Two Ridiculous Defenses of the Ryan Medicare Plan
Arguments for the Ryan Plan that characterize it as being "against bureaucracy" are apparently oblivious to the fact that private health insurance is full of bureaucracy.
Ramesh Ponnuru offers, in one paragraph, the two most ridiculous arguments in favor of eliminating privatizing Medicare possible.
No, the alternative is heavy-handed bureaucratic cost- cutting. The Democratic plan is cutting payment rates so that Medicare becomes as lousy a program as Medicaid, with doctors refusing to participate in it. The Democratic plan is letting an unelected board decide which treatments won’t get funded.
Out of curiousity, is Ponnuru familiar with how the real world works? In the real world, the vast, vast majority of doctors accept both Medicare and Medicaid. In the meantime, anyone who has private health insurance knows that it’s a struggle to find an “in-network” doctor that you can go to without paying extra out of pocket costs. In my area, there are hospitals that don’t accept all health insurance companies — even national carriers.
As far as unelected boards making decisions about funding go, last time I checked, major insurance companies are also run by unelected boards. And whether a medical service is funded is the choice of the insurance company, not the patient. But the “unelected boards” of Medicare are subject to the political process and the voting in and out of elected officials–which means, ultimately, that patient concerns will be key, however attenuated they may be. The unelected boards of the private sector are accountable to shareholders — not patients. This is particularly true given that most of us have no opportunity to make decisions about our insurance provider — we’re limited either by our employer’s choices or the simple fact that most regions only have a handful of providers offering roughly the same plans.
If Ponnuru wants to compare the quality of service of Medicare vs. private health insurance companies, I don’t think his side is going to win.
This is especially true when you consider that Ryan’s Medicare vouchers will substantially increase the out-of-pocket costs for the poor and the elderly. This is, in part, due to the fact that the “efficient” private sector has over double the administrative costs than that “inefficient” government program, Medicare.
And, I might add, the “Democratic Plan”, as adopted by the Obama Administration and the Democrats when the passed the ACA, actually does something about the underlying problem with funding Medicare — rising health care costs. And they’re doing it by basing Medicare payments to health care providers based on performance.
A major goal of the new health care law, often overlooked, is to improve “the quality and efficiency of health care” by linking payments to the performance of health care providers. The new Medicare initiative, known as value-based purchasing, will redistribute money among more than 3,100 hospitals.
Medicare will begin computing performance scores in July, for monetary rewards and penalties that start in October 2012.
This plan ain’t perfect, but it’s at least a start.
In the meantime, the Ryan Plan is best characterized as:
1) Privatize Medicare
2) ????
3) Lower health-care costs!
I’m open to market-based reforms of the health care system. But it would be nice if they had some grounding in reality, instead of magical thinking.
Note that there is some stuff that Medicare won’t pay for right now: Google “medicare coverage database” for some examples. So the idea that it would be an incredible catastrophe if Medicare started picking and choosing what services it would pay for is doubly silly.
Ryan has a plan, do the Democrats or you for that matter Alex. The medicare fund will run out soon. Is there some part of “we are 14.3 Trillion dollars in debt” you cannot understand? If you took all the money from all the rich people it would not pay our debt. You must tax the middle class. That will not be popular.
If the cost controls in the Affordable Care Act don’t work, one of three things will happen:
(a) payroll taxes for Medicare will be increased and employer provided health care insurance for employees not covered by Medicare will be eliminated or severely cut;
(b) Medicare will be privatized a la Ryan, and seniors will either impoverish themselves and their families paying for health care or will do without;
(c) private insurance companies will be converted into something like their European counterparts, and they, and Medicare, will dictate medical costs to doctors, hospitals, and pharmaceutical companies the way they do in Europe.
I’m betting on (c).
Wiley,
Go find a live horse to beat – this one’s been dead for weeks. The Ryan “plan”, such as it is, is just another thinly-veiled attempt by the GOP to pass more money to rich folks. It does call for $3T in cuts to Medicare programs, but then it totally eliminates that savings with about the same amount in tax cuts for the wealthy. How does that address the deficit at all? Answer: It doesn’t.
wiley…are you stoned? seriously…because that would explain mindlessly repeating thouroughly debunked talking points you heard on fox news.
stan,
or..D…we will continue to evolve the ACA in the same way we have continued to evolve Medicare and Social Security.
