Home > Uncategorized > The Policy Verdict I – NYTimes.com

The Policy Verdict I – NYTimes.com

October 10, 2012 Leave a comment Go to comments

This idea has been floating around for a while, and it used to be popular in parts of the Democratic Party until the party swung left. Senator John Breaux, a Democrat, co-led a commission that promoted this idea in 1997. Bill Clinton floated a “managed competition” plan for Medicare late in his presidency. Democrat Alice Rivlin and Republican Pete Domenici have co-authored a premium support plan for the Bipartisan Policy Center.

Paul Ryan wrote his own version a few years ago and has come up with a more moderate version with Senator Ron Wyden, a Democrat. Whenever you hear a Democrat say that Romney and Ryan would end Medicare or cost seniors $6,000, that is a misleading reference to the original Ryan plan, not anything on offer today. Today’s Romney plan would not shift costs to seniors.

Would a market-based approach reduce costs? There are some reasons to think so. A study published in the Journal of the American Medical Association found that if Ryan-Wyden had been in place between 2006 and 2009, costs might have come down by around 9 percent with no reduction in benefits. Under a demonstration project in Denver in the 1990s, private plans bid 25 percent to 38 percent less than government-determined payment rates.

The Medicare drug benefit began in 2006 with a voucher approach. Costs have been about 30 percent below early estimates. A RAND Corporation study of consumer-directed high deductible plans found that when families had an incentive to monitor costs, they spent about 14 percent less.

Do these and other studies prove that market-based approaches would work? Absolutely not. In each case, the situation is complicated. Voucher plans may save money, but perhaps by shedding the sickest customers.

There are serious health economists who scoff at market-based strategies. Others just don’t know. The leader of the Congressional Budget Office, Doug Elmendorf, candidly admitted at a Congressional hearing that his agency doesn’t know how behavior would change under this sort of competition.

My bottom line is this: The status quo is cataclysmic. The national debt problem is a Medicare problem. The Democrats’ price-control approach has little chance of working.

The Romney-Ryan approach might work. If it doesn’t, the federal budget would suffer but seniors wouldn’t. Today’s seniors would be left untouched anyway, and tomorrow’s would have the option of private plans or traditional Medicare. At worst, if the market approach flopped, we’d be back to where we started.

If we don’t get Medicare right, there’s no money for anything else. On this particular policy issue, the Republicans have the edge.

via The Policy Verdict I – NYTimes.com.

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