Would vouchers for Medicare create an insurance market to meet demand?

posted at 2:15 pm on April 15, 2011 by Ed Morrissey

Paul Ryan’s plan to remake Medicare into something closer to a free-market plan relies on vouchers to allow seniors and the disabled to choose their own plans and manage their own care decisions.  In order to succeed, the private insurance market will have to create products to meet the demand.  Benjy Sarlin at TPM asks a question that has also occurred to me as well, which is whether those products will actually come to market:

At first glance, Paul Ryan’s plan to send millions of seniors into the free market with dwindling vouchers in hand might seem a boon to the private insurance industry. But would companies even want to participate?

Unlike the Affordable Care Act, which mandated that millions of young and healthy Americans purchase insurance with government subsidies, the Paul Ryan plan would instead bring the oldest, sickest, and least profitable demographic to the table. And with the CBO projecting that the average senior would be on the hook for over two-thirds of their health care costs within just 10 years of the plan’s adoption — a proportion that is projected to worsen in the long run — the government subsidies backing them up may not bring in enough profitable customers to make things worthwhile.

“If reimbursement rates are too low to provide basic benefits, they’ll tell the government, ‘You do it,’” one insurance lobbyist told TPM. “I don’t think they can require they lose money, they’d just pull out.”

There is no small amount of irony in this argument, because it’s the same one conservatives make about the existing systems of Medicare and Medicaid, and the ObamaCare program as well.  As those already on the plans know, the government doesn’t cover anywhere near the same percentage of costs as private insurers.  That’s one reason Medicare Advantage proved so popular as a private-public partnership to cover the costs and services that otherwise are out-of-pocket for Medicare/Medicaid recipients or poorly covered by its reimbursements.  Providers already are leaving Medicaid patients to the emergency rooms, and they’re increasingly doing the same for Medicare patients too because of the poor reimbursements.

Furthermore, ObamaCare exacerbates the problem by putting arbitrary mandates on insurers, where the reimbursements have been more rational thanks to competition.  HHS has had to issue more than a thousand waivers to keep insurers from closing down their businesses in order to meet mandatory premium-to-care ratios that were important to no one except members of Congress who didn’t understand the concept of risk pools, but who were certain they could run the industry better than the stakeholders could.  As experiments in ObamaCare-like systems showed in Maine and Massachusetts, imposing top-down, mandate-heavy systems usually results in provider flight and skyrocketing costs.

Insurers competing to add providers to their networks have to negotiate reimbursements, which is why providers don’t generally turn down insurance.  Ryan’s plan offers incentives for existing insurers to jump into a newly-created senior market, not the least of which is tens of billions of dollars each year in cash generated through the vouchers.  Looking at a massive new market with that much at stake, the problem won’t initially be whether seniors can find a plan, but whether the plans will differentiate enough for seniors to have some flexibility in crafting plans that fit their individual situations.  And that, in any case, would still be a huge improvement to the one-size-fits-all, single-payer Medicare and Medicaid systems that have crowded out private-sector insurers for decades.

Still, the question will be whether the voucher system can hold up over the long run.  Government subsidies tend to inflate costs, as we have seen in the student-loan industry.  Thanks to a flood of money that spiked demand, college tuition costs expanded far past the rate of inflation over the last four decades, and government spending had to increase just to keep up with the prices. Vouchers for health insurance run the risk of doing the same thing, and a $15,000 voucher in 2014 that sufficiently subsidizes an insurance plan may fall woefully short in 2020 when the costs become more apparent.  Better insurance also runs the risk of overuse that will drive up provider costs as well, just as it does now in the non-senior health-care sector.

The best system overall for the US is one that gets third party payers out of the way of pricing signals, but on senior care, that’s almost certainly a political impossibility.  Ryan’s plan works best to get cost control in the government portion of health-care financing as a transition from single payer, but it may not be a viable long-term solution, either.


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If you build it they will come

txmomof6 on April 15, 2011 at 2:19 PM

With Ocare, their companies are dead in the water (if not bought out by da gubment)
Methinks ins companies would be THRILLED to create whatever they need to stay solvent/unbought.

pambi on April 15, 2011 at 2:20 PM

I think there could be a hybrid system implemented gradually, which should cover everyone, not just poor people or old people. No question it is going to be a tough nut to actually implement, and ther will be hard cases that will make people angry. But there are thousands of old people suffering and dying prematurely right now because of Medicare screwups and coverage denials. The media just don’t report them.

rockmom on April 15, 2011 at 2:26 PM

with the CBO projecting that the average senior would be on the hook for over two-thirds of their health care costs within just 10 years of the plan’s adoption

It seems odd to me that we think it’s unfair for a person to be responsible for two-thirds of their health care costs.

Should a person be responsible for 100% of their health care costs?

