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Home Publications Blogs CEPR Blog Someone Remind Cato's Michael Cannon That Private Health Insurance is Expensive

Someone Remind Cato's Michael Cannon That Private Health Insurance is Expensive

Written by David Rosnick   
Monday, 19 September 2011 14:30
Over at Cato, Cannon pimps for the Ryan Plan, but leaves out all the most important facts to make his case. Citing the Dartmouth Atlas, he writes, "one third of Medicare spending is pure waste. Since the amount of the [Ryan Plan] vouchers would be based on per-enrollee Medicare spending, they would essentially give Medicare enrollees 50 percent more money than they would need to purchase all the beneficial medical care that Medicare currently provides." Actually, this would be true only if they could use the voucher to buy back into Medicare, rather than purchasing private health insurance. According to the Congressional Budget Office, Medicare-equivalent health care spending is 12 percent larger when going through private insurance than through Medicare itself. CBO projects that private insurance will perform worse over time, so that by 2022 when Ryan's plan would go into effect, total spending through private insurance would be 52 percent higher than through Medicare.

Furthermore, the Ryan Plan increases the age of eligibility from 65 to 67 — greatly increasing the costs to those who would have been covered by Medicare. Combined with the higher prices, the Ryan Plan would raise individual spending on Medicare-equivalent health care by $256,000 over 20 years for each the first beneficiaries (currently age 54). In order save any money under the Ryan Plan, these first beneficiaries would have to cut their medical coverage by half. The problem only gets worse over time, so that today's 14 year olds would have to cut their coverage by nearly three-quarters.

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