Wonks discuss Medicare: No vouchers
Ryan’s Medicare Reform: An Early Supporter Recants
Posted by John Cassidy, The New Yorker
And what are these facts?
1. Traditional Medicare works better, and more cheaply, than most private-insurance plans. With tens of millions of enrollees, Medicare can exploit its bargaining power to pay health-care providers less than private insurers do: that is the great advantage of a single-payer system. Typically, doctors and hospitals receive twenty or thirty per cent less from Medicare for a given procedure than they do from private insurers. They don’t like it, but they need the business.
2. Medicare’s big challenge is demographics, not cost inflation. We’ve all seen the projections: if nothing is done to constrain it, spending on retiree health care will virtually swallow the federal budget. But what’s driving that spending is the growing number of enrollees—another million and a half Baby Boomers every year—rather than rising spending per person. “[W]hen it comes to what health-care costs per person, Medicare’s growth rate is remarkably low,” Feder pointed out—about three per cent a year over the next decade, according to the latest projections, which is considerably less than the cost inflation in the private-insurance sector.
3. In the health-care industry, competition hasn’t produced the savings that economists expected, and it has led to other problems, such as gaps in coverage. Remember the rise of H.M.O.s, another idea promoted by Enthoven that was supposed to revolutionize health care and drive down costs? Part of the problem is the advance of costly treatments. But a bigger problem is that private insurers, rather than haggling with doctors and hospitals, try to make money by limiting the procedures they cover and by aggressively managing their risk pools—that is, taking on fewer sick people. This problem can be addressed through vigorous oversight, but that’s not an easy thing to implement, especially when half of Congress is controlled by a party that breaks out in hives at the very idea of government regulation.
4. Significant measures have already been taken to reduce the future growth of Medicare spending. Under the Affordable Care Act of 2010—“Obamacare”—the formula that governs payments to health-care providers was altered to reduce outlays significantly—about five hundred billion dollars over ten years. Assuming that these measures go into effect, their impact will be very noticeable. Citing numbers from the Congressional Budget Office, Feder wrote that “Medicare premiums, currently estimated to be 11 percent lower than private insurance premiums for the same benefit package, will be about 30 percent lower by the end of the next decade.” (This change in the growth in outlays accounts for much of what Romney has been referring to as money taken away from seniors.)
(More here.)
Posted by John Cassidy, The New Yorker
One of the things we’ll hear quite a bit from Republicans in the coming months is that the Ryan/Romney approach to reforming Medicare, which involves issuing vouchers to future retirees so they can choose from various health-insurance options, has bipartisan support. Up to a point, that is true. In the community of economists, policymakers, and policy wonks which has studied and debated this issue, there are some Democrats and progressives who favor moving to a voucher system, although they usually avoid that phrase and use the less controversial term “premium support.”
(snip)
At a seminar organized by the Brookings Institution last December, Henry Aaron, along with two other experts on health-care policy—Judy Feder, a professor at Georgetown, and Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities—explained why he now thinks it would be dangerous and foolhardy to switch to vouchers, and why sticking with a modified version of the existing system is a much better idea for seniors. “My text today is the remark attributed to John Maynard Keynes,” Aaron wrote. “When the facts change, I change my mind. What do you do, sir?”
(snip)
At a seminar organized by the Brookings Institution last December, Henry Aaron, along with two other experts on health-care policy—Judy Feder, a professor at Georgetown, and Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities—explained why he now thinks it would be dangerous and foolhardy to switch to vouchers, and why sticking with a modified version of the existing system is a much better idea for seniors. “My text today is the remark attributed to John Maynard Keynes,” Aaron wrote. “When the facts change, I change my mind. What do you do, sir?”
And what are these facts?
1. Traditional Medicare works better, and more cheaply, than most private-insurance plans. With tens of millions of enrollees, Medicare can exploit its bargaining power to pay health-care providers less than private insurers do: that is the great advantage of a single-payer system. Typically, doctors and hospitals receive twenty or thirty per cent less from Medicare for a given procedure than they do from private insurers. They don’t like it, but they need the business.
2. Medicare’s big challenge is demographics, not cost inflation. We’ve all seen the projections: if nothing is done to constrain it, spending on retiree health care will virtually swallow the federal budget. But what’s driving that spending is the growing number of enrollees—another million and a half Baby Boomers every year—rather than rising spending per person. “[W]hen it comes to what health-care costs per person, Medicare’s growth rate is remarkably low,” Feder pointed out—about three per cent a year over the next decade, according to the latest projections, which is considerably less than the cost inflation in the private-insurance sector.
3. In the health-care industry, competition hasn’t produced the savings that economists expected, and it has led to other problems, such as gaps in coverage. Remember the rise of H.M.O.s, another idea promoted by Enthoven that was supposed to revolutionize health care and drive down costs? Part of the problem is the advance of costly treatments. But a bigger problem is that private insurers, rather than haggling with doctors and hospitals, try to make money by limiting the procedures they cover and by aggressively managing their risk pools—that is, taking on fewer sick people. This problem can be addressed through vigorous oversight, but that’s not an easy thing to implement, especially when half of Congress is controlled by a party that breaks out in hives at the very idea of government regulation.
4. Significant measures have already been taken to reduce the future growth of Medicare spending. Under the Affordable Care Act of 2010—“Obamacare”—the formula that governs payments to health-care providers was altered to reduce outlays significantly—about five hundred billion dollars over ten years. Assuming that these measures go into effect, their impact will be very noticeable. Citing numbers from the Congressional Budget Office, Feder wrote that “Medicare premiums, currently estimated to be 11 percent lower than private insurance premiums for the same benefit package, will be about 30 percent lower by the end of the next decade.” (This change in the growth in outlays accounts for much of what Romney has been referring to as money taken away from seniors.)
(More here.)
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