I love my grandma and I’d take an extra job to make sure she got the medical help she needed, but, I don’t think it’s the responsibility of my friends and neighbors and complete strangers to chip in for her medical costs too.

That said, my grandma makes $6000 per month in pension and social security benefits, so, at 83, she makes more per month than I do. I certainly don’t think it’s the responsibility of tax payers to chip in for the medical costs of a woman who makes $72,000 per year, no matter how awesome the cookies she bakes are.

JadeNYU on April 15, 2011 at 2:27 PM

Still, the question will be whether the voucher system can hold up over the long run. Government subsidies tend to inflate costs, as we have seen in the student-loan industry. Thanks to a flood of money that spiked demand, college tuition costs expanded far past the rate of inflation over the last four decades, and government spending had to increase just to keep up with the prices.

Let not forget the pre-Obamacare FDR system of government subsidy for insurance was a typical Democrat economic idea. It inflated costs in such a way that the poor were screwed over. Ryan’s subsidy plan is far less likely to actually hurt the poor’s ability to receive health care. The more capitalist structure of Ryan may be better at controlling costs than the FDR system was. It certainly is no worse.

thuja on April 15, 2011 at 2:28 PM

You can’t swing a dead cat without hitting a car insurance advertisement…

… Get the government out of the business, and let the ‘invisible hand’ of the free market work its magic.

Seven Percent Solution on April 15, 2011 at 2:29 PM

Nothing is going to work long term if they don’t do something about the cost of healthcare. Meantime, if we assume insurance companies can manage risk pools as they do today, wouldn’t the new plans just be absorbed into that system? Of course, that would require repeal of Obamacare–or as Romney is promising, waivers for one and all.

Dee2008 on April 15, 2011 at 2:29 PM

The ideal is to give subsidies for catastrophic care, give money to the super-low income elderly who can’t afford their doctor’s visits out-of-pocket, and let everyone else compete in a free market for health care with their own money.

I’ve often thought that expanded health savings accounts, which roll over from year to year, would be best. Make them inheritable and tax-free upon death, and seniors would have a strong incentive to use the money wisely.

Roxeanne de Luca on April 15, 2011 at 2:30 PM

I certainly don’t think it’s the responsibility of tax payers to chip in for the medical costs of a woman who makes $72,000 per year, no matter how awesome the cookies she bakes are.

JadeNYU on April 15, 2011 at 2:27 PM

Love your post. That’s part of the beauty of Ryan’s plan. It calls for a sliding scale based on need.

Dee2008 on April 15, 2011 at 2:32 PM

That’s part of the beauty of Ryan’s plan. It calls for a sliding scale based on need.

Dee2008 on April 15, 2011 at 2:32 PM

Any honest means testing would necessarily lessen government’s power. I’d just as soon get them out of the business of paying for health care altogether.

gryphon202 on April 15, 2011 at 2:34 PM

In fact, it would. It would create an entire new market of carriers that would specialize in elder care policies which would spawn spinoffs for specialized ancillary care agencies such as visiting nurses, home health aides, counseling services for seniors and their beloved families.

The prospects are endless. Not just for the free markets, but for a total focus on care, compassion, affordability and an attitude toward the value of our Senior Citizens; what they have given to our society and to repay our debt as their survivors.

AARP would and should be totally excluded.

Key West Reader on April 15, 2011 at 2:36 PM

Ryan’s plan has one thing that ObamaCare does not. COMPETITION. Oddly enough, it’s competition that drives down costs.

Who knew?

GarandFan on April 15, 2011 at 2:36 PM

Until the Lefties and the Scrooges come down to Earth their won’t be a solution. Don’t go pointing fingers and yelling ‘aisle crosser’. You know that is the problem. The Karls and the JP Morgans won’t budge. After the crash, and the crash will come, it will take a couple hundred years to sort this all out.

I welcome my Ape overlords. Then I eat them.

Limerick on April 15, 2011 at 2:38 PM

Sorry the Ryan plan appears to be the GOP just pissin’ in a whirlwind!

I hope I’m wrong.

PappyD61 on April 15, 2011 at 2:40 PM

That’s why you need to make it so you can save some of the voucher for later as you get older. If you give 15 grand, but say that you don’t have to spend it all and can save some of the money, it will lower costs.

cpaulus on April 15, 2011 at 2:43 PM

A new market-based system can’t begin and end with just vouchers, obviously. Interstate insurance should be one of the first reforms that the GOP pushes. This will open up competition and reduce costs to some extent.

Removing other barriers to entry both on the insurance side as well as the provider side is needed to broaden the market.

chimney sweep on April 15, 2011 at 2:45 PM

It builds a dead old people market really well.

Dave Rywall on April 15, 2011 at 2:45 PM

As soon as I read the question, I thought that depends on the reimbursement rate. If the Reimbursement rate is high enough, then it would be worth it financially. And that is the key.

jeffn21 on April 15, 2011 at 2:48 PM

There is already competition in the Medicare Advantage marketplace, with new providers still entering the field.

