As more Republicans continue to distance themselves from Rep. Paul Ryan’s (R-WI) plan to voucherize the Medicare program, likely presidential candidate Newt Gingrich posted a Facebook message on Wednesday suggesting that he too would stop short of Ryan’s proposal to force Americans currently under 55 years of age into private coverage beginning in 2022:
On entitlement reforms, Paul Ryan has offer his “Path to Prosperity” budget plan which stands in stark contrast to the 2012 budget proposed by the White House earlier this year. [...]
One option is for Congress to move towards a 21st Century personal Medicare system that would allow seniors to choose, on a voluntary basis, a more personal system with greater options for better care.
His language is vague, but it sounds like Gingrich is suggesting that seniors should have a choice of staying in traditional fee-for-service Medicare or opting for private coverage from the new Medicare Exchange. Under the Ryan plan, beginning in 2022, new retirees would have to enroll in a private plan, while those currently over 55 could leave traditional Medicare and opt into the private Medicare exchange. That kind of movement could lead to adverse selection against traditional Medicare and increase costs for beneficiaries in that program.
Gingrich’s modification would likely have the same effect. Seniors would now have a choice between traditional and private coverage, but private insurers — driven by a fiduciary responsibility to increase returns for their investors — would design policies that attract a healthier segment of the Medicare population by either advertising certain health benefits (like gym memberships) or under promoting others (like cancer treatment) that would enlist sicker applicants. As a result, healthier beneficiaries would gravitate towards those private plans, increasing the costs for sicker individuals who need a broad range of services. According to researchers at the Kaiser Family Foundation, this would “result in a large erosion of the Medicare fee-for-service program,” despite government attempts at adjusting for risk selection. Seniors would experience higher costs, even as their voucher continues to depreciate.