Most seniors can’t imagine life without Medicare. Before its passage in 1965, seniors often did without needed health care. Many suffered or died prematurely as a result. Some bankrupted themselves and their children to pay physicians and hospitals. Today, seniors are the only age group in our nation with guaranteed access to most of the health care that they need. Older Americans live longer and healthier lives because of the commitment that we made to them in Medicare. The problem is that Medicare is expensive. There are three basic ways of reducing the cost. One is to use less health care. Another is to reduce the price of health care. The third way is to reduce administrative costs so that more of the money goes to pay claims. There are opportunities in all three areas but conversations about how to improve quickly turn into shouting matches.

Paul Ryan proposes a Medicare Voucher system: http://paulryan.house.gov/issues/issue/?IssueID=9969. The value of the voucher would be set annually at the second lowest rate offered by any insurance company.   It is unclear what coverage the plan would offer because the private plans would not be required to match the coverage offered by traditional Medicare. If you want a better plan, you could add your own money to the value of the voucher. Mitt Romney says that he is in general agreement with Ryan. They plan to limit spending to a specific amount and then trust the insurance companies to manage health care costs. Seniors get to buy what the companies offer for the voucher and choose from a confusing array of plans (somewhat like the Medicare Drug Plan but worse). If the companies don’t match traditional Medicare for your voucher, it will be your problem and the risk of rising costs will be yours. The insurance companies will make a profit regardless of whether you have good benefits.

Since 1997, insurance companies have had the opportunity to profit by providing better value than traditional Medicare and they have been unable to reduce costs. Insurance companies sell “Medicare Advantage Plans” which are required to provide coverage equivalent to traditional Medicare. Advantage Plans have become part of the problem rather than the solution. Medicare pays an insurance company MORE than the cost of regular Medicare (http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=48 ) and the rates paid by the Advantage Plans to doctors and hospitals are often LOWER than the rates paid by Medicare. Medicare spends 2% of its revenue (tax dollars) on administrative costs. Insurance companies spend much more, typically more than 10% (also tax dollars). (http://www.kff.org/medicare/upload/7731-03.pdf) The bottom line is that government-operated Medicare provides more care for less money than the insurance companies.

First Romney and Ryan say that Medicare costs too much. Then they propose to turn Medicare over to insurance companies which have HIGHER costs than the government. Their plan relies on magical thinking. They would have us try what we are already doing with the belief that it will work next time.

Democrats fear that the voucher system will reduce the kinds of services covered by Medicare and increase the deductibles, co-pays and premiums required of seniors. They also fear that Republicans would totally privatize Medicare by eliminating the existing program and allowing only the plans offered by insurance companies. Since leading Republicans have proposed that in the past, the fear is understandable. Any plan to change Medicare should begin with a guarantee that the basic level of benefits now available will not be reduced and will be funded for all Medicare recipients. Revisions should be about improving service, efficiency, and quality while driving cost down. The Romney Ryan approach is to limit spending, turn the money over to insurance companies (which will profit whether they perform well or not) and let seniors fend for themselves.

Competition that benefits taxpayers and patients is good but we should not allow a giveaway to insurance companies. Participation in Medicare by insurance companies is ok but they should be required to match the coverage we have now. Let’s also have competition in the other direction by allowing Medicare to sell coverage to anyone, regardless of age, at rates that allow Medicare to at least break even. This would create the “government option” which many liberals wanted in the healthcare reform law and it would allow public-private competition across the board in health care.

The rules to govern this could be simple: Medicare benefits are not reduced. A Medicare recipient can choose private insurance covering at least what Medicare covers. Medicare payments to insurance companies are the same as the cost of covering an average Medicare recipient. Medicare and every insurance company must accept any person eligible for Medicare who wants to enroll with them. Insurance companies (like Medicare) must publish the rates that they will pay to health care providers and pay the same rates to everyone. Variance would be allowed for quality and cost incentives.

Medicare would design health insurance products for the private market in competition with insurance companies. Participation by health care providers would be voluntary. Payment rates would be determined as they are for Medicare.   This insurance plan could be purchased by individuals or by employers.

This proposal truly creates a marketplace and competition where healthcare providers, insurance companies and Medicare all compete to drive cost down while improving quality and satisfaction. It can readily be linked to the ACA (ObamaCare) provisions allowing health care providers and insurance companies to profitably collaborate to improve quality and cost performance.

We don’t need to make an “either or” decision between Democrats and Republicans. It will be better to insist on a “both and” approach. We can create a health services marketplace where the best ideas of liberals and conservatives compete head to head on a level playing field to serve the quality and cost needs of the public. In this kind of competition, it is likely that everyone will learn to perform better. The candidates and political parties should demonstrate the courage to test their ideas in the marketplace.