If the government would scale back the diktats and allow insurers to create plans in response to actual demand, I’m sure we’ll see thousands of new choices.

Another essential part of this, of course, would be medical cost transparency. The patient should always have a co-pay, and the co-pay should have a known relationship to the actual cost.

The government-run Medicare/Medicaid system is a tangle of government lies to providers (about reimbursement rates and terms) and (in self-defense) provider lies to the payers. This dysfunctional system must be dismantled in favor of a system where the patient is in a position to make reasonable cost/benefit decisions. Co-pays and vouchers can be used to accomplish this.

Obamacare is structured to hide actual costs from the patient. Further, Obamacare incorrectly assumes that the only cost which matters is the cost to the government: this is a fatal flaw (in more ways than one)!!!

Government Control based on cost-to-government will lead to inferior medical care: already, we already see pressure on Medicare/Medicaid health system providers to use fewer CAT scans and MRI’s in favor of a medically-inferior 50 year old X-ray technology!!! A patient-centered system would be trying to make the best technology cheaper, instead of stifling innovation and forcing the use of inferior and less effective choices.

landlines on April 15, 2011 at 2:50 PM

Ryan bill just passed the House. ALL Democrats voted against it. Only four Republicans voted against it, one of which was Ron Paul.

Susanboo on April 15, 2011 at 2:50 PM

For your consideration:

Paul Ryan: A Swing And (Unfortunately) A Miss

flyfisher on April 15, 2011 at 2:51 PM

It builds a dead old people market really well.

Dave Rywall on April 15, 2011 at 2:45 PM

You mean like the Canadian system that tells a man he needs immediate open heart surgery, tells him to go home and pack a bag and wait for the beeper they give him to beep.

It took 6 weeks.

ladyingray on April 15, 2011 at 2:51 PM

The GOP proposal passed 235-193, with every Democrat voting “no.”

OT

cmsinaz on April 15, 2011 at 2:51 PM

If you build it they will come

txmomof6 on April 15, 2011 at 2:19 PM

yepper

cmsinaz on April 15, 2011 at 2:52 PM

You mean like the Canadian system that tells a man he needs immediate open heart surgery, tells him to go home and pack a bag and wait for the beeper they give him to beep.

It took 6 weeks.

ladyingray on April 15, 2011 at 2:51 PM
——-
You mean the random made up thing about the thing you made up about something? Yes. Exactly like that.

Dave Rywall on April 15, 2011 at 2:53 PM

The biggest cost to seniors are prescriptions. If we truly want to lower health care costs for everyone (and seniors particularly) then nationalize drug research.

Let the drug companies continue to manufacture the drugs at whatever profit they can get. But allow the government to take the lead in research and allow the government to open their patents to anyone in the industry, thus assuring competitive prices.

The drug industry is so heavily regulated and subsidized at this point that the government takes all the risks and the drug companies take all the profit. They use government grants and government protections (patent laws providing 20 years protection, soon to be 12 years with ObamaCare) to make their profit.

If there was ever anything that should be nationalized in the health care industry, this would be it in my opinion. I honestly abhor thinking of the government taking over anything. But with drugs eating up the amount of money they do, it’s the only thing I can think of since the patent laws allow a pharmaceutical company to pretty much charge whatever they want with no competition for 20 (12) years.

ButterflyDragon on April 15, 2011 at 2:54 PM

Again. If you create a pool of insurers nationwide that can compete for business, and if seniors are given vouchers of say… $6k each annually….

Not based on age; it must be a blind system of vouchers given equally, you could get a nationwide pool of carriers that would willingly take those premiums, spread the risk amongst the lesser risk, provide care for all, at a reduced price, with full oversight by State Insurance Department boards. The key factor would be that the insurance company would not be privy to the dollar amount of any vouchers. Hence, they would never know the risk, health, non-risk , great health or vitality of any insured.

That is what Insurance is all about. Shared risk with no known outcome.

Win. Win.

Key West Reader on April 15, 2011 at 2:55 PM

For Ryan’s plan to work with Medicare, Obamacare must first be crushed, otherwise mandates will apply to those new policies. The only insurance that makes sense, and which is insurance in the true meaning of the word, is catastrophic health insurance. Allow that for anyone that wants it, and the costs will come down.

Of course the democratics will demand that any new policies be ‘approved’ by the corrupt Chris Dodd AARP.

slickwillie2001 on April 15, 2011 at 2:55 PM

It builds a dead old people market really well.

Dave Rywall on April 15, 2011 at 2:45 PM

Only if you are Barack Obama. Who hates old people.

Back atcha biotch

Key West Reader on April 15, 2011 at 2:56 PM

It builds a dead old people market really well.

