With his pick of Representative Paul Ryan Governor Romney has framed a decisive choice over economic policy. Many people on all sides of the political spectrum have begged Romney to explain in more detail his economic plan. He has now filled in some major blanks.
The Ryan budget plan is just a broad outline of budgetary goals. His major innovation is to make Medicare a subsidized private insurance model. Here the government would provide healthy or unhealthy, rich or poor, disabled and non-disabled, genius and average, a payment to buy insurance. The payment would not cover all of the cost of insurance. Under Ryan’s theory the consumer would then have skin in the game, make smart buying decisions on insurance, and drive efficiency.
As I wrote about last year Jimmy had some minor surgery and since we have a large deductible private plan, I tried to get cost estimates from the doctors, the hospital, and other providers. Not only could no one tell me, but they found it very odd. Over and over the providers told me it was pre-negotiated with the insurance company. The insurance company told me it depended on the mix of services the doctors used and those services were a set price.
No wonder medical costs are out of control – no one is in charge of costs or even aware of them.
My experience points out a central flaw in the conservative ideas in Ryan’s plan. I, as a consumer, can perhaps affect health insurance rates. But I cannot bring market forces to the price of the actual healthcare service unless there is no insurance carrier. The carrier is between me and the provider. Unless I am handing cash to the providers I cannot bargain even assuming I have the skills to do so.
And the system is currently rigged. The carriers have their negotiated volume pricing and if I pay cash I pay rates much higher. Jimmy’s retail surgery was about $14,000, but I paid $6,200 at the insurance rates.
Personally, I do think Ryan’s entitlement reforms are ideological and structurally resemble crony capitalism. Now the government hands me back a portion of my tax dollars to pay to insurance companies regulated by the state and federal governments? The carriers then take some of that money to lobby Congress.
But I commend Romney for putting a solution on the table for entitlement reform. I commend him for reacting to voters and providing more specifics. And I commend both Romney and Ryan for forcing the President to finally provide some more specifics on what he would do that could actually pass a polarized Congress.