Even people not particularly enamored with government involvement in health insurance hate the Ryan plan for Medicare:
You put the load right on me, Democracy in America: Paul Ryan's plan to replace Medicare with a system of vouchers for seniors to buy health care on the private market ... ends the guarantee that all American seniors will have health insurance. The Medicare system we've had in place for the past 45 years promises that once you reach 65, you will be covered by a government-financed health-insurance plan. Mr. Ryan's plan promises that once you reach 65, you will receive a voucher for an amount that he thinks ought to be enough for individuals to purchase a private health-insurance plan. ... If that voucher isn't worth enough for some particular senior to buy insurance, and that particular senior isn't wealthy enough to top off the coverage, or is a bit forgetful and neglects to purchase insurance, there's no guarantee that that person will be insured. It's up to you; you carry the risk.
Mr. Ryan thinks this is a good thing, because individuals who are responsible for paying for their own health insurance will be strongly motivated to seek better insurance at a lower price. I think this is a terrible thing, because the mechanism Mr. Ryan is using to incentivize people to seek better coverage for the price is to expose them to the risk that they will suffer from disease for which their insurance doesn't cover them. The threat that you will suffer illness with inadequate treatment because you can't afford it and your insurance doesn't cover it is certainly a pretty strong motivator for most people to seek better insurance. But the purpose of insurance is to insulate people from risks like that. Furthermore, individuals do not have negotiating power when they go up against health-insurance companies. You and I don't know what the risks or costs of different illnesses and treatments are, and we don't have the time or expertise to evaluate the legal fine print of insurance agreements with the care and attention devoted to them by the insurance companies who write them.
The idea of making market forces work to bring down health-care and health-insurance costs is plausible. What's not plausible is the idea that average individuals are the best-placed people to be carrying out those negotiations. It's entirely possible to set up markets where powerful, well-informed organizations represent individuals in negotiations with insurers and providers in order to bring prices down, without putting those individuals at risk of losing their coverage or of having to go untreated. That's how the Affordable Care Act envisions saving money on Medicare, without running the risk that the elderly will lose their health-insurance coverage. ...
Mr. Ryan's proposal to privatize and voucherize Medicare attempts to reintroduce the incentive to cut costs by dumping that risk back onto individual seniors. And the greatest risks will fall on the poorest, sickest, or least savvy elderly; they will be the ones most at risk of going uncovered. I agree with Mr. Ryan that the government needs to limit taxpayers' exposure to Medicare cost inflation. I think this plan is a fundamentally immoral way to do it.
Here's another reason the Ryan plan is likely to fail to control costs:
The 2022 Medicare Crisis, by Paul Krugman: Matt Yglesias has a very good point: the supposed transition strategy under the Ryan plan, in which everyone currently over 55 gets Medicare as we know it, while everyone younger than that gets vouchers that won’t be enough to buy adequate insurance, sets up an unstable political dynamic. In fact, we can be sure that whatever happens, it won’t be what the plan says will happen.
If the Medicare Advantage precedent holds, what will happen in 2022 or a bit later is that Congress will react to the fury of younger seniors — who see that those born just a few years earlier have vastly better benefits than they do — by increasing the vouchers. And the end result, in that case, would be that the Ryan plan substantially increases Medicare costs...
Alternatively, if the benefit cuts stick, you’ll have a lot of furious people realizing that they are paying high taxes to support lavish medical care for older Baby Boomers, while being themselves condemned to pleading with insurance companies to provide coverage in return for an inadequate voucher. ... So traditional Medicare will be in the firing line — and all those assurances about how nobody currently over 55 will be hurt will turn out to be empty.
So this plan isn’t going to work; the only uncertainty is about exactly how it would fail.
It may be that increased competition would, in fact, lower health care costs. But for that to work the conditions for competitive markets to thrive must be present, and one important condition is that people are fully informed about the price and quality of the products they purchase. There are other problems in these markets as well, but the inability of individuals to evaluate "the risks or costs of different illnesses and treatments" as well as their effectiveness means that these basic conditions aren't met. Thus, there's no reason to expect that this will work.
However, as pointed out above, that doesn't mean that market-based solutions cannot work. Organizations working on behalf of groups of individuals can, with the right invectives, overcome the information problem and bargain effectively on their behalf.
As also noted above, we already have something like that in the works, it's in the Affordable Care Act, and we'd be much better off focusing on making this program function effectively than dreaming that somehow individual vouchers are the answer. They're not, and "the greatest risks will fall on the poorest, sickest, or least savvy."
The game being played here has little to do with the budget itself. It is an ideological debate about the role and obligation of government. First, cut taxes for the wealthy to create a big hole in the budget, have a Great Recession aid the cause by stripping government at all levels of tax revenue, increasing costs of serving people, and creating short-run deficit problems (and a war here and there doesn't hurt the cause either), and finally use the deficit as a club against social insurance programs such as Medicare and Social Security.
The cover for the attempt to get government out of the social insurance game is the deficit, but deficit reduction is not the primary purpose. The goal to reduce the government's involvement in these programs by whatever means. If deficit reduction was, in fact, the primary goal, there are much better ways to do this than the Ryan plan, e.g. the market-based mechanisms in the ACA.
I wish I could trust Democrats as the gatekeepers, but they seems just as determined as Republicans to kill some program so that they can wear the badge of deficit reduction for the upcoming election. The badge itself seems much more important than what it takes to get it. Democrats are itching to kill something, anything, so they can put the notch on their gun, and that is the most worrisome part. "We don't need no stinkin' badges!," but it looks like that's what we are going to get.