Dave Rywall on April 15, 2011 at 2:45 PM

Well since liberals and the party of death have no problem killing off people of any age that are useless in their eyes you should be quite comfortable with this.

txmomof6 on April 15, 2011 at 2:57 PM

And with the CBO projecting that the average senior would be on the hook for over two-thirds of their health care costs within just 10 years of the plan’s adoption — a proportion that is projected to worsen in the long run…

So based on a $15,000 voucher, the CBO is projecting health care costs of over $45,000 per year for the average senior within 10 years.

There’s the problem in a nutshell right there. I don’t see many seniors being able to afford health care costs of $45,000/year and rising. I also don’t see many insurers being interested in offering insurance to a demographic that typically racks up those kinds of costs.

Wish I knew the answer. Absent a miracle in cost control, I think some form of rationing is inevitable.

cool breeze on April 15, 2011 at 2:58 PM

Ryan and Obama’s plans are both ideological markers and well short of details. Both plans come with fictional forecasts involving conjured numbers which don’t add up.

The good news… both are talking about reducing spending and tackling our current dismal fiscal trajectory.

lexhamfox on April 15, 2011 at 3:01 PM

The biggest cost to seniors are prescriptions. If we truly want to lower health care costs for everyone (and seniors particularly) then nationalize drug research.

ButterflyDragon on April 15, 2011 at 2:54 PM

I think nationalize is the wrong word. The government does contribute to research now through universities and basic science projects often in partnership with the private sector.

lexhamfox on April 15, 2011 at 3:04 PM

If we truly want to lower health care costs for everyone (and seniors particularly) then nationalize drug research.

ButterflyDragon on April 15, 2011 at 2:54 PM

Nationalizing anything never brings the cost down. Only competition does that. You get competition by reducing barriers to entry into the market. We need massive reformation of patent laws and expedited FDA review.

alwaysfiredup on April 15, 2011 at 3:06 PM

I, my parents and my employers have been paying health insurance premiums for most of my life. It’s been a net gain for the insurance companies since most years, I don’t have enough medical expenses to even meet my deductible. Why should I be arbitrarily thrown out of the pool at age 65?

SukieTawdry on April 15, 2011 at 3:07 PM

It builds a dead old people market really well.

Only if you are Barack Obama. Who hates old people.

Back atcha biotch

Key West Reader on April 15, 2011 at 2:56 PM

Correction -he hates old white people.

slickwillie2001 on April 15, 2011 at 3:07 PM

I’ve often thought that expanded health savings accounts, which roll over from year to year, would be best. Make them inheritable and tax-free upon death, and seniors would have a strong incentive to use the money wisely.

Roxeanne de Luca on April 15, 2011 at 2:30 PM

I loved my HSA that my previous employer offered. Unfortunately, my current employer doesn’t offer one. It was nice to save my own money, and have my employer match it, and then spend it on heathcare the way I needed to, I just used a Visa card. No forms or reimbursements, the money just accumulates until retirement if you didn’t use it, etc. I’d love for all of my heathcare to be managed this way.

I am lucky though, my current employer offers family coverage for just $100/month. I don’t know how, our plan is through BCBS of MA, but it sure is great.

Common Sense on April 15, 2011 at 3:07 PM

cool breeze on April 15, 2011 at 2:58 PM

People need to learn how to die.

Nowadays we just stick people in the hospital and do our best to defy reality by keeping them hooked up to machines and pumping them full of drugs at great cost.

Which is why I have a living will. I refuse to allow my family to be crushed by debt.

ButterflyDragon on April 15, 2011 at 3:09 PM

So based on a $15,000 voucher, the CBO is projecting health care costs of over $45,000 per year for the average senior within 10 years.

There’s the problem in a nutshell right there. I don’t see many seniors being able to afford health care costs of $45,000/year and rising. I also don’t see many insurers being interested in offering insurance to a demographic that typically racks up those kinds of costs.

Wish I knew the answer. Absent a miracle in cost control, I think some form of rationing is inevitable.

cool breeze on April 15, 2011 at 2:58 PM

The miracle is this.

We can control costs. Don’t ever let anyone tell you anything less.

Health insurance is like car insurance. The purpose of insurance is to pool the funds of many to fund the losses of few.

That said.

Obama has spooked the health insurance market and that spookiness has raised rates.

Medicare and Medicaid rates are stable. As a matter of fact, most physicians and pharmacies are doing what they can to stay alive.

By giving all Medicaid and Medicare recipients vouchers, IF the nationwide market was opened, there would be no need to ration care.

Obama lives in a world where his WIFE PARTICIPATED IN PATIENT DUMPING BECAUSE THEY DIDN’T HAVE HEALTH INSURANCE. You will not hear a reporter asking him for details on this issue. You can look it up; I did not provide a link because you need to study it for yourself.

Now. We have a large populace that has relied for generations on the gubmint. They don’t like it, they just take advantage of it.

