The Medicare program has removed the uncertainty that previously left older people exposed to the threat of open-ended and potentially ruinous medical expenses. While controlling the open-endedness of medical spending is a major public and private challenge, it is absolutely necessary to stabilize the expenses in the health-care sector. Until recently it had been taken as settled wisdom, on both policy and political grounds, that insuring people against the risk of complete financial ruin from late-in-life medical expenses left everyone better off. Medicare has benefited the elderly, their families, doctors and the entire medical system (ask Ron Paul and Rand Paul since they both take Medicare patients in their medical practices). Our health care system is unsustainable in numerous ways, but rarely has anyone argued that removing universal coverage for the elderly would make things better rather than worse.
That's the understanding being challenged by Rep. Paul Ryan's budget plan in which we revert back to the pre-Medicare era in which each family prepared for unknown late-in-life expenses. Ryan’s Medicare plan provides for vouchers of $15,000 annually to seniors to cover medical expenses, but any amount exceeding that limit must be covered by the Medicare recipient through other means. Seniors and the poor account for over half of health care spending. Within those groups, 5% of the population accounts for 50% of health care costs; and 20% of the population accounts for about 80%. These costs come for the most part at times when economic incentives have no influence at all on medical decision-making: in medical crises; in treating chronic conditions; and, for most Medicare patients, in the last six months of life.
That's why a voucher program for Medicare, which will shift an increasing share of those inevitable costs onto the elderly themselves, can fairly be categorized as a 100% estate tax or death tax. People under 55 need to know that if the plan crafted by Rep. Paul Ryan were passed, most of them will never have a cent to leave to their children. It will all go to the health care industry to support the American way of dying.
If one major goal is containing overall health spending, it is delusional to think that the elderly can be more effective negotiators than Medicare in its entirety dealing with the health system as a whole. Every bit of real-world evidence suggests that private insurers are worse at containing total costs and administrative overhead than Medicare. Moreover, the people shopping for insurance will be in a terrible position: older, retired, many or most with preexisting conditions.
If another major goal is reducing the non-purely-economic costs and anxiety of disease and treatment, then this is also a terrible idea. The voucher program means that potentially, every Medicare recipient and their family must factor in a risk they are not now exposed to: the "what if" of absolutely ruinous medical costs.
The overall economic price tag for medical care is likely to go up under the Ryan plan since there are no drivers in the bill to control medical expense. The number of people who will have to live with worry and uncertainty will increase. It's hard to believe that the Republicans will seriously embrace a plan to undo Medicare with a death tax that's about as regressive a tax that anyone ever suggested.