False choices in the Medicare policy debate

This is a TIE-U post associated with Jonathan Oberlander’s Political Dynamics and Policy Dilemmas (UNC’s HPM 757, Fall 2011). For other posts in this series, see the course intro.

The Fall 2011 point-counterpoint in the Journal of Policy Analysis and Management included these four entries [1]:

I highly recommend reading them all. Many good points were made by the authors. Marmor, Oberlander, and White emphasized that Medicare’s cost control problems are not unique to the program and are health system wide. They wind up where many other health policy wonks have, advocating all-payer rate setting.  Along the way, they defend Medicare’s prior history of cost control initiatives and the additional ones built into the ACA, though they also note that more cost control will be needed. Fundamentally, the authors question the assumption that competition among Medicare plans is necessary for cost control.

Antos, in contrast, is not impressed with Medicare’s cost control past or sanguine about its future. He argues for major restructuring of Medicare so that it relies more heavily on private plans, along the lines proposed by Rep. Paul Ryan and passed by the House last spring. However, by my reading he makes two distinctions that need not automatically align with his specific policy preference. Then, in their response, Marmor et al. buy into Antos’s framing. Thus, the whole group ends up articulating two false policy choices. The two issues are common in today’s health policy debate. Below I explain them and why I think they arise.

Issue 1: “Competition” is not the same thing as “privatization”. Antos cites the work of Coulam, Feldman, and Dowd (CFD) who articulate a “competitive bidding,” defined benefit model for Medicare plans. Antos correctly notes that CFD advocate including traditional Medicare among the bidders. In some markets, one or several private plans may be the lowest bidder. In others, traditional Medicare may be. (Antos notes the former, but not the latter.) Either way, the government payment (premium support) would be set by the lowest bidder. The competition would involve both plan types, public and private, and is precisely in the style that advocates of a public option in the ACA exchanges support. By itself, and in concept, this is no more “privatization” of Medicare beyond that which we see today. Of course we cannot predict with precision exactly what proportion of Medicare beneficiaries would end up in private plans or in traditional Medicare under a competitive bidding system. A lot depends on the details. (I’ll come back to this.)

However, CFD-style competitive bidding is not what Rep. Ryan proposed or what passed the House. It is not what exists in Medicare Part D. Neither of those programs has or would have a public option. Rep. Ryan’s plan doesn’t involve competitive bidding at all, though Part D does. Additionally, Rep. Ryan’s plan does not guarantee a defined benefit, but is a defined contribution style of premium support, one that the CBO has determined would fail to keep pace with health care costs. Antos does not make all these distinctions, but they are crucial. By leaving out these points, one is left with the impression that “competition” means “privatization” and, moreover, means shifting costs to Medicare beneficiaries. That is not what CFD proposed. That is not what competition means. These notions are not central to a more competitive Medicare.

Issue 2: The IPAB and other Medicare payment innovations are not the opposite of competition. Since “competition” does not mean “privatization” there is no reason to insist on choosing between the IPAB, along with other Medicare payment innovations (bundled payments, ACOs, etc.), and competition. If traditional Medicare is among the plans in competition, it has to set its payment policies somehow, as do the other, private plans. It’s certainly debatable what structure should govern traditional Medicare, as well as the private arm(s) of the program, but payment reforms — even ACOs and the IPAB — and competition can coexist. Comparative effectiveness, or patient centered outcomes research, also can exist in a competitive Medicare. It’s arguably a public good that benefits all plans and all consumers.

It has become standard in the media, if not in academic writing, to suggest that the IPAB and other Medicare payment reforms are the opposite of a more competitive Medicare. Antos implies as much in his essay: “Two basic approaches have emerged […] the Independent Payment Advisory Board [… and what] Rep. Paul Ryan (R-WI) has proposed.” However, later, Antos notes that “nothing precludes IPAB’s adoption of competitive bidding methods and other market-based payment arrangements.” So, it’s clear that the IPAB need not preclude competition or vice versa.


Marmor et al. largely buy into the false distinctions that Antos implies, writing, “Thus, according to Antos, it follows that competition reform (illustrated by Congressman Paul Ryan’s plan) is the solution to Medicare’s sobering ‘fiscal reality’.” It’s true that Rep. Ryan’s plan illustrates a competitive framework, but it is not the paradigm of competition. As discussed above, competition need not preclude traditional Medicare. It’s possible traditional Medicare would even thrive in a more competitive environment.

So why the rhetorical resistance to head-to-head, public-private plan competition? It’s fascinating that Marmor et al. believe strongly, and cite evidence to support, that Medicare outperforms private plans on cost control. Likewise, Antos believes, and cites evidence to support, that private plans can outbid traditional Medicare, at least in some markets. But if each side is so confident in their position, why do they not both accept competition between the two plan types? Why is the middle way — CFD-style competitive bidding — not taken?

Why indeed? Why is the public vs. private false distinction made and accepted by both sides? I think there are several answers. First, obfuscating some nuances makes for an easy debate. Even if academics are open to the messy details, the media at large is, generally speaking, not. It’s much easier to understand and sell “market” vs. “government.” People are entertained by that type of debate, as evidenced by the fact that we engage in it so readily and have been for so long, with no end in sight.

Second, there are two sides. If not in academia (though they are there), if not in the media (though they are there too), certainly in politics (of course). It’s the Ds vs. the Rs (more or less) and they each have their historical and ideological preferences, though they are not monolithic. At least in broad stroke, the two sides have different gut instincts about the political economy of Medicare and how successful implementation of various types of reforms can ever be.

More importantly, the two sides do not trust each other. Even if both could accept the theoretical possibility of a Medicare plan market that includes a public option and its payment reforms, they know the devil is in the details. Whether the playing field is level or tilted in favor of public or private plans depends on a myriad of small policy choices. What may look theoretically balanced at 10,000 feet is too easily skewed in on-the-ground practice. A peaceful draw too easily turned in to a bloody rout.

Marmor, Oberlander, White, and Antos may, in fact, trust each other. But the feeling of distrust in most other forums of health policy debate is palpable. Each side worries the other will pull a knife. They’re not wrong. Politics and policy are not so easily divorced, particularly when Medicare is concerned. However, by striving for a cleaner, analytic separation of the issues we can illuminate what’s truly crucial for obtaining policy goals of either side. By being clear about what a “market” is and with what it is and is not consistent, we can see that at least some of what each side claims to be valued can coexist. Once that is established, I am sure there will still be arguments. That’s fine, but at least it should be more evident to all what we’re actually arguing about.


[1] All in Journal of Policy Analysis and Management, Fall 2011.


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