Re “ the “efficient” private sector has over double the administrative costs than that “inefficient” government program, Medicare. “
Yes the government is more efficient and cost effective than the private sector and a unicorn flew past my house last night to. Another use of smoke and mirrors. From a study
“The study found that when all of the hidden costs and certain related
unfunded liabilities were included, Medicare and Medicaid administrative costs with
the related unfunded liabilities were significantly higher (26.9 percent) than the private
sector (16.2 percent)”
http://www.cahi.org/cahi_contents/resources/pdf/CAHI_Medicare_Admin_Final_Publication.pdf
I agree with your characterization of the Ryan plan, Alex. Unfortunately, the PPACA isn’t any better. Both the CBO and the Medicare Trust Fund actuaries have questioned the assumptions that lead to it reducing healthcare costs.
If viewed through the extremely narrow and IMO inadequate prism of reducing federal liability for healthcare the Ryan plan might conceivably be effective. Unfortunately, the problem in healthcare isn’t merely that it’s disastrous for fiscal sanity at the federal level but that rising costs are disastrous to state, local, and personal budgets.
“Both the CBO and the Medicare Trust Fund actuaries have questioned the assumptions that lead to it reducing healthcare costs.”
That is kind of true Dave. The CBO actually does not comment on items like the IPAB. There is no model for it in medicine. The Medicare actuaries appear to believe that attempts to control costs will be done in by politics. It is not that the actual methods employed are unlikely to at least partially work. They do seem to think you need more than what is in the ACA.
Steve
IMO the best way to look at it is which system gives me the best quality care at the lowest cost.
A low premium with a higher “out of pocket” cost may be the best if I don’t visit the doctor much since my total cost could be much less. Now a higher premium with a lower “out of pocket” cost may be better. Maybe a plan with some extra side benefits may be better. Being stuck in a one size fit all government system probably isn’t in the best way to go.
Trying to use smoke and mirrors to try to hide the facts isn’t going change that. In the real world the trend is more doctors turning away Medicare patients because of the oppressive regulations. Regulations that are ever increasing by the way. When private company bad practices get them turn down by doctors, the company bleeds costumers. If they don’t change those bad practices, they will bleed to death. The government can make itself a monopoly to avoid that. Monopolies are seldom good. Having a few choices is better than none.
Norm,
Are you saying that Medicare has evolved into an efficient, viable, sustainable program?
Wiley, in 2000 the GOP was handed a budget that was in balance. What happened????
What part of that can you not understand? Please give me your tortured logic so I can rip you to shreds… or just ignore you, which is all you deserve. You and your ilk created this deficit, but now you want to pass it off on Obama.
Pete, are you saying less is more?
Can you document this assertion:
Not news stories, but actual studies.
This is pretty simple. Question: Do we live in a country that takes care of its aged? It’s disabled? It’s poor?
Or do we give more tax breaks to the rich?
Yes or no, and yes, this is a poll.
ps: very unscientific.
Bains, not sure who was saying what, but I have not seen a doctor in years… and I have GOOD health care. Last time I saw a Doc I was in ICU. 3 yrs ago and she was saying I needed to go some where else.
ps: and for the record, I really do have good health care. but if I was to insist on a doc, it would be less health care.
tom p, what happened? Clinton’s dot com bubble burst, then 19 nuts flew planes into the WTC, then Republkicans proved to be as venal as Democrats in passing NCLB and a prescription drug plan without adequately funding, and, yes, tax cuts. Do you realize just how much higher overall spending and deficit spending is now than the worst levels during the Bush years? Hey I agree with you, spending under Bush got out of control, so why is doubling down on the spending now better? Oh, that’s not what you were trying to say?
Alex, so Ponnuru knows nothing about the real world? Really? I administer a health care plan. If I get too unhappy with my insurance company I can pick another one, at least for now. Once the private insurance companies are successfully driven out of business I will lose that choice. Surely you can understand that, or is that privately your goal too? I assume you are also aware that more and more doctors are walking away from Medicare all the time. And what about the 30% cut in Medicare reimbursements on 1/1/2012 that was mandated (but not passed) to get the phantom savings Obamacare is supposed to bring? Do you think rational actors will not respond to the beatings, I mean, uh stimulus that Obamacare provides? Really?
