Obamacare

In Defense of Poorly Regulated Private Markets

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Here's Center on Budget Priorities senior fellow Paul Van de Water criticizing GOP Rep. Paul Ryan's plan to turn Medicare into a smaller, genuinely sustainable program: "The Ryan bill just gives every [Medicare] beneficiary a voucher and makes them fend for themselves in a poorly regulated private market."

That's meant to sound frightening, but properly translated, it's not: What Van de Water's really saying is that Ryan's proposal would give individuals control of how they spend their medical dollars while freeing providers from excessive government rules and regulations. 

The quote comes from this Jonathan Cohn column. In it, Cohn argues that seniors aren't capable of making their own medical decisions without government assistance. That's not meant to be uncharitable: Cohn wants the government to help ensure that people get proper medical care; his method of doing so is to focus on centralized decision making and provider-side regulations. It's nannying, to an extent, but it's earnest, well-intentioned nannying. As Cohn puts it:

It's not clear how many seniors really have the ability to navigate the world of health care with the sort of sophistication to really hunt down the most cost-effective care, even if, as Ryan promises, they'd have more information at their disposal. At the very least, you'd want to give seniors ironclad protections when it comes to the design of insurance products—making sure a wide array of services were covered and that out-of-pocket spending were limited.

The problem with those "ironclad protections," however, is that they're a big part of what makes insurance so expensive: This is essentially an argument for government-designed health insurance, with insurance companies told what they must offer in order to be allowed to operate. Industry figures indicate that state-level mandates add anywhere from 20 to 50 percent to the cost of insurance premiums, depending on the state.

On the other hand, there's limited but fairly strong evidence that giving individuals control over their own medical dollars actually lowers medical spending. As I've noted on multiple occasions in the past, consumer-driven plans, which couple individual spending accounts like HSAs with high-deductible insurance, have proven remarkably effective at bringing down overall medical spending without sacrificing quality of care. And yes, that means actually reducing spending rather than simply slowing spending growth. And in contrast to liberal worries that this approach might incentivize people to avoid getting the care they need, such plans have actually shown increased usage of preventive services. Granted, none of the studies involved seniors, but it is really wise to discount their ability to make their own medical decisions just because they're a little older? Rather, I think we ought to assume that, regardless of age, individuals working with their doctors can make good decisions about their health care—and that we shouldn't be afraid of policies that move the government out of the way in order to let them do so.

I noted a televised exchange about health care between Congressman Ryan and President Obama here. In July, Reason Senior Editor Michael Moynihan spoke with Congressman Ryan about why we don't need more college entitlements:

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  1. Why can not health insurance be regulated the same as auto insurance?

    1. You will experience deja vu.

  2. Why can not health insurance be regulated the same as auto insurance?

    1. You will experience deja vu.

      1. all over again…

  3. I wholeheartedly endorse the GOP’s strategy of trying to fuck with Medicare and Social Security.

    1. The government is going to have to cut spending on entitlements, raise taxes to fund entitlements, or inflate their way out of them. Unfortunately, we’ve chosen inflation as the solution because the other two seem sacrosanct.

      1. Inflation is not a solution, it’s an accounting trick used to steal more of your money. And it will ensure that when you’re old, your savings will be gone and you’ll be forced to depend on the government for health care.

        1. It’s a political solution. Politicians maintained your generous Medicare benefits while not raising your taxes and then will proclaim themselves geniuses and the problem solved. From a political perspective, it’s a great solution.

  4. Jon Cohn makes another mistake. He assumes everything remains static except the vouchers. That is not going to happen.

    If seniors have the money, in the form of vouchers, health providers would develop the ability to communicate with seniors so they could make informed choices. Also, its not hard to envision intermediaries between the two emerging for the same purpose; a whole new senior advisory industry.

  5. Nope, I don’t know one senior citizen who has any children or relatives, friends, fraternal organization, or religious institution to help them out. No, instead of a community of people who care about them, they have only the souless bureaucrats at Medicare to help them make complicated decisions.

    1. From what I can tell, my senior citizen parents know WAY more about medical decisions than the medicare bureaucrats they try to get answers from.

      1. I was recently exploring medigap and medicare advantage options for my father in law. The medicare folks answering the phones knew very little. Of course, my father in law doesn’t know much either.

