Rep. Paul Ryan's (R-Wis.) proposal to replace Medicare with private insurance subsidies would drive healthcare costs up by $34 trillion over the program's 75-year planning period, according to a new report from the liberal Center for Economic and Policy Research.
The report extrapolated the data from the Congressional Budget Office's analysis of the Ryan proposal, which found that the cost of private plans would increase faster than Medicare costs. The Ryan plan would give seniors the same premium support as called for under Medicare at first, but because coverage costs would grow much faster, seniors would quickly be left footing a bigger and bigger share of the bill.
However, the report makes two debatable assumptions.
The first is that lawmakers won't increase the Medicare payments called for in Democrats' healthcare reform law, which Medicare's chief actuary has said is unlikely as more and more hospitals struggle to stay in the black.
Also, the report repeatedly refers to higher prices under Ryan's plan as "private-sector waste."
Healthcare providers however say private plans have higher costs than public health programs in large part because they pay more for hospital stays, doctors' visits and medicines, making up for underpayments by public programs such as Medicare and especially Medicaid. In addition, private plans' high administrative costs, about 15 percent, include not only profits but also fraud prevention and care coordination investments that Medicare critics say are sorely lacking in the traditional Medicare program.
"If private plans actually paid Medicare rates, hospitals would go belly up," said Ken Thorpe, executive director of the Partnership to Fight Chronic Disease. "They'd have no profitable customers left."