If you create or envelop a large portion of seniors into private care policies…. if you give the elder population vouchers to pay for care, they would envelop themselves into the norm; get the care that they need with no disruption.

THE ISSUE IS THIS:

What do do with the welfare queens that are on Medicaid that run themselves to the hospital for a nose bleed? Complete with golden teeth, gold plated debit cards that enable them to purchase sheets at Macy’s when I have to buy them from Sears?

Or the welfare pimps who have never known otherwise. I get my tennis shoes from the gubmint. Dont fuu wih me i caint spell

START, NOW.

Key West Reader on April 15, 2011 at 3:09 PM

Wish I knew the answer. Absent a miracle in cost control, I think some form of rationing is inevitable.

cool breeze on April 15, 2011 at 2:58 PM

We have one right now, and it’s called the free market. If you can’t afford something with the money you have on hand, you either get a loan or you don’t buy it. If those don’t suit you, there’s always indemnity insurance, in which you pay into a pool before you need to take money out, and hope that neither yourself nor anyone else needs to take money out.

Viewed from that perspective, money placed into an insurance plan by a healthy person is lost money to them, which is one of the pitfalls of any government-forced-insurance plan; if a healthy person doesn’t want to lose money in paying for insurance they don’t need, they find a way to avoid purchasing the insurance until they do need it. The yearly penalty under Obamacare for not purchasing insurance is $750, and $750 is a bit more than one month’s premium; the obvious solution for the healthy person is to buy no insurance and pay the fine until one needs the insurance, and then buy it. In the year one buys the insurance, one avoids the $750 fine, and so it’s as if one purchased 12 months of insurance with 10 months of extra budget.

From an actuarial standpoint the latter type of insurance fund will always be under-funded, because everyone paying in is already unhealthy enough to require much more outlay than is being paid in.

unclesmrgol on April 15, 2011 at 3:11 PM

So long as there are no rule requiring them to cover more expenses than can be made up by the premiums they can charge, the market will exist.

Count to 10 on April 15, 2011 at 3:12 PM

The biggest cost to seniors are prescriptions. If we truly want to lower health care costs for everyone (and seniors particularly) then nationalize drug research.

ButterflyDragon

This, folks, is the kind of economic illiteracy that has gotten this country where it is today.

xblade on April 15, 2011 at 3:14 PM

I, my parents and my employers have been paying health insurance premiums for most of my life. It’s been a net gain for the insurance companies since most years, I don’t have enough medical expenses to even meet my deductible. Why should I be arbitrarily thrown out of the pool at age 65?

SukieTawdry on April 15, 2011 at 3:07 PM

Because, actuarially, they would have to raise rates a lot more to cover you past 65. Those rates you are paying in are keyed to cover outlay plus a modest percentage of profit. If outlays go up, rates go up.

unclesmrgol on April 15, 2011 at 3:15 PM

People need to learn how to die.

ButterflyDragon on April 15, 2011 at 3:09 PM

You are basically right. Most of the costs for seniors are racked up in the last few months of life.

But what are the odds that any politician is going to be willing to touch the harsh reality of that subject? Just ask Sarah “Death Panels” Palin.

cool breeze on April 15, 2011 at 3:17 PM

unclesmrgol on April 15, 2011 at 3:11 PM

You make good points but that happens all the time even without Obamacare via emergency room care.

lexhamfox on April 15, 2011 at 3:18 PM

The cost of insurance for seniors will certainly exceed the value of any voucher given to them. It won’t work.

Has anyone here ever tried to buy your own health care plan? If you can find one, you are still looking at $12-20k per year in premiums.

Old Fritz on April 15, 2011 at 3:27 PM

You mean the random made up thing about the thing you made up about something? Yes. Exactly like that.

Dave Rywall on April 15, 2011 at 2:53 PM

You mean like Danny Williams?

Yeah, that’s what I thought. Now go back to playing in the sandbox, and make sure the cat doesn’t cover you up.

Dominion on April 15, 2011 at 3:27 PM

This, folks, is the kind of economic illiteracy that has gotten this country where it is today.

xblade on April 15, 2011 at 3:14 PM

Incorrect. You are obviously illiterate on the pharmaceutical industry.

The government already pays for research. We the taxpayers help pay for the R&D for drugs, then we get to pay outrageous prices for the drugs (until the patent expires) as thanks for our assistance.

Right now Chemist X works for ABC, Inc. Chemist X is paid via a grant supplied by Uncle Sam. Chemist X makes a breakthrough. ABC, Inc. files a patent on that breakthrough. Uncle Sam protects their patent for 20 years.

ABC, Inc. makes money coming and going, all at the expense of the American taxpayer.

Now, let’s change it up by saying that since Chemist X was working off of a grant supplied by the US government, that the patent is owned by the US government. Who they can distribute freely to numerous corporations who can compete for market share on that breakthrough drug.