        1. Adam’s father-in-law: Stop talking to yourself.

          Adam: It’s a Bluetooth.

          Adam’s father-in-law: I just peed on me.

  6. It’s quite shocking how little faith our government has in the ability of average citizens to take care of themselves. Of course, I guess the fact that these politicians continue to get re-elected validates their lack of faith.

  7. The first link goes to an anti-trust article, not the Cohn column.

  8. The problem is that there is no private option.

    Government interference in the health care markets has become so pervasive, it’s inescapable. You can’t buy a prescription from a pharmacy in the United States of America that doesn’t serve any free-loading Medicare patients…

    And just because most of them don’t know they’re freeloading, doesn’t make it any better. So get a clue–just because you don’t pay for it, doesn’t mean the government does. It’s state sanctioned shop-lifting, with all the costs going to the people who do pay for their medications, and anything, any proposal at all, that helps insulate average Americans from people on the government system should be supported.

    There needs to be a private option.

    1. I bet you shop at Whole Foods!

      1. Not so much anymore, there are lot of worthy competitors, I can find most of that stuff for less elsewhere.

        …but I did buy some WFMI way back in the ’90s!

        Pretty smart, huh?

  9. given the current level of gummint involvement, it’s a wonder anyone can navigate the health care malestrum. if we can get the gummint otu of it maybe some of the dross wil slip away

  10. So Cohn’s arguement is kind of the reverse of the “it’s for the children”, right? “It’s for the old people.”

    I need to know how that affects the drinking game – does that mean I have to skip a drink, or how do I handle that?

    1. Drink with a Metamucil chaser.

  11. The Ryan bill just gives every [Medicare] beneficiary a voucher and makes them fend for themselves in a poorly regulated private market.

    Fuck, yeah! I want that!

    (No, really, I WANT a poorly regulated private market.)

    1. I would prefer sparsely regulated to poorly regulated.

      1. But poorly & heavily regulated is what you’re gonna get.

        1. Actually, the choice is between market regulated and government regulated. I know which I prefer.

  12. See, if the AARP weren’t a shake-down operation masquerading as an advocacy group, they could get to the front and become the “Consumer Reports” of geriatric health care. Or Consumer Reports could fit the bill.

  13. Inflation is not a “solution” to variable costs. Other than fixed expenses (most notably interest), inflation is basically irrelevant.

    Peter- is the “health care beat” something you are truly fascinated by, or did you just lose a coin toss, somewhere along the way?

  14. How did Ryan get elected in Wisconsin? Good for him.

    On to my point: the vouchers themselves will cause medical care inflation just like Medicare does. If an insurer or provider knows that customers can pay $2k for their services, that’s what they’ll charge. If government is giving $3k vouchers (for example), it will be as inevitable as the sun rising that said service will now cost $5k. Subsidies never benefit the consumer, only the provider.

  15. Paul Ryan is so… pretty.

  16. It’s not clear how many seniors really have the ability to navigate the world of health care with the sort of sophistication to really hunt down the most cost-effective care, even if, as Ryan promises, they’d have more information at their disposal. At the very least, you’d want to give seniors ironclad protections when it comes to the design of insurance products?making sure a wide array of services were covered and that out-of-pocket spending were limited.

    In other words I’m too stupid to make good choices, so the government should take all the good choices away.

  17. I’ve been doing a lot of reading about these high deductible health plan lately as I’m about to obtain one through my job. I admit, These plans are usually accommodated by a HSA, HRA, or FSA, into which you put a certain amount pretax, and said money can be used to pay for medical expenses, or go towards your deductible. It saves the company money, which in the long run, lets you keep your job, which is nice in this economy. And even though you have to pay everything up to your agreed deductible amount, everything after is covered, with parameters of your plan. Another bonus is that, if you use the Doctor infrequently, the money in HSA is your money, and it accumulates. If you leave the job, that money is still yours. There are pros and cons to every situation. I have posted a couple links I found to be very useful. I hope they help in your search for info.

    http://highdeductiblehealthplan.blogspot.com/
    http://www.youtube.com/highdeductiblehealth

  18. medicare is very important for every citizen, a deserved welfare,should be ensured.

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