My friends on the left are rapidly losing their credibility by claiming tht Medicare can just go on and on and on and on spending money that does not exist. Anything that can’t go on won’t. We are entering a period of time where living standards are going to decline because the growth in needs continue to outpace the growth in the economy, and Medicare is no exception to this.
tomP
I’m wondering if Norm believes Medicare and SS have evolved in a positive or negative way.
Alex, wouldn’t it be fair to mention that Ryan’s plan provides more assistance to the poorest among us, or would that not fit the narrative because nothing good may be said about the heathen attempts to get spending under control?
As to the Medicare trustees and the CBO, as they frequently note they must apply what is the law for their estimates, no matter how silly. At least one of the Medicare trustees had the courage to note that the revenue assumptions that Obamacare is based on is utter bullshit.
“My friends on the left are rapidly losing their credibility by claiming that Medicare can just go on and on and on and on spending money that does not exist. Anything that can’t go on won’t. We are entering a period of time where living standards are going to decline because the growth in needs continue to outpace the growth in the economy, and Medicare is no exception to this.”
Even though I regard charles austin as an ingratiating fanatic, I actually agree with him on this point. As I tried to say earlier and as implied by hey norm, either Congress will give the executive branch the power to control medical costs or the system will be reformed along the lines suggested by Paul Ryan. I can’t see the poor and the middle class in this country accepting the kind of medical care they’d be able to afford under Ryan’s plan, hence I think we’re going to wind up with a single payer health care insurance system or something close to it.
I am coming around to that way of thinking too.
” I administer a health care plan. ”
So do I. My insurer wants a 42% increase this year. Lots of babies this year. Some spent time in the NICU.
“Alex, wouldn’t it be fair to mention that Ryan’s plan provides more assistance to the poorest among us”
No. That is absolutely false. The MMedicaid block grants will decrease the amount of money going to Medicaid, which is already the cheapest insurance plan with reasonably full coverage.
” At least one of the Medicare trustees”
IIRC, the one who works for the AEI, so not surprising. There is reasonable disagreement on how much revenue and how spending will occur with the ACA.
Steve
So did the Unabomber.
medicare is sustainable…health care costs, the source of medicare’s problems, are not…not for medicare, or businesses, or for individuals. ryan’s tea party manifesto does absolutely nothing to address health care costs. all it does is shift costs and responsibilities to seniors in order to create budgetary room for additional tax cuts. i keep picturing an 80 year old, with some level of dementia due to their age, and a rapidly shrinking health care dollar due to the intentional design of ryan’s plan, trying to deal with an insurance company representative in bangladesh.
the aca is a first step in making health care costs, and thus medicare, more sustainable. is it perfect – not by any stretch. but it is a moderate plan originally proposed by conservatives that should have bi-partisan support. the fact that it does not is indicative of a wildly extreme republican party intent on dismantling medicare and the entire social safety net in favor of tax cuts for the rich that are way, way, way below any historical level, and are in themselves unsustainable.
Price controls do not work and that’s all Hey Norm and Obamacare have to offer.
Performance-based reimbursement is “price controls”?
But can you really save any money by doing so? Unless you mean switching to a different company because they offer a plan with less coverage.
Could you explain to me why we need private health insurance companies? What useful purpose do they serve?
“Price controls do not work and that’s all Hey Norm and Obamacare have to offer.”
They work in Europe. Per person medical costs there are lower than ours by a factor of two, and the gap is increasing. What we’re talking about here is not World War II price controls but negotiations involving a strong buyer and relatively weak sellers, like Walmart and its suppliers.
At this point I expect charles to recount his horrible medical experiences in Great Britain. Even if he’s right, and I don’t think he is, the quality of medical care in the UK or elsewhere in Europe is irrelevant in a discussion of medical costs.
This is not a very good argument. It’s true there are boards of people in health insurers who decide what to cover. There are also boards of people in manufacturers who decide what to produce. And yet we do not think that it would make no difference to our lives if the government nationalized the factories. We certainly don’t think that this would make our lives better.
The reason is that the feedback mechanisms are different: voting, versus exit and negotiation. Insurers are competing to get business, which means their coverage decisions have to please consumers. They are also subject to regulation. Exit is an incredibly powerful check on companies; it’s why markets work.
