This new video from the Center for Freedom and Prosperity discusses a proposal to solve Medicare’s bankrupt finances by replacing an unsustainable entitlement with a “premium-support” system for private insurance, also known as vouchers.
This topic is very hot right now, in part because Medicare reform is included in the bold budget approved by House Republicans, but also because Newt Gingrich inexplicably has decided to echo White House talking points by attacking Congressman Ryan’s voucher plan.
Narrated by yours truly, the video has two sections. The first part reviews Congressman Ryan’s proposal and notes that it is based on a plan put together with Alice Rivlin, who served as Director of the Office of Management and Budget under Bill Clinton. Among serious budget people (as opposed to the hacks on Capitol Hill), this is an important sign of bipartisan support.
The video also notes that the “voucher” proposal is actually very similar to the plan that is used by Members of Congress and their staff. This is a selling point that proponents should emphasize since most Americans realize that lawmakers would never subject themselves to something that didn’t work.
The second part discusses the economics of the health care sector, and explains the critical need to address the third-party payer crisis. More specifically, 88 percent of every health care dollar in America is paid for by someone other than the consumer. People do pay huge amounts for health care, to be sure, but not at the point of delivery. Instead, they pay high tax burdens and have huge shares of their compensation diverted to pay for insurance policies.
I’ve explained before that this inefficient system causes spiraling costs and bureaucratic inefficiency because it erodes any incentive to be a smart shopper when buying health care services (much as it’s difficult to maintain a good diet by pre-paying for a year of dining at all-you-can-eat restaurants). In other words, government intervention has largely eroded market forces in health care. And this was true even before Obamacare was enacted.
Medicare reform, by itself, won’t solve the third-party payer problem, but it could be part of the solution – especially if seniors used their vouchers to purchase real insurance (i.e., for large, unexpected expenses) rather than the inefficient pre-paid health plans that are so prevalent today.
Joe Califano, LBJ’s chief domestic advisor, was on a talk show a while back (I can’t remember which or when). He was asked why medicare spending was 10 times as much in 1990 as had been projected way back in the mid ’60s. His answer was “usual and customary.”
The AMA would only support medicare legislation if it were “fee for service” and “usual and customary.” This eliminates the competition factor and encourages fraud and abuse. Add to this the ability of hospitals to issue tax-free municipal bonds to build unnecessary duplicative facilities and the restrictive admissions policies of U.S. medical schools, which denied admission to tens of thousands of fully-qualified pre-med graduates and you have part of the reason why our health care costs are far and away the highest on earth.
Yes, Daniel, government shares a good deal of the blame but so do large coporate entities that entice people to work for them by providing “gold-plated” medical insurance and private and public unions that negotiate or extort (in the case of the teachers unions) generous medical benefits from their employers. Private insurers also bear responsibility by paying unsubstantiated claims and then passing on the costs to corporate and private policy holders.
Vouchers won’t cut costs because they don’t solve the fundamental problems. They’ll just shift costs to retired people (at least those who can afford to pay).
The problem with voucher systems as I see it is that they cause price inflation. Since recipients of the voucher cannot spend it on other sorts of products, competitive forces are highly limited and producers can raise their prices. Essentially you give those producers a captive market. Limiting the growth rate of the voucher payments sounds great, but realistically it won’t last long. With rising prices there will be intense political pressure to raise the voucher payments, which of course will only intensify the problem. At least that’s what I worry about. And then of course the free market will get blamed.
Voucher systems are no more likely to cause price inflation that the runaway fee-for-service fiasco that we have now. If a voucher system could be combined with a 50 state insurance marketplace and some form of Medibid for referrals, it could be a serious improvement at a controlled cost.
The article says that the medicare premium support plan is very similar to the gov emloyee health care plan that members of congress get. Why not go one step further, and instead of just doing something that is similar, why not make it identical. Just replace medicare, and enroll all of them into the congressional/gov employee plan. That way, we can be absolutely certain it will work, since congress would be stuck with the same plans that the medicare people get. Of course it might cost too much, since I suspect the current plan for congress is goldplated, but in that case, if it is trimmed back to cut costs, at least congress and fed burocrats share in the pain.
