May 30, 2011, Vol. 16, No. 35 • By YUVAL LEVIN
The House Republican proposal would change Medicare’s counterproductive design. It would leave today’s seniors and those now 55 or older in the current system, since they have planned their retirements around it. But everyone younger than that would join a redesigned Medicare when they retire. Rather than pay all providers a set fee directly, seniors would use the money (in the form of a premium support payment that would start at current Medicare rates and grow with inflation) to choose insurance plans from a menu of guaranteed private coverage options. Poor seniors and those in the worst health would get significantly greater support, while the wealthiest would receive less. And seniors would be buying guaranteed insurance with limits on out of pocket costs, not paying directly for care. Sebelius’s notion that they would simply “run out” of money if they got sick is nothing more than fear-mongering.
Insurers and providers would compete for seniors’ dollars. They would be free to find innovative ways to offer better quality at lower costs. That’s how markets produce efficiency: by letting sellers find ways to offer buyers what they want at prices they want to pay.
Everyone agrees that such efficiency improvements are essential. As Ryan has put it, the basic choice offered by the parties’ competing approaches to Medicare has to do with how efficiency is achieved. It’s a choice between giving a board of experts the power to deny care to seniors based on its magisterial judgment of quality and value, and giving seniors the power to deny business to providers based on their individual opinions and priorities.
In principle, therefore, this is a choice between markets and central planning, which should no longer be hard to make. In practice, it is a choice between modernizing Medicare to allow it to continue providing seniors with health security in retirement and letting the program collapse under its own weight.
For politicians, it is also a choice between reforming a program that seniors are comfortable with and leaving it alone despite its fatal problems. Republicans have chosen to deal with that difficulty by leaving current seniors with all the benefits they are accustomed to in the current program and reforming it for the next generation. Democrats have chosen to deal with it by pretending there is no problem, falsely insisting that any reform will harm today’s seniors, and leaving a colossal disaster for the next generation. Republicans, in other words, have chosen a policy solution that carries political risk while the Democrats have opted for political advantage.
The Ryan budget’s particular approach, of course, is not the only possible way to address Medicare’s woes. There is plenty of room to debate alternative solutions. But any effective solution would have to harness market forces to improve the efficiency of our health care system and give seniors more choices.
Unfortunately, the Democrats have opted for no solution at all. That doesn’t mean President Obama wants to kill the elderly. But his cynical complaisance and demagoguery do risk killing Medicare, and doing grave damage to the budget and the economy along the way.
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