Obviously, exit doesn’t function very well in the private health care market, because employers, not individuals, are the major consumers. But at least it functions a little. And the problems of markets with no exit are not usually thought to be solved by reducing it still further.
The Medicare chief actuary has been very skeptical about the proposed cuts, not merely because he thinks that they’re politically unstable, but because he thinks that the cuts will force real benefit reductions. While it’s true that a majority of doctors accept Medicaid, I believe only 40% will accept any Medicaid patient who comes to them; most sharply limit their Medicaid caseload because the reimbursements are money-losing. We are increasingly starting to see this with Medicare as well. As long as you keep reimbursements above marginal cost, you can cut them below average cost for some fraction of patients and still keep doctors and hospitals in business. But tautologically, you cannot keep reimbursements below average levels for everyone. And Medicaid often pays below marginal cost; effectively, in many places Medicaid patients often become guinea pigs for new residents at teaching hospitals, which can afford to eat the loss for training purposes. Or, at least in New York, you have “Medicaid Mills” which rely on borderline fraud to keep operating.
The quality control stuff in Medicare is fine as far as it goes, but it’s incredibly naive to cite intentions as results. Ask yourself, if this is such an awesome way to reduce costs, why insurers don’t do it more aggressively? Not that the market is perfect, but surely this rapacious horde of greedy businessmen who spend every waking hours trying to cheat us out of the care we have paid for, have not succeeded in controlling their costs through such an obvious idea (one that’s been around for ages, not one that was suddenly thought of by some bright boy in the administration)? After all, it would instantly save them money. And the large insurers have quite a lot of data on outcomes in their local hospitals: who gets readmitted, etc.
The answer, as I understand it, is that performance measures have historically functioned to discourage doctors from taking any patient with complicated problems (when they started ranking surgeons, surgeons stopped operating on patients with high risk factors). And patients don’t like it when their surgeons won’t do operations because it will reduce their quality rating with the insurer.
Maybe this is what you want–it will save money if surgeons do fewer operations–but it’s not some magic way to make doctors do a better job on the patients they’re now treating. Measuring healthcare outcomes is extraordinarily difficult–so difficult that no system, neither ours nor anyone else’s, has so far found a good way to do it. As in education and government, when outcomes can’t be measured, inputs are what we pay for.
I’m not against using Medicare’s bargaining power to reduce things like hospital-acquired infections, but there’s little evidence that this reduces long-run costs; someone who doesn’t die expensively of septicemia now may die even more expensively of cancer later.
I was unable to follow Megan McArdle’s arguments during the debate over the Affordable Care Act, and I’m still unable to follow them. I’m convinced she’s against the act, but I don’t know her reasons. In 2009 she was against it because she felt it would be too good at controlling medical costs and would stifle medical innovation by depriving innovative companies and individuals of potential profits. Now she seems to think the ACA won’t control costs well enough. Is that what she’s saying? If it is, does she favor giving Medicare and Medicaid stronger powers to set fees for medical procedures? If not, does she think Ryan’s plan is the answer? Or does she favor the status quo in medical insurance? Please clarify your remarks, Ms. McArdle.
I don’t think my remarks are unclear; I think you would like me to make different remarks.
Here are a few other remarks that might offer insight into my thinking:
1) The existence of a problem does not imply the existence of a solution. If I say something isn’t going to work, or is worse than the problem it is trying to fix, asking “what’s your plan” is not a rebuttal. Your plan may be a terrible idea even if I do not have a plan that is better than the status quo.
2) Systems are path dependent; you do not get do-overs, and you cannot necessarily implement a system at time n that worked for someone else at time n-3
3) The US system offers fairly heavy subsidies for other systems in the form of R&D
4) Policies that work mathematically often fail politically
5) Price controls are not the same thing as cost control, and they introduce other distortions.
As it happens, I’m in favor of income insurance–have the government cover all medical expenditures over, say, 20% of income, with subsidies for the very poor. This would at least provide more market pricing and cost control than we currently have, while preventing financial disaster. It would work mathematically. I doubt it will work politically. I doubt any plan that would work mathematically will work politically, because what works politically is to tell people that they can have all the health care that will do them any good, and it won’t cost them more than they pay for their cell phones.
