Newt Gingrich “clarified” his support for privatizing Medicare on a call with conservative bloggers and journalists this afternoon, as he continues to back away from his claim that Paul Ryan’s plan presented a “radical” change to the program. Gingrich admitted that he’s unsure if allowing seniors to purchase Medicare benefits from private insurers would work, but proposed moving bravely ahead by offering supplemental vouchers to today’s senior citizens:
While he continued to warn against imposing “radical change,” Gingrich called for an arguably bolder move on Medicare. “I would offer on a voluntary basis, a supplement plan, a voucher—I wouldn’t call it a voucher—but some kind of support plan this year,” Gingrich said. Paul Ryan’s plan wouldn’t begin to take effect for 10 years. [...]
“Part of what I’m worried about is going through a radical change that has not yet been tested,” Gingrich said. “But you could really start this year. And you could start to reduce some of the pressure on Medicare and on the budget this year. And you then put Obama in the position of saying, ‘No, I’m not going to let any senior citizen choose.’”
“There’s actually an advantage to starting with a voluntary plan,” he continued, “so you get practical operational experience with the first couple hundred thousand people, the first couple million people. And then you look comparatively.”
Someone should tell Gingrich that there is already such a voluntary plan and it’s called Medicare Advantage. And for all the raving you hear about private insurers lowering costs and providing better coverage for less, the data from that “experiment” doesn’t back it up. While some plans are certainly better than others, on the whole private insurers — which don’t have the bargaining power of Medicare — are receiving an average of 9 percent (about $8.9 billion) more than traditional Medicare and don’t seem to be saving the program any money (an estimated 13 percent of the payment going towards profits and administrative costs).
The Washington Examiner’s Phil Klein offers additional details from the call:
Gingrich explained that his differences with the Ryan approach is that he thinks instead of transitioning Medicare entirely into a system in which retirees are given money toward the purchase of private policies, seniors should be given the choice between the current system and a new system. He said he would support offering them that choice immediately, so that the government could study the results of the so-called “premium-support” model with the hundreds of thousands of people rather than implementing it system-wide for all Americans currently 54 and younger.
This is all very similar to what Sens. John Breaux (D-LA) and Bill Frist (R-TN) offered in 1999 and 2001 — which Gingrich seemed to support. Unlike Ryan, Breaux and Frist replaced the current Medicare program with competing health plans, while maintaining the CMS-sponsored Medicare fee-for-service coverage as an option. They also offered seniors a premium support that did a better job of keeping up with health care costs by establishing a contribution that was set as a percentage of actual plan bids for a comprehensive set of benefits. The beneficiary paid the difference between the plan bid and the government’s contribution (which is indexed to average costs).
Analysts at the time argued that the proposal would lead to severe adverse selection for seniors who remain in traditional Medicare and now concede that the cost savings from this kind of approach were likely overstated. Henry Aaron — who developed the premium support concept with Robert Reischauer in 1995 — has since walked away from the proposal, arguing that the Affordable Care Act may push Medicare to use its leverage to create much more substantial savings.