How do we inject price competition into the system? Vouchers might be a start, but public disclosure of pricing is a must. Drugs, doctors, hospitals, labs – it should all be public information.
One of the many things about the Obama plan that sticks in my craw is the removal of lifetime limits on health care coverage. This is not to say that people should be left out in the cold when they hit $1M or $2M or what-have-you, but it’s at that deep-in-the-black point where the government — rather than the private sector — could rationally assume the risk.
The number of people that use $2M in healthcare are pretty rare. Very complex cancer, deeply premature multiple births, etc. that no rational market actor would hedge against. The risks of medical-induced bankruptcy are far less than the costs of buying an infinite policy for very unlikely events.
Socialize the risk for these events makes some sense in that the government doing it is probably cheaper, but more importantly, it can do so without massively distorting a market that can and ought to be far more price-sensitive.
“government shares a good deal of the blame but so do large coporate entities that entice people to work for them by providing “gold-plated” medical insurance”
And corporate entities offer the gold-plated medical insurance because GOVERNMENT gives them tax incentives to do so. If government removes those incentives, or allows individuals to enjoy the same tax advantage as corporations, corporate entities will not be at fault. They’re just doing what they’re given incentives to do.
I must say I’m surprised by the fact that libertarians don’t discuss the root of this problem and the solution to it thereby. It all begins with the granting of special status to certain groups of people by government, namely the licensing of physicians. This grant of recognition is the means whereby a tacit monopoly in the provision of a service is achieved. Once the monopoly is gained there is distortion of the market in that service provision. Any purported solution to the problems brought about by the initial decision to grant this status is simply another distortion of that market. One might be able to somehow ameliorate the market distortion by applying what look like market-based reforms, but until the original grant of recognition is repealed, a distorted market will persist and continue to plague the society so afflicted. The bottom line? If you live in a society which is based on equality of rights and opportunity, any special grant to an individual or group, regardless of the good intentions involved, will work to the destruction of that society. I am a doctor. I can tell you from experience that there is nothing special about doctors and doctoring that requires our whole country to go into the toilet to preserve this special status. STOP IT!
@Richard40: I agree if the congress critters and the Bureaucrats have the same insurance as the “COMMON FOLK” I think the system will improve for the better definitely for the “COMMON FOLK”.
When Gingrich is lumped with Obama, you know the party has moved too far to the right. The Tea Party has Republican politicians so scared, they are all drinking the Libertarian Kool-Aid. We don’t need Obamacare, but vouchers? Let’s give more money to the insurance companies and medical system that put us here and let our old-timers eat the difference on dwindling pensions.
Everyone points to Ronald Reagan as an icon. Well, Ronald Reagan would not have done that & he would have the gumption to stand up to the bullies.
@teapartydoc: “I’m surprised by the fact that libertarians don’t discuss the root of this problem … the granting of special status … by government, namely the licensing of physicians.”
we discuss it rather often, not just in the medical context either. seek, ye shall find. start with ij.com, maybe
[...] Dan Mitchell at the Cato Institute created the above video and commented on it in Who’s Right on Medicare Reform, Ryan and Rivlin or Obama and Gingrich? [...]
[...] Dan Mitchell at the Cato Institute created the above video and commented on it in Who’s Right on Medicare Reform, Ryan and Rivlin or Obama and Gingrich? [...]
[...] Something to keep in mind next time you hear Obama, Reid, or Pelosi demagogue against Congressman Ryan’s Medicare proposal. [...]
[...] by Dan Mitchell I’ve beaten up on Newt Gingrich for his views on global warming and his attack on the Ryan budget plan, but I’m completely on his side in the faux controversy about whether it is racist to call [...]