The health care plans in France and Germany work politically, even though they cost people a lot more than their cell phones and everybody knows it. Are you saying they don’t work in a policy sense?
“As long as you keep reimbursements above marginal cost, you can cut them below average cost for some fraction of patients and still keep doctors and hospitals in business. ”
You need to be explicit about what “costs” mean. It most often means that the doc is just not making what he wants to earn. Given that US docs make much more than elsewhere, is that sustainable?
Look at it the other way around. Why do private insurers pay so much more than what Medicare and Medicaid pay? Medicare pays, on average, about 20% more than private insurers, though in some specialties (mine) it is more like 300% more. Why do they do that? In order to make sure that their patients are seen, they need only pay a very small amount over what Medicare pays, all else being equal (which of course it is not. It costs much more to process private insurance bills, but not 20% more.)
“4) Policies that work mathematically often fail politically”
See, Ryan plan, 2011.
” It would work mathematically.”
Nope. It would be easier to administer, but it would provide no brake on the cost of care. That health care spending covered above the 20% limit would continue to grow like it does now.
Steve
Stan: are we living in France or Germany? See points 2 & 3.
Steve:
Why do they pay more than Medicare/Medicaid? Because *some* entrants into a market can pay above marginal cost but below average cost, provided that someone else is paying above average cost. They pay more because they have to; for providers, Medicare is marginal money, and they can’t negotiate the rates. Insurers have to negotiate rates, and a provider can turn down a marginal insurer who wants to pay below average cost.
It does not, however, follow that by the clever use of monopsony power, Medicare can pay less still, or that we can expand Medicare’s pricing. When the marginal dollar becomes non-marginal, people withdraw from the system. Note that this is what is happening in Medicaid and increasingly in Medicare, even though the average cost is driven (in part, not in total) by “what the doctors want to make”. Becoming a doctor is hard in the US (and for various public choice reasons, this would be pretty much impossible to change–can you imagine what would happen to the pol who suggested less training for physicians?). They expect to be compensated accordingly. We cannot simply dictate a wage to them–not if we want to continue to attract quality people into the field, and have them continue to work a lot of hours.
But you’re wrong that the problem is all doctors. Doctors are not what’s driving hospital budgets up; that’s the nurses and PAs and orderlies, of whom there are far more than staff physicians. These jobs also usually pay much more here than they do abroad. And it’s also true that this cost is just what RNs “want to make”. Do you think you can simply order them to work for less? If not, why not? Personally, I’d start with the facts that some of them can probably get other jobs, that there’s already a nursing shortage, and that, like doctors, these specialties have extremely politically powerful unions and other groups dedicated to making sure that their pay doesn’t get cut.
The Ryan plan would work mathematically in that it would limit the problematic exposure of the US government to unsustainable unfunded liabilities. Simply refusing to pay for expensive treatments will also work mathematically. The politics are more difficult, and of course both involve some patients not getting treatments that might make them better. There’s no obvious reason that IPAB is going to do a better job of deciding what patients should get than the patients themselves. Consumers are often stupid. So are blanket rules, which is what the government has to offer. This is an argument about who should be in charge of the decisions, not about whether patients are going to get all the health care they want. They won’t. We can’t afford all the health care they want.
In all sorts of markets, we reconcile unlimited wants with limited resources through prices. This is burdensome to people who want more than they can afford. Rationing doesn’t solve this problem (indeed, in many, I’d say most, cases, it makes the problem worse by increasing demand and decreasing supply). At best it redistributes the shortages from people we don’t like to people we do. But the rhetoric about denying seniors needed treatment simply assumes what it wants to prove–that the government can somehow keep supply of useful treatments steady while driving prices down. That’s far from proven.
Yes, yes, I know–Europe! Costs! Life expectancy! But after you take care of antibiotics, vaccines, and a few limited and pretty cheap treatments, there’s actually very little correlation between the amount of health care received, and life expectancy; and of course, things like diet, heredity, and sedentary lifestyles, plus socioeconomic stuff, which differ greatly between the US & Europe, are correlated with mortality. We can probably prove that European systems aren’t actively killing people; we can’t prove that they’re providing good care at a cheaper cost. For example, Japanese-Americans have the same, or even slightly longer, life expectancies as Japanese people living in Japan.
