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Beware of Medicare reform

By Jennie L. Phipps · Bankrate.com
Sunday, December 4, 2011
Posted: 6 am ET

Rising Medicare costs are daunting and could adversely affect even the most carefully considered retirement planning, but reforms that aren't well considered could be equally costly.

A new report by the Urban Institute, a nonprofit public-policy think tank, calculates that the healthcare reform -- the Affordable Care Act -- will reduce the projected growth of the cost of Medicare funding by $500 billion over 10 years and hold increases in spending per beneficiary to about 3.5 percent per year. But that number doesn't take into account the increase in physician fees that are likely to occur, which the Urban Institute calculates at $300 billion over 10 years, erasing much of the savings from Affordable Care Act reforms.

The institute also argues against the proposal by U.S. Rep. Paul Ryan (R-Wisc.) to move people who are currently younger than 55 to a plan that would offer a voucher that recipients could use to buy private health insurance. Any cost over the amount of the voucher would be the responsibility of the recipient. This plan would cost more than the current one, the institute says, because Medicare as it is currently operated is a 10,000-pound gorilla. If it says it will only pay $X, then that's what it pays, and healthcare providers have to figure out how to live with it. Without Medicare's impact, prices are likely to go up. Nationally, private insurance rates are 25 percent higher for physician services and about 40 percent higher for hospital services, the institute says.

The institute also points out that 69 percent of Medicare recipients use less than $5,000 worth of benefits per year. Another 23 percent are using less than $10,000 in benefits. The remaining recipients -- generally people with serious health problems or chronic conditions -- represent only 8 percent of the Medicare population. So the cost-sharing aspects of the Ryan plan may not be very significant.

It looks like the biggest beneficiaries of the Ryan proposal will be insurance companies.

Those of us who are older than 55, close to retirement or there already are unlikely to be affected much by proposed changes to Medicare, but younger people should pay close attention. Shortsighted reforms could be very costly.

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4 Comments
dred
December 05, 2011 at 11:22 am

"If it says it will only pay $X, then that's what it pays, and healthcare providers have to figure out how to live with it. Without Medicare's impact, prices are likely to go up."

Therein lies the FATAL FLAW of Medicare. Just how do you think "healthcare providers" (including hospitals)deal with "only paying
$X"? THEY RAISE RATES ON EVERYONE ELSE.

If you allow insurers to compete across state lines (which would obviate the lobbying done in each state to include ridiculous things like aromatherapy and phrenology, which drives up costs in certain states), allow CUSTOMERS to CHOOSE how much insurance and the deductible they CHOOSE to carry, you've just DECREASED the cost of insurance, while allowing the evil insurance companies to actually make an evil profit and stay in business. This was the intended result of HSAs.

By the way, the current Obamacare model is designed to run most insurers out of business, not only by forcing competition with a taxpayer-subsidized competitor, but also by burdening the private insurers with onerous restrictions, such as how much cash they must keep available for occurrences. And when you finally have a single-payer monopoly, that already says no to as much as it can, and pays whatever it feels like, and there is no other way to "figure out how to live with it," you'll see a mass exodus from the "healthcare provider" field (once known as "doctors") especially in the upper-age bracket who can retire or can afford to enter another line of work, and you'll see an even larger avoidance of the profession by most qualified college students. So I hope you speak Farsi or Hindi, because chances are your doctor will. And I hope you have a lot of patience while you wait to see them, as your cancer spreads or your bad knee cripples you. Think it can't happen here? It already is happening in most socialized medical countries.

bytejockey
December 05, 2011 at 10:58 am

"..Medicare as it is currently operated is a 10,000-pound gorilla"

Ever been to the zoo and seen what a 400 pound gorilla leaves behind? Extrapolate that up by a factor of 25 and see the mess we have now.

John Q Taxpayer
December 05, 2011 at 8:44 am

So how much is the DNC paying you to write these articles? I haven't seen anything so full of liberal talking points since Obama's last speech.