R&D is already “nationalized”, whether you like it or not.

ButterflyDragon on April 15, 2011 at 3:33 PM

But what are the odds that any politician is going to be willing to touch the harsh reality of that subject? Just ask Sarah “Death Panels” Palin.

cool breeze on April 15, 2011 at 3:17 PM

One of the reasons I was not thrilled with that avenue of attack, as accurate as it was.

Count to 10 on April 15, 2011 at 3:33 PM

Anything that is subsidized is over-utilized and under valued. That is the rule of subsidies.

When Medicare does not pay the full cost of whatever is treated, those doing the treatment must raise the cost of treatment for others. That is the rule of cost-shifting due to subsidies.

When government is involved to perform a service it has a higher overhead than any other form of organization due to the bureaucracy and red tape involved not just for the consumer of such services but for the staff involved. No organization performs worse than government in terms of overhead.

Combine these three items and you have an under-valued, over used medical system that shifts costs to actual payers not on government assistance that then raises the cost for all users of the system, and the government absorbs more in the way of costs than any insurance plan, and far and away more than any charity performing medical services.

The only way to correct this system is to get the government out of it as it’s ‘help’ is not worth the cost to the Nation as whole. Those costs continually rise to meet the lack of payments by government. Even if the government paid the full cost that full cost must have overhead appropriate to it, thus increasing the overall cost of the government to provide that service, thus your taxes will go up at an extremely rapid rate. The most costly system is one is the ‘mixed’ system which has the negatives of insurance, government and spiraling costs.

There are no sets of regulations that will go against the Iron Law of subsidies: they will always show up in absorbed GDP no matter how much government tries to stop it. Even worse in trying to stop it government incurs additional cost and burdens the system with more overhead and bureaucracy in those attempts.

To get away from such a system the government must stop giving subsidies via a large bureaucracy and then slowly end its subsidies completely and even the playing field and reward those who treat the poor with tax breaks. That can be done by subtracting pro bono time for physicians or allowing write-offs for the cost of manufacture and distribution of medication to the poor and destitute. It can be enhanced by full write-offs for individuals who donate to medical charities. These are forms of subsidies, yes, but they shift the burden of provision from government to individuals, charities and corporations. That is subsidizing a system of understood needs to be met and allowing people to determine where the money, time and effort goes via that subsidy, so that needs are addressed at the lowest possible level. By getting government out of the paying part of the system and the collections part of the system, it is left up to others to decide how best to run medical care for the poor and destitute. Better a for profit company than a red tape wielding bureaucrat… and far better a volunteer physician, nurse, or private citizen willing to help out at a hospital or hospice.

Get rid of the current medical subsidy system. Add Medicare and Medicaid together, divide by 2, apportion to the States via block grants and phase that out over 5 years so the State can determine the best way to care for their citizens. Then reward good behavior and those willing to donate time, goods, and cash to support the old ‘social safety net’ of citizens doing the hard work that government can’t do as cheaply. Nothing is as cheap nor as rewarding to society as people volunteering to help each other on their own. Far better that path of the caring citizen than that of the uncaring bureaucrat.

ajacksonian on April 15, 2011 at 3:33 PM

The cost of insurance for seniors will certainly exceed the value of any voucher given to them. It won’t work.

Has anyone here ever tried to buy your own health care plan? If you can find one, you are still looking at $12-20k per year in premiums.

Old Fritz on April 15, 2011 at 3:27 PM

Only if they insist it cover everything.
Insurance is supposed to average out expenses, not magically make them go away for everyone.

Count to 10 on April 15, 2011 at 3:35 PM

For the record, I’m 59, caring for my 81-year-old mother.

As a society we can’t afford what we wish we could do for seniors. Individually most of us can’t afford it either. Throwing insurance and other 3rd parties into the mix doesn’t really change the $, when it is obvious I and my mother will cost more and more as time goes on.

A commenter above doesn’t want society paying for her grandmother in comfortable circumstances, a very fair comment. Take it on down to families – if my son has to choose between paying for me in my final years OR sending the grandson to college, what do I want? What if his choice is pay for me or lose his home? Pay for me or go hungry?

If govt. schemes could work, and paying to ease our conscience could work, we’d know it by now. These choices are always going to exist and be difficult. The way it is now, our kids pay either way, with no choice in the matter.

jodetoad on April 15, 2011 at 3:36 PM

Get rid of the current medical subsidy system. Add Medicare and Medicaid together, divide by 2, apportion to the States via block grants and phase that out over 5 years so the State can determine the best way to care for their citizens.
ajacksonian on April 15, 2011 at 3:33 PM

Not a bad idea — the states would just have to figure out how to deal with people that move across state lines.

Count to 10 on April 15, 2011 at 3:37 PM

Key West Reader,

Sorry, but welfare queens on Medicaid don’t have anything to do with the fact that Medicare is rapidly going bankrupt.