[...] Ryan, House Republicans approved a very serious budget plan that would have reformed both the Medicare and Medicaid and substantially reduced the long-run burden on the U.S. [...]
[...] Ryan, House Republicans approved a very serious budget plan that would have reformed both the Medicare and Medicaid and substantially reduced the long-run burden on the U.S. [...]
[...] combination of poorly designed entitlement programs (mostly Medicare and Medicaid) and an aging population will lead to America’s fiscal collapse. Rate this: [...]
[...] combination of poorly designed entitlement programs (mostly Medicare and Medicaid) and an aging population will lead to America’s fiscal collapse. [...]
[...] combination of poorly designed entitlement programs (mostly Medicare and Medicaid) and an aging population will lead to America’s fiscal collapse. Daniel J. [...]
[...] did try to do something meaningful. The Ryan budget contained sweeping structural reforms to both Medicare and [...]
[...] combination of poorly designed entitlement programs (mostly Medicare and Medicaid) and an aging population will lead to America’s fiscal collapse. Daniel J. [...]
[...] combination of poorly designed entitlement programs (mostly Medicare and Medicaid) and an aging population will lead to America’s fiscal collapse. Daniel J. [...]
[...] combination of poorly designed entitlement programs (mostly Medicare and Medicaid) and an aging population will lead to America’s fiscal collapse. Daniel J. [...]
[...] combination of poorly designed entitlement programs (mostly Medicare and Medicaid) and an aging population will lead to America’s fiscal collapse. Daniel J. [...]
[...] America faces the same fate if we don’t reform poorly designed entitlement programs such as Medicare and [...]
[...] America faces the same fate if we don’t reform poorly designed entitlement programs such as Medicare and [...]
[...] America faces the same fate if we don’t reform poorly designed entitlement programs such as Medicare and [...]
[...] Dan Mitchell at the Cato Institute created the above video and commented on it in Who’s Right on Medicare Reform, Ryan and Rivlin or Obama and Gingrich? [...]
[...] The second video shows how to fix Medicare. [...]
[...] and restoring market forces. It means personal retirement accounts for Social Security. It means vouchers for Medicare. And it means block-granting Medicaid back to the [...]
[...] 2. Ryan-Wyden may be “Obamacare for Seniors,” but that’s still better than the current system, which is sort of a “UK-single-payer-for-seniors” plan. In other words, Ryan-Wyden isn’t a good plan, but it’s not as bad as the current system. It would be a small step in the right direction. But it’s hard to get excited about a small step when lawmakers earlier this year voted for a big step. [...]
[...] other candidates then ganged up and reminded voters of Newt’s various sins – such as criticizing the Ryan budget, climbing into bed (or at least onto a couch) with Nancy Pelosi to advance global warming hysteria, [...]
[...] is why there is a desperate need to reform programs such as Medicare and Medicaid. But politicians almost certainly won’t adopt the needed reforms if they have the [...]
[...] is why there is a desperate need to reform programs such as Medicare and Medicaid. But politicians almost certainly won’t adopt the needed reforms if they have the [...]
[...] is why there is a desperate need to reform programs such as Medicare and Medicaid. But politicians almost certainly won’t adopt the needed reforms if they have the [...]
[...] is why there is a desperate need to reform programs such as Medicare and Medicaid. But politicians almost certainly won’t adopt the needed reforms if they have the [...]
[...] I was disgusted when he criticized Paul Ryan’s entitlement reforms. [...]
[...] because of entitlement programs, but this set of videos shows how to reform Social Security, Medicare, and [...]
[...] because of entitlement programs, but this set of videos shows how to reform Social Security, Medicare, and [...]
[...] because of entitlement programs, but this set of videos shows how to reform Social Security, Medicare, and [...]
[...] because of entitlement programs, but this set of videos shows how to reform Social Security, Medicare, and [...]
[...] from becoming another Greece, we need personal retirement accounts for Social Security. We need vouchers for Medicare. And we need to block-grant Medicaid back to the [...]