Wednesday, October 17, 2012

Romney's Medicare reform and the irony of choice

Presidential candidate Mitt Romney has staked his campaign in part on substantially reforming Medicare.  Under his proposal the insurance plan would switch from providing defined benefits to a defined contribution, based on the 2nd cheapest plan available in a person's area.

There are a lot of gaps and details missing from the proposal, but the Kaiser Family Foundation took a stab at measuring the effect on seniors.  They looked at what would happen if that plan had been in effect in 2010, looking at the plans people actually enrolled in (traditional Medicare or one of the Medicare Advantage plans).  The result:  Overall 59% of all Medicare enrollees (88% of Medicare Advantage enrollees) would have to pay higher premiums to stay in their current plan.  Or to put it more directly, the defined contribution Romney's plan provides would not be adequate to pay for the plans most people are in now. 

The numbers are particularly bad for residents in the Portland area:

County# of Medicare Enrollees not Fully Reimbursed for Current PlanAvg Monthly Funding GapTotal Annual Funding Gap
Multnomah39,285$211$99,470,202
Washington26,210$216$67,936,968
Clackamas27,656$229$75,997,589
Total93,151$218$243,404,759

To put that last number in perspective, $240M is about what the highly contentious income tax increases from measures 66 and 67 will cost this year. Romney's Medicare reform would impose a burden of that magnitude on the elderly just within the tri-county Portland area.

Of course, seniors could always opt for one of the two cheapest plans and avoid any funding gap. But that belies all the justifications for Romney that claim his plan increases choice or involves a free-market. The only people with choices under Romney's plan are those willing and able to pay.  Everyone else gets a pick from the bottom of the litter.