Robin Hanson would say that this is an argument for providing basic care and leaving the rest to the market. I think that it’s more complicated than that–at any given time, many new & expensive treatments are likely to kill you, while other treatments are likely to save you, an effect that averages out to show little effect, but over time, the iatrogenic treatments are stopped while the others continue and become cheap, meaning that most health care dollars will always show no effect.
But regardless of where you fall on that debate, we’re not going to stop helping people get health care; they want it too much. So now we’re just arguing about how to ration. I prefer to put the decisions in the hands of the patients; others prefer a centralized technocratic regime. But it’s not the case that one group wants to deny seniors needed treatment while the other is going to give them everything they want and need.
We are concerned with health costs in this country. We know from many studies, including the famous one by Uwe Reinhardt and colleagues (http://tinyurl.com/3logv2d) that centralized health insurance systems have more negotiating power than our own insurance industry and lower administrative costs, thus yielding lower prices for medical services. We also know from the experience of the Netherlands and Switzerland that health care systems don’t collapse when a country sets out to control medical costs. Doctors, nurses, and other health care professionals don’t go Galt and they don’t flee the country. They adjust, particularly if restrictions on their income are applied gradually and with adequate consultation. Yet people like Megan McArdle prefer that we continue to “put the decisions in the hands of the patients”, i. e. health care should be rationed by income. But that isn’t my main bone of contention with McArdle’s latest post. That distinction belongs to “There’s no obvious reason that IPAB is going to do a better job of deciding what patients should get than the patients themselves.” If I understand her correctly, the business editor at the Atlantic doesn’t care for medical research about what procedures work and what don’t. This confirms my feeling that Hofstadter’s “Anti-intellectualism in American Life” (http://tinyurl.com/4yrpp5n) is as relevant now as when it was written back in the 60’s.
You don’t understand her correctly. What the business and economics editor of the Atlantic believes is that comparative effectiveness research is far more complicated than the naive version that prevails in the media (we’ll just do what works!). The overpromisers of CER like to deride their critics as anti-science, but it is neither scientific nor intellectual to believe that most medical decisions fall neatly into some binary “works” or “doesn’t work” framework. The technocratic fallacy is science-as-religion. Anti-scientific, in fact. Anti-intellectual.
Medical decisions are often a complicated system of tradeoffs, and medical evidence tends to be weak because of the limits of human experimentation. There are a few things we know we shouldn’t do but do anyway (like back surgery) but the way we know that is that we did a lot of it, expensively–and even these cases are complicated, because while back surgery is not better than a comprehensive regime of physical therapy, it’s often very difficult to get patients to undergo a comprehensive regime of physical therapy.
Moreover, once you get beyond very crude objective measures (blood counts, blood pressure, mortality), CER rapidly starts to involve a lot of guessing and value judgements. We can control someone’s cholesterol, but we don’t actually have great evidence that lowering cholesterol reduces risk in people who haven’t already had a heart attack–we might be reducing the symptom of some other underlying process, rather than preventing heart attacks.
And that’s a relatively easy one–we know we’re willing to pay to prevent heart attacks. What about a $50,000 course of chemo that extends a pancreatic cancer patient’s survival rate by an average of four months and reduces pain by 20%–when those people have an average life expectancy of less than a year from diagnosis? You can see that as a waste–or you can argue that four months is a really long time if right now you only have six months to live. On the other hand, treatment has side effects. A board is not going to make the “right” decision, much less the “scientific” decision or the “intellectual” decision; it’s going to make a decision.
And, of course, that decision will be challenged in the political process. Poltiicians will override the board, and not based on the merits, but based on which pressure groups are loudest and most popular.
In case anyone is wondering, they can head over to The American Scene and see Jim Manzi jumping through many of the same hoops as McArdle, though he’s applying it to economic and not health issues. They’re essentially arguing for radically decentralized, almost neo-Anarchic decision making without acknowledging that such stuff is essentially impossible to achieve or even attempt in our modern world.
This sort of thing…
“A board is not going to make the “right” decision, much less the “scientific” decision or the “intellectual” decision; it’s going to make a decision.”
is a good sign that you’re dealing with such an argument.
Mike