One of the features of Paul Ryan’s plan to save the federal budget is that it replaces Medicare with vouchers with which older folks can use to buy private health insurance.
The idea is that this private insurance will do what Medicare does. And it might. At first.
But the vouchers are linked to the CPI, not to the inflation rate of healthcare expenses (and private insurance costs).
So as time goes on, barring a radical change in the inflation rate of healthcare costs, the vouchers will cover less and less of the costs that Medicare covers today.
This will protect the government from rising healthcare costs. And hose seniors.
(Fans of Ryan’s plan say the “competition” unleashed by the move away from government handouts will reduce the inflation rate of healthcare expenses. We suppose that’s possible. But we’ll believe it when we see it. The doctors we talk to say Medicare payouts are brutally low. So it’s hard to imagine them going lower, at least until we have vastly more doctors.)
Courtesy of Asha Bangalore of Northern Trust, here’s the inflation in healthcare costs (blue line) vs the CPI (red bars):
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