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Originally published August 21, 2012 at 2:13 PM | Page modified August 21, 2012 at 2:13 PM

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Paul Ryan's delusional plan to reform Medicare

The Paul Ryan Medicare plan would replace guaranteed benefits with vouchers and would save money by increasing that number of dollars over the years by less than expected rises in medical costs. But accepting Ryan's sunnier vision, writes Froma Harrop, requires swallowing several delusions.

Syndicated columnist

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Paul Ryan has bold economic ideas. Or maybe he doesn't. It's really hard to know what Mitt Romney's VP pick thinks, since his budget plan includes Obamacare's $716 billion in Medicare savings over 10 years, but his election plan has him saying he would restore those spending cuts. Romney is accusing President Obama of "robbing" that money from today's beneficiaries.

Let's set the confusion aside for a moment and look at where the projected cuts would be made.

First off, none of the savings comes from changing eligibility or benefits. The president's health care reforms actually add benefits to Medicare. The savings come from reducing payments to hospitals, home-health services and other providers, though not doctors. And all the provider groups (except for insurers) have gone along with it because by covering 32 million currently uninsured Americans, the law brings them more paying customers.

The Ryan plan would affect only Americans now under age 55. It would replace guaranteed benefits with vouchers, whereby folks would be given a set number of dollars with which to buy private coverage or pay their Medicare premium. It would save money by increasing that number of dollars over the years by less than expected rises in medical costs.

In the real world, private insurers will skim off the young, healthy and profitable. What's left of traditional Medicare will attract the sickest patients, and down it goes.

But even accepting Ryan's sunnier vision requires swallowing several delusions:

Delusion 1: Offering vouchers to buy a private plan opens a wonderful world of choice to future beneficiaries. Exactly what would that choice be? It would be a choice of private insurers. In many cases, that means less choice of doctors and hospitals, as the for-profits force enrollees into their networks of approved providers.

Private insurers are in the business of making money for their executives and stockholders. UnitedHealth Group CEO Stephen Hemsley alone hauled in $42 million last year. As implied above, an old person with asthma, a heart problem and two other worsening conditions is very, very bad for the bottom line. The idea that these profit-oriented companies would compete to attract sick and expensive elderly patients is not only a fantasy, it's an insane fantasy.

Delusion 2: Old-fashioned Medicare as we know it would be preserved for Americans 55 and older. This will not happen.

The scheme to radically degrade Medicare benefits for those born after 1957 would blow up well before the year of change, 2023, arrives. The Ryan plan has gotten as far as it has because younger Americans have not been focusing on their retirements. Republicans think they can drop this voucher system on them unawares.

But the likelihood that Americans born in 1957 or after are going to accept a two-class deal in which they have to pay for older peoples' generous benefits while expecting far less for themselves is about zero. As time goes on, there will be progressively more voters born after 1957 and fewer born before. Thus, the politically numerous would either demand that older Americans' Medicare benefits be dragged down to their promised levels or that the whole voucher business be dropped. And who could blame them?

Delusion 3: Only private insurers can curb Medicare spending. Not true. The evidence comes in the Republicans' own political ads complaining that ObamaCare cuts Medicare spending. Furthermore, spending on the Medicare program has been growing more slowly than that on private coverage because of lower administrative costs.

There's so much waste in Medicare that you could probably cut $1 trillion out and patients would not notice a difference. That's actually good news -- or should be.

(c) 2012, The Providence Journal Co.

Providence Journal columnist Froma Harrop's column appears regularly on editorial pages of The Times. Her email address is fharrop@projo.com

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