And health care costs were going up at 15-25% annually for years before Obama was elected, so it wasn’t simply that Obamacare spooked the market. There is scant evidence that anyone has figured out how to spiraling control health care costs in our system.

You are right about Michelle being involved in patient dumping, though.

cool breeze on April 15, 2011 at 3:39 PM

The cost of insurance for seniors will certainly exceed the value of any voucher given to them. It won’t work.

Has anyone here ever tried to buy your own health care plan? If you can find one, you are still looking at $12-20k per year in premiums.

The current plans have too many govt. mandates and too little competition.

If the only phone you were allowed to buy was an i-phone, and you could only buy an i-phone made in your state, you’d pay $1000 for a phone. Thankfully, that’s not the case. We have a variety of options from a variety of providers. You can pay $50 or $1000…you choose. That’s the benefit of comptitive market! Why do people question this?

Deafdog on April 15, 2011 at 3:39 PM

From an actuarial standpoint the latter type of insurance fund will always be under-funded, because everyone paying in is already unhealthy enough to require much more outlay than is being paid in.

unclesmrgol on April 15, 2011 at 3:11 PM

From the beginning all insurance policies are blind.

In other words, you are pooling the resources of many (premiums) against the risk of loss (claims).

If you have equal numbers of contributors, into a “fund” of sorts, then there are no winners or losers.

It boils down to a pooling of funds to protect against loss; some may pose a higher risk and some may pose no risk, and some may fall in between.

Obamacare defeats the purpose and intent of insurance. So, if the meat puppet acheives his ends then there will be no insurance. There will only be government.

I for one would LOVE to deal with the government if my windshield gets broken. Or if I crash my car. Or if I get sick. Or if I need surgery.

Yes, the government is the BEST entity to deal with something of which they have no knowledge. Only money.

Key West Reader on April 15, 2011 at 3:51 PM

It builds a dead old people market really well.

Dave Rywall on April 15, 2011 at 2:45 PM

Somehow I still think Canadians will flock to America to get their healthcare done in a timely and affordable mannter.

gwelf on April 15, 2011 at 3:54 PM

As a society we can’t afford what we wish we could do for seniors. Individually most of us can’t afford it either. Throwing insurance and other 3rd parties into the mix doesn’t really change the $, when it is obvious I and my mother will cost more and more as time goes on.

jodetoad on April 15, 2011 at 3:36 PM

Exactly.

So what to do? Not many choices but to either control costs (which history shows is improbable) or ration care. Its already happening. The FDA moved recently to reject Avastin for the treatment of breast cancer because its simply too d*mn expensive. Expect a lot more of that in the future, with or without Obamacare.

cool breeze on April 15, 2011 at 3:54 PM

Sorry, but welfare queens on Medicaid don’t have anything to do with the fact that Medicare is rapidly going bankrupt.

And health care costs were going up at 15-25% annually for years before Obama was elected, so it wasn’t simply that Obamacare spooked the market. There is scant evidence that anyone has figured out how to spiraling control health care costs in our system.

You are right about Michelle being involved in patient dumping, though.

cool breeze on April 15, 2011 at 3:39 PM

The issue arises out of a shut out or lack of competition.

As we know, Allstate, GEICO, State Farm and companies like that all have the ability to compete with one another across state lines. This is why they compete for your business and I’m reasonably certain that you have seen their commercials on television.

The private Health Insurance market has no ability to compete. At all.

The answer to this query is the fact that the gubmint has had its hands on the Senior health care market via AARP and its “supplements” that actually had the freaking AUDACITY to reach into the auto market.

The answer is and always be this: Open the markets nationwide for health care as a whole society. Or, take the Obama Care plan.

The difference is Free Markets vs. Gubmint Control of your health care delivery.

Time to choose.

Key West Reader on April 15, 2011 at 3:56 PM

There is scant evidence that anyone has figured out how to spiraling control health care costs in our system.

There is tons of evidence that the more govt. is involved in any sector of the economy, the more it is f-ed up.

Why have healtcare costs been spiraling up? There are several reasons, but the biggest is that govt. over-regulates – way too many mandates, for example – and over-subsidizes. I posit that the solution for a govt. created problem, then, is to find ways to remove govt – not find ways to inject more government.

Deafdog on April 15, 2011 at 3:58 PM

Let me just sum this up in a very simple manner. So that even the Journolists working for the Obama regime can understand. I will form the query as questions, just to make it easy for Ezra Klein.

1. Do you want to have a physical examination at the DMV?

2. Do you want to have a DMV worker inspect your breasts?

3. Do you want to have a prostate exam at the DMV?

4. Do you want a DMV to inspect your testicles?

5. Do you want to sit at the DMV office waiting for the next available DMV worker to inspect your body?

6. Would you like to allow a DMV worker to give your next pelvic exam and tox screen?

If you are Ezra Klein, I’m sure you’re not affected by these issues because he is neither a male or female.

