Medicare Reform, RIP?

May 6, 2011

by Mario Rizzo

The Financial Times  reports today that the Republicans may be backing away from the (Paul) Ryan proposal  eventually to replace traditional Medicare with subsidies for the purchase of  private insurance. The Financial Times  says, “This would shift exposure to rising health costs away from the  government and on to seniors…” Of course, this is literally true if there is  never an increase in the dollar amount of the subsidy, an unlikely event in  view of the regular increases in Social Security benefits.

Putting aside, for the moment, the details of the Ryan plan,  what many voters refuse to understand is the unpleasant choice they inevitably face. Either cost-control by the consumers or  cost-control (aka rationing) by the State.  The issue is stark.

Either consumers directly or indirectly will communicate to  healthcare providers the need to economize or the State will put limits on what people can get. The thing is Americans don’t want to have to do the former  nor allow the latter to happen. The “advantage” of State limits is that they feed fantasies  Americans may still have about State magic. Stones into bread, and all that. We  can all get the best care regardless of cost. (Keep in mind I want the best care regardless of cost too!)

Consider if Medicare, supported by the FDA, says a certain procedure  doesn’t work or is not “indicated” then maybe it is just not worthwhile.  No complications about probabilities or  whether it works in some people need be raised once the decision is made. And  best of all, your neighbor will probably not  get the treatment if you don’t.  So we  are more or less equal. One size fits all.

Furthermore, if the doctor orders an MRI rather than a  simple x-ray, there is no problem. Why not? Medicare will pay. If the doctor  orders a laboratory test for a urinary tract infection rather than use a cheap  kit in the office, there is again no problem. If the doctor requires you to see him rather than answers your questions by email, there is certainly no problem.  Medicare pays for the (short) visit.

I am aware that cheaper is not always just as good.  There are tradeoffs. Maybe a partial solution is this. Let there be Medicare with strict cost-controls (designed to  keep costs to the estimated CPI or something like that) and a subsidy problem  with a CPI- indexed increase built in. Let people choose. See what happens.

None of this gets to the means-testing issue, of course.

What I think will happen is that the system will become even  more chaotic, complex and arbitrary than it now is. Those who can game the system (not the poor) will fare better.  The entitlement house will become increasingly more likely to collapse  in a very unpleasant and messy way.

One Response to “Medicare Reform, RIP?”


  1. The Left base of the Democrat Party strongly opposed Medicare cuts. The Dems want to run the 2012 elections over the issue.

    It’s up to the Tea Party to educate its base on the issue. Remember one of the issues used against Obamacare was the damage it would do to Medicare.

    What will kill Medicare in the long-run is that there will be no doctors left taking medicare patients. My primary care physician has never accepted Medicare, even though he has many older patients eligible for it.


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