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Ryan and his ‘plan’ a disaster for seniors

By Mike Andrew

With his choice of Republican Congressman Paul Ryan as his vice presidential running mate, Mitt Romney very literally told the country’s seniors to “drop dead!”

The choice reflects Romney’s weakness both as a candidate and as a leader, because it was clearly a concession forced on him by the far right of the Republican Party, which neither likes nor trusts him. At the same time, it commits the Republicans and their presidential ticket to a draconian privatization scheme that would gut healthcare for America’s seniors.

The notorious “Ryan Plan” would provide federally subsidized vouchers for people now 55 and younger who elect to opt out of Medicare and purchase private for-profit insurance instead.

If you want to keep your Medicare coverage, you’d have to make up the difference in cost out of your own pocket.

Because health care costs keep going up, the value of Ryan’s vouchers also increase by the annual growth in GDP plus 0.5%.

Let’s look at how that plays out in the real world. Last year, America’s GDP grew by just 1.7% (well below the historical average of 3.3%). Therefore, under Ryan’s plan, seniors’ healthcare subsidy for 2012 would rise by 2.2%.

But that’s not nearly enough to cover the rise in real health care costs. According to Standard & Poor’s calculations, private health insurers and Medicare combined paid an average 5.8% more per person for healthcare services in the last year.

The flaw in Ryan’s plan becomes even more evident when you separate private insurance plans from Medicare. Private insurance costs rose 7.7% last year, S&P determined, while outlays under the regulated Medicare program increased just 2.7%.

The Center on Budget and Policy Priorities estimated that the Ryan plan could cost seniors an extra $6,400 a year. The nonpartisan Congressional Budget Office reached a similar conclusion.

That number looks bad enough when it stands alone, but it looks even worse if you compare it to figures for retirees’ income and expanses.

According to the Employee Benefits Research Institute (EBRI), the median income for retirees 50 and older is $30,480.

This is a little more than half of the median income for a working adult – $53, 548 – so right off the bat, retirees have to learn to economize. But, according to the EBRI numbers, they simply can’t economize enough, because the median spending for retirees is $31,365, or $885 a year more than they take in.

Of course, most retirees are not living it up at posh country clubs, or spending their money on dressage horses. In fact, much of their spending goes to uninsured medical expenses.

Seventy percent of retirees living below the poverty line have suffered acute health conditions such as cancer, lung disease, heart problems, or stroke, compared with 48% for those above the poverty line, according to health and retirement study data.

And almost all seniors living in poverty – 96% – have one or more chronic health conditions, such as high blood pressure, diabetes, psychological problems, or arthritis, versus 61.7% of retirees with incomes above the poverty line.

This emphasizes even more the importance of Medicare.

If we think of a typical retiree – let’s call her “Mary Median” – Mary will spend $885 more than her income, which means she’ll have to dip into her savings to get by.

If Mary retires at 65 and lives till 85, she’ll need $17,700 in savings to sustain herself.

Under the Ryan Plan, Medicare would cost Mary $6,400 more every year. That means that if Mary lives to 85, she has to have saved not $17,700, but a whopping $145,700 just to cover extra costs for her medical insurance. Of course, Mary has no way of knowing how long she’ll live, and how much savings will be enough to see her through.

What will Mary do?

If she owns her own home, she could sell it or borrow against her equity, but the collapse in housing prices means she won’t get as nearly much out of it as she might have 10 years ago. If she rents, she could move to a cheaper place, but that often means moving farther away from stores and essential services. She could skimp on food, but poor nutrition is a major factor in ongoing health problems.

Mitt Romney and Paul Ryan leave Mary with no good solution, none at all. And, since Mary represents median income, fully one-half of all retirees are in worse shape than Mary.

According to a separate study by EBRI, nearly one-half – 47.2% – of younger baby boomers are at risk of not having enough savings to pay basic retirement expenses and uninsured health care costs. Among older boomers, the percentage is only slightly less – 43.7%.

And this is with Medicare still in place! How many more will be at risk if Romney and Ryan win election and privatize Medicare?

In the latest version of his budget plan, Ryan has opened the possibility that some seniors could opt to keep Medicare, but the Medicare program will have to compete with private insurance plans.

In the Republican bizzaro world, Medicare is like a 401K – you put money in while you’re working, and then take money out as needed when you retire. But Medicare was never meant to be a private savings account. Medicare is a national insurance program, and like all insurance programs, it only works well when everyone is in the pool.

If you allow people who can buy attractive private insurance policies to opt out of Medicare, the ones who will be left – the poorest, oldest, and sickest seniors who would never be insured in a private for-profit system – will be dependent on a derelict program that lacks the resources to pay for their care.

No wonder Nobel Prize-winning economist Paul Krugman wrote recently “Ryanomics is and always has been a con game.”

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