Rick Santorum promised to expedite the implementation of Rep. Paul Ryan’s (R-WI) Medicare privatization plan during a town hall in Northfield, New Hampshire this afternoon, saying that today’s seniors should receive a premium support subsidy to purchase coverage from private insurers. Ryan’s original budget proposal — which most House Republican supported — exempts current enrollees and doesn’t kick in until 2022. In that year, people turning 65 will receive a pre-determined “premium support” payment to purchase private insurance. But since the government’s contribution would be indexed to inflation and fall behind actual health care costs, by 2030 the proposal would “only cover 32 percent of a typical 65-year-old’s total health care spending.”

Proponents of the plan argue that opening up Medicare to greater private competition would ultimately lower health care costs, but today Santorum admitted that if the GOP’s “trust” in insurers’ ability to lower spending is misplaced, seniors will be forced to spend more on health insurance:

SANTORUM: In Medicare, we’re saying, trust the private sector to drive down costs and it’s a belief that that will happen. And if it doesn’t of course seniors will have to participate more in the increasing cost of health care. So there is a downside, I freely admit that.

Watch it:

In fact, there is very little evidence to suggest that private plans have or can do a better job of lowering spending. Medicare’s sheer size and bargaining clout have contributed to itsgreater success in controlling health care costs and have allowed it to introduce market innovations and payment reforms that were later adopted by private industry. Here is the per-beneficiary comparison:

As Paul Krugman points out, “if Medicare costs had risen as fast as private insurance premiums, it would cost around 40 percent more than it does. If private insurers had done as well as Medicare at controlling costs, insurance would be a lot cheaper.”

Last month, Newt Gingrich and Mitt Romney both enthusiastically endorsed Sen. Ron Wyden’s (D-OR) and Rep. Paul Ryan’s (R-WI) Medicare premium support plan — a wonky middle-ground between Ryan’s goal of complete Medicare privatization and the Democrats’ reliance on the growing market power of traditional Medicare to drive innovation in the health care system. Under the proposal, seniors would receive a voucher to purchase insurance from an exchange of private plans or Medicare.

During a town hall event in Iowa yesterday, surging GOP presidential candidate Rick Santorum threw his support behind Wyden/Ryan plan, but bemoaned its key compromise — the provision to preserve traditional Medicare:

SANTORUM: One of the things I liked about the Ryan/Wyden plan and why I’ve endorsed it — even though I have a problem with the public option part that Ron Wyden has insisted on, it is a plan that says innovation with insurance companies and consumers drive down costs, instead of having this government-run Medicare system. [...] You have Medicare driving the entire health care system in this country and it’s crushing it.

Watch it:

Santorum is a strong supporter of Ryan’s original Medicare privatization scheme to completely eliminate traditional Medicare as an option for seniors and has promised to accelerate its implementation. Medicare, however, has a better track record of controlling health care costs than private insurers and has introduced market innovations and payment reforms that private plans later adopted. Medicare’s smaller administrative spending and its ability to use its sheer size and clout to bargain for cheaper services explain this advantage. In fact, “if Medicare costs had risen as fast as private insurance premiums, it would cost around 40 percent more than it does. If private insurers had done as well as Medicare at controlling costs, insurance would be a lot cheaper.”

Scott Keyes contributed to this report from Iowa.

Our guest blogger is Topher Spiro, the Managing Director for Health Policy at the Center for American Progress.

Last week Sen. Ron Wyden (D-OR) and Rep. Paul Ryan (R-WI) released the latest proposal to restructure Medicare by providing “premium support” or vouchers to beneficiaries. The plan, as we’ve noted, is problematic. But it also begs the question: can any design of premium support work?

The answer is: probably not.

No version of premium support can achieve real savings without adverse consequences for beneficiaries. Some versions (like Rep. Paul Ryan’s budget) would impose an arbitrary cap on the amount of the voucher, significantly shifting costs to beneficiaries—regardless of their choice of plan. Other versions would make many of those who wish to remain in traditional Medicare pay sharply higher premiums. For these beneficiaries, the choice of traditional Medicare would be a false one in reality.

What’s more, no version of premium support can fully prevent private health insurance plans from attracting healthier beneficiaries, driving up premiums for those who remain in traditional Medicare. And finally, no version of premium support can create a level playing field between private plans and traditional Medicare. As a result of these two factors, more and more beneficiaries would gradually shift to private plans over time.

These risks are too great. Medicare coverage costs less than comparable private coverage, and Medicare is more successful at containing costs per enrollee than private plans. While diluting traditional Medicare would sacrifice these advantages, premium support would provide little benefit in savings because the Affordable Care Act already created a mechanism to limit the growth in Medicare costs.

Find out more about the flaws that are inherent in Medicare premium support here.

Rep. Paul Ryan (R-WI) has argued that his proposal to voucherize Medicare would not effect Americans over the age of 55, as they would still enroll in the traditional fee-for-service program. Americans currently under 55, however, would have to choose a private plan from a new Medicare exchange in 2022 that would receive an $8,000 voucher from the federal government. Only younger Americans would feel any changes, Ryan insists:

RYAN: So, specifically, what we’re saying is, if you’re 55 and above, no changes whatsoever in Medicare. But, if you’re like me, if you’re 54 and below, Medicare is going insolvent by the end of the decade. It’s going bankrupt. And it’s leading our country towards bankruptcy.

So, future seniors, 54 and below, will get a list of Medicare-approved plans, kind of like how it works today, but for all of Medicare.

But this isn’t a promise Ryan can keep. In 2022, newly-eligible beneficiaries would have to enroll in a private plan, but existing beneficiaries (those who are over 55 today) would also have the option of leaving traditional Medicare. As Ryan’s budget put it, “While there would be no disruptions in the current Medicare fee-for-service program for those currently enrolled or becoming eligible in the next ten years, all seniors would have the choice to opt into the new Medicare program once it begins in 2022. No senior would be forced to stay in the old program.”

That opens up the possibilities of private plans trying to lure away the healthiest beneficiaries (as is currently the case in Medicare Advantage) and of health care providers abandoning traditional Medicare patients for the higher reimbursement rates of private insurers. For chronically ill seniors who are more likely to remain in fee-for-service Medicare this means two things: higher costs (as the healthier beneficiaries exit the risk pool) and fewer doctors.

Ryan could take steps to prevent this kind of provider erosion — most doctors currently accept Medicare patients because of tis sheer size and clout — by requiring physicians who serve seniors using vouchers to also accept enrollees in traditional Medicare. But it’s unclear what the rules would be and the likelihood that today’s seniors would face the risk of adverse selection is still very great.