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When Medicare Works—and When it Doesn’t

1:33 PM, Sep 21, 2011 • By JEFFREY H. ANDERSON
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In the Hill, former Health and Human Services secretary Mike Leavitt and former HHS deputy secretary Tevi Troy write about the one part of Medicare that has succeeded in controlling costs — Medicare Part D (the prescription drug program), which works a lot like Paul Ryan’s proposed Medicare reforms.


Leavitt and Troy write

“As former overseers of Medicare, which together with Medicaid makes up a staggering 23 percent of federal spending, we offer this advice: Find savings in Medicare by replicating the market-based approaches of the prescription drug program…. 

“Now in its fifth year, Medicare Part D is costing 41 percent less than the Congressional Budget Office originally projected….

“[Seniors] continue to express strong satisfaction with the program in independent surveys. [They] are given abundant choice, with a minimum of 28 drug plans offered to enrollees this year. And seniors have not balked at the array of choices, as some naysayers predicted they would. Instead, they have embraced the choices.

“Nine in 10 seniors have selected an option other than the standard, government-recommended option. This suggests that Americans are willing to look at a complex menu of choices to select the plans that work best for them….”

The authors conclude, “The Medicare prescription drug plan works because it is market-based, allowing seniors to choose from a selection of private-sector insurance plans. Market-based reforms offer great promise for healthcare entitlement reform and future budget relief.”

There is a long train of evidence showing that privately run health care has a far better record of controlling costs than government-run health care does. From 1970 through 2008, the costs of Medicare and Medicaid each rose one-third more, per patient, than the costs of all other health care in America — the vast majority of which is purchased privately.  Even more strikingly, as a percentage of the gross domestic product (GDP), Medicare’s and Medicaid’s costs have each risen more than twice as much as the costs of all other health care in America.

Since privately run health care has done a far better job of controlling costs than government-run health care, and since the part of Medicare that most closely approximates privately run health care (Medicare Part D) is the one part that has come in under budget, you would think there would be bipartisan consensus that more choice and fewer government controls is the way to go.

But with Obamacare and its largely unaccountable Independent Payment Advisory Board (IPAB), President Obama is moving in the completely opposite direction — and is taking the Democratic party with him. For more on the IPAB, the rather grisly proposal on which Obama just doubled-down in his recent deficit plan, see these pieces by Stanley Kurtz and Mark Hemingway.

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