bit, saying the “phase out” part was taken out of context and he’s only talking about how we “reform our entitlement system.” Here’s his follow-up, which doesn’t change the essence of what he was arguing:
“It’s an actuarially unsound health care system,” said Bush, who said something must be done before the system burdens future generations with $50 billion of debt. “Social Security is an underfunded retirement system; people have put money into it, for sure.“The people that are receiving these benefits, I don’t think that we should touch that; but your children and grandchildren are not going to get the benefit of this that they believe they’re going to get, or that you think they’re going to get, because the amount of money put in compared to the amount of money the system costs is wrong.”
Bush hasn’t yet released his plan to phase out/reform Medicare, but given these comments it seems likely he’ll embrace something like what Paul Ryan has been advocating for years. It involves changing Medicare from a guaranteed single-payer government insurance plan into a voucher plan, in which the government gives senior citizens a set amount of money with which they can go out and get private health insurance. It saves money by limiting the value of that voucher, so if it’s less than what coverage actually costs, well, tough luck. In that way, it eliminates the central promise of Medicare, which is that every American senior citizen will have health coverage.
We’ll await Jeb’s particulars, but I promise you that most of the GOP candidates will embrace some version of this plan, because that’s what the Republican consensus on Medicare is these days. And it’s always justified with the argument Jeb gives: because of skyrocketing costs the program is doomed, so privatization is the only way to make sure it’s there for your kids. But don’t worry, current seniors, we won’t touch your Medicare! Which is one of the ironies of their argument: the free market is supposed to make everything wonderful, but they fall all over themselves to promise senior citizens that they won’t disturb the big-government, socialist program that seniors love.
Ten years ago, Medicare was a runaway freight train. Spending was projected to increase indefinitely, rising to 13 percent of GDP by 2080. This year, spending is projected to slow down around 2040, and reaches only 6 percent of GDP by 2090. Six percent! That’s half what we thought a mere decade ago. If that isn’t spectacular, I don’t know what is.
Those are projections for what’s going to happen decades from now, so things are doubtless going to change. But the presumption of the Republican argument is that Medicare is eventually going to eat the entire federal budget, and so we have no choice but to fundamentally alter it. And that’s just not true.
The other assumption they make is that the way to alter Medicare is simple: privatize it. But they’re wrong about this, too. Medicare is expensive, but that’s not because it’s an inefficient big-government program. In fact, Medicare is remarkably efficient, more so than private insurance. That’s because it benefits from economies of scale, and because it doesn’t have to spend money on things like marketing, underwriting, and big salaries for executives. The reason Medicare is expensive is that American health care is expensive, and it serves a lot of people. The retirement of the large Baby Boom generation is what’s producing its current funding challenges.
Let’s not forget that at the same time Republicans cry that Medicare is unaffordable and so must be dismantled, they fight any effort to actually lower costs in a rational way. For instance, they’re adamantly opposed to comparative effectiveness research, which involves looking at competing treatments and seeing which ones actually work better. That this isn’t something Medicare already takes into account sounds ridiculous, but it’s true. If there are two medications for a particular ailment that are equally effective, but one costs $100 a year and one costs $100,000 a year, wouldn’t it make sense for Medicare to 1) find that out, and 2) make coverage decisions accordingly? But Republicans have said no — Medicare should just pay for both, no matter what it costs.
Republicans also oppose the most significant effort to reduce Medicare costs in decades, something called the Affordable Care Act, which included all kinds of provisions meant to achieve this goal. Perhaps most critically, the law starts a move away from the fee-for-service model, in which doctors and hospitals make more money the more procedures they do, to a model where they get paid a single rate for treating a patient. Under the fee-for-service model, if your hospital screws up, you get an infection, and you have to get re-admitted, they make more money; the ACA actually punishes them for that, giving them a greater incentive to provide better and less expensive care.
But Republicans not only want to repeal the ACA, which means repealing all those kinds of payment provisions, they have nothing much to say about how, specifically, we might save money in Medicare. Their only answer is that if we privatize it, the magic of the market will produce savings. Of course, if that were true America would have the cheapest health care system in the advanced world, since ours is already more private than in any other similar country. And yet we don’t — ours is far and away the most expensive, and that’s precisely because the market has failed.
So to sum up, this is the Republican argument on Medicare: We absolutely can’t do anything in particular that would bring down the cost of Medicare, but the cost of Medicare is so outrageous that we have no choice but to privatize it.
When Jeb Bush and the other candidates talk about this subject, pay close attention to what they say. They’ll use the word “strengthen” a lot — we want to strengthen Medicare! They’ll tell seniors, who vote in great numbers, that they aren’t going to touch their precious Medicare. And they’ll ignore what we’ve learned in the last few years, talking as though things look just as bad as they did before the Affordable Care Act was passed and health care spending slowed. But the truth is that their solution is no solution at all.