• Privatizing Medicare

    Krugman weighs in,

    1. Privatizing and voucherizing Medicare does nothing whatsoever to control costs. We’ve seen that from the sorry history of Medicare Advantage. I’m sure that the Republicans will claim savings — but those savings will come entirely from limiting the vouchers to below the rate of rise in health care costs; in effect, they will come from denying medical care to those who can’t afford to top up their premiums. […]

    2. E.J. Dionne is right: This will be Obama’s defining moment. Will he stand up for the principle that society takes care of those in need? Or will he cave in? I wish I had confidence in the answer.

    I sure hope someone in the administration or Congress is thinking about the third way: competitive bidding. It’s worth considering precisely because it addresses one concern Krugman raises, that vouchers won’t keep up with health care costs. It also addresses the other concern Krugman raises and has raised before, that vouchers will rise as fast or faster than health care costs.

    Notice these two concerns are at odds, but both are serious issues. If we take them as such — seriously — we might consider proposals to address them. But I wouldn’t bet on it.

    There’s another concern some have raised about Rep. Ryan’s plan for Medicare: it fundamentally breaks the social compact of of the program (see Jon Cohn). Why should workers today pay for rich benefits of seniors today on the promise that when they retire they get … vastly less? That strikes some as a fundamentally unfair approach, one that counters the original conception of the program. Unsustainable though it may be, a source of political support for Medicare (and Social Security) is the idea that one gets back at least what one puts in and just as much (in some sense) as one’s parents and grandparents.

    This just raises another conflict, though it need not. It suggests that one cannot “save” the program without reducing benefits for future beneficiaries. But who says only future beneficiaries need to sacrifice? In other words, saving Medicare need not be a front in an intergenerational war. Can it be avoided? I wouldn’t bet on that either.

    One could say similar things about Medicaid, by the way. There’s no law that says the poor must pay for reducing future budget deficits. But will they? You probably already know how I’d bet on that one too.

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    • “Why should workers today pay for rich benefits of seniors today on the promise that when they retire they get … vastly less? That strikes some as a fundamentally unfair approach, one that counters the original conception of the program.”

      I agree that it’s very unfair, especially since the rich seniors today did not contribute anything even close to the level of benefits they’re getting now. But old people vote, and there’s a lot of them.

    • I agree that it will be difficult to avoid an intergenerational war because of the power of senior voters. What I don’t understand is how anyone can submit a proposal on medicare/medicaid reform without at least proposing a study on cost reduction, through both competitive bidding as you stated as well as some sort of cost/benefit analysis on specific procedures. Without gaining some sort of institutional knowledge on how to fight cost increases it seems like we could easily face the same decline in benefits years down the road. Moving everything into the private sector may only increase the cost problem due to the fact that the average user will be expected to pay for the profits of the insurance providers in addition to the overall health care expenses. Also, insurance companies themselves have little incentive to reduce costs since they can pass along any increases to the end user.

    • The whole idea behind these programs was to have current workers supporting the retirees. That was the deal. Since companies today move as much of their businesses offshore, there are fewer and fewer current workers to pay into the system. That strategy was designed to do two things:
      1) Lower the company’s overall labor costs and,
      2) Eventually do away with any safety net valued by millions of Americans since Roosevelt’s New Deal in the ’30’s.

      If you like being taken advantage of. If you like being lied to. If you truly believe the Koch Bros. are looking out for your best interests, then vote Republican. If you want to live your life as a free and respected member of society, then vote Democratic.

    • “I sure hope someone in the administration or Congress is thinking about the third way: competitive bidding”

      Competitive bidding would be useful in achieving the critical dual goals of containing costs and preserving value and effectiveness only if it were subject to heavy control to assure that the care offered by competitors in bidding achieved savings without compromising effectiveness. I believe that would be achieved only if careful study of effectiveness combined with rules forcing both the offer of effective care and the denial of ineffective care.

      Of course, once those rules were in effect, providing for purchase of insurance through vouchers to private insurers would not add to the effectiveness of cost control and probably would actually cause increased costs or reduction of valuable benefits since, as Krugman points out, Medicare Advantage has more or less proven that private insurers cannot provide equivalent care as cheaply as Medicare FFS.

      The whole idea of vouchers, if you discount the notion that they are actually a scheme to deny necessary care to the large number of Americans who cannot or will not comfortably pay a substantial additional premium to get the care they need, seems to me to be just one more attempt by American politicians and health care theorists to avoid the inevitable conclusion that health care costs should be and must be constrained by refusal to pay for care that is ineffective, minimally effective, or actually harmful. Virtually every other developed country has reached that conclusion and acted on it, with the result that they enjoy much less costly health care and much better health care results. Americans’ insistence that the rules do not apply to them, that science is at best suspect and at worst malicious, and that the interests of rent seekers in various parts of the health care industry should take precedence over the health of Americans and the vitality of the economy continues to block the arrival of a rational — not rationed — health care system in the United States.

    • As soon to be Medicare recipient, any change to the system must include current and near-term recipients, not just future generations.

      How can private insurance be cheaper or even the same cost as today’s Medicare? Even if we assume that private insurance companies could reach the administrative efficiencies of Medicare, you still need to add profit and marketing costs (at least) back, reducing the percentage of the premium that will go to actual medical coverage.

      Also today Medicare sets the price that it will pay for services, those providers who won’t accept Medicare’s rates opt out. If the insurance companies are left to negotiate rates we can be assured that the cost of care for seniors will drastically increase.

      This is simply a scam to shift the risk from government to the individual. Medicare needs reform, but it should take the form of managing service utilization, cost effective treatments and end of life care. This is an example of the type of treatment that drives costs .