Privatize Medicare? Discuss.

In April, Rep. Paul Ryan (R-WI) offered his and the Republican balanced budget plan that included significant reforms of major spending programs. The most controversial reform proposed would be to privatize Medicare.

Ryan compares his Medicare premium support reform to the Federal Employees Health Insurance Plan (FEHBP), a government-run health care exchange that gives federal employees a wide choice of private health insurance coverage. "We're moving Medicare into a system that is identical to the system I have as a Congressman and all federal employees have," Ryan said, stressing that seniors will have the same kinds of private options "that members of Congress enjoy."

Ryan's plan would start in 2022. New Medicare beneficiaries then will be able to choose a plan that works best for them from a list of guaranteed private insurance coverage options. A Medicare premium-support payment would subsidize the private insurance company plan of the senior's choice.

In addition, Medicare would provide increased assistance for lower-income beneficiaries and those with greater health risks. Reform that empowers individuals—with more help for the poor and the sick—would guarantee that Medicare could still fulfill the promise of health security for America's seniors.

The Ryan plan constrains the rate of growth in Medicare by offering seniors a defined government contribution, regardless of the rate of growth in health care costs. The federal government's contribution in the FEHBP program, by contrast, reflects actual increases in premium levels.

As the Office of Personnel Management describes it, the FEHBP formula "is known as the ‘Fair Share' formula because it will maintain a consistent level of Government contributions, as a percentage of total program costs, regardless of which health plan enrollees elect." The difference is that Ryan's proposal provides seniors with a set amount of money that, in order to reach the kind of savings he's advertising, would have to depreciate every successive year — even as health care costs increase.

Ryan's other selling point about increased assistance to lower income Americans is similarly misleading, say the critics, because seniors who will be forced to choose from an array of private insurers would still have to pay more for the same amount of coverage than if they simply stayed in the traditional Medicare program. Private insurers carry extra cost, as a comparison of traditional Medicare and private insurers in Medicare Advantage demonstrates.

Both operate under the same rules and enroll the same population, but according to the Congressional Budget Office, traditional Medicare spends less than 2 percent of expenditures on administrative costs, while private plans in Medicare Advantage spend approximately 11 percent on additional expenditures like high salaries, advertising, and profits. As the CBO concluded, under Ryan's plan, "future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare."

In other words, the savings that Ryan is proposing would come from shifting more of the cost of health benefits to the beneficiary and moving seniors into less efficient health care coverage (and then leaving those costs for seniors to shoulder).

Ryan's reform of Medicare is controversial. So was Medicare when it was first passed and signed by President Johnson. Students can compare the arguments posed by supporters and critics of Medicare legislation at that time and see if they are similar to those who would change Medicare today as Congressman Ryan proposes.

Assign students to write a report of at least 150 words or a presentation of at least seven slides using at least three resources from the Pathfinder listed below. Students should address the Document Based Question: "Summarize the rationale behind President Lyndon Johnson's Medicare program, and describe some of its major benefits."

Select the Subject Heading search option > Enter Medicare in the Search box > Click the Medicare Search link

Your students can use our custom ProQuest models for written and PowerPoint-style reports.

Teachers may be interested in a ProQuest flexible rubrics model for evaluating inquiry-based learning activities.

Educators may also wish to employ the Quizinator Web tool (free, but registration required) for creating a variety of printed resources, including short assessments.