But I would invite people to make a choice. Who do you want all over your body? Your doc? Or the Gubmint?

/Purposely left out the groping of children by TSA

Key West Reader on April 15, 2011 at 4:04 PM

Key West Reader,

I would enthusiastically support interstate competition in health insurance, but don’t expect it to be any kind of panacea. I am not aware of any of the 50 states where health insurance is significantly less expensive than most states for similar coverage (I think there are a few that are significantly more expensive).

Also, the idea of interstate competition has been around for decades, yet we never got close to getting it, even during those periods when the GOP controlled the House, the Senate and the Presidency. What reason is there to hope we would get it ever?

cool breeze on April 15, 2011 at 4:11 PM

Has anyone here ever tried to buy your own health care plan? If you can find one, you are still looking at $12-20k per year in premiums.

I have. Fortunately I live in a state where I was able to choose from among several competing providers who offer individual policies. I have a pretty comprehensive plan, from a major insurer, and I don’t pay anywhere near $1,000 a month for it.

AZCoyote on April 15, 2011 at 4:12 PM

Now there’s no linkage between what care costs, and who pays for it. It’s like those credit card theft commercials, where someone steals your card and buys stuff you’d never buy. Why not. They’re not paying for it. Same with Medicare. It’s free. “You can get a mobility device, at no cost to you”.

Paul-Cincy on April 15, 2011 at 4:13 PM

Ace had a good post the other day about the difference between produced/manufactured ‘goods’ and crafted ‘goods’.

So many things today are so much cheaper than in the past because manufacturing has provided a way to make it so (the labor of a few can produce a lot) whereas some things require a dedicated craftsman to produce and such things will always be expensive.

Books were really really expensive when they required a crafstman to create and illustrate them by hand but the printing press makes this process quickly and cheaply done by the relatively minimal labor of a few.

Unfortunately medical care falls into the ‘craftsman’ category and there are certainly things than can be done to make it cheaper there is only so much you can do. Certainly routine medical things can be done relatively cheaply but open heart surgery will always be expensive.

Also unfortunately liberals have fostered a culture where people feel entitled to things without considering the real cost. They chant that healthcare is a right without regard to the craftsman who has to provide this ‘right’. Ultimeately this road leads to forcing the craftsman to provide his service which means we’ll have fewer craftsmen and it’s a downward spiral from there. Most the time a liberal rants about ‘rights’ it’s a good bet that ‘right’ will only be albe to be ‘provided’ by infringing on the freedom of others.

gwelf on April 15, 2011 at 4:14 PM

I think the market will look a lot like the market for Medicare supplements today. And I think there will be better outcomes all around. Instead of waiting weeks to see the one guy in the area who takes Medicare, you see a doctor in a private insurer’s network right away. That will do a lot for better health outcomes for the elderly.

With drug prices no longer pegged to Medicare reimbursement, I think this will drop drug prices overall. When Medicare pays so little for Oldfolksneeditine, and nobody else will reimburse what it cost the company to make Oldfolksneeditine, the drug company is forced to raise prices for other medicines to cover the losses, and focus on high-profit vanity drugs like baldness cures, 1mp0t3ncy cures, and fat drugs at the expense of drugs for things like cancer.

Sekhmet on April 15, 2011 at 4:20 PM

It isn’t, or at least shouldn’t be, considered that $15,000 is all the premium seniors would pay. That is merely the amount of the proposed vouchers. At present seniors already pay more than $100 per month premium on medicare and I pay another $100 per month on seoondary insurance (heavily subsidized by prior employer) and still have some high co-pays on brand name prescriptions. In my case, if I had the $15,000 voucher, I would consider the addition of the premiums I pay to Medicare and secondary insurance plus anticipate having to pay co-pays on prescriptions. Premiums and co-pays, I currently pay out $500 to $700 per month anyway. Remember, this is insurance. Insurance was never meant to pay first dollar of any coverage event.

Oleta on April 15, 2011 at 4:20 PM

You can’t swing a dead cat without hitting a car insurance advertisement…

… Get the government out of the business, and let the ‘invisible hand’ of the free market work its magic.

Seven Percent Solution on April 15, 2011 at 2:29 PM

If health insurancfr workeed m,ore like car insurance, we wouldn’t be in the mes we are in.

First of all, nobody expects their employer to pay for their car insurance, even though most of us have to drive to work. Thgis certainly can be a hardship if you are unemployed or poor, but you don’t hear people screaming for free car insurance, do you?

Second, people can choose their level of coverage with car insurance. Don’t want collision? Don’t buy it. Then you assume responsibility for all of your repairs or buying a new car if you have an accident. The states require minimal liablity coverage so that everyone who drives has a minimum amount of insurance against a catastrophic crash that affects someone else.

Third, car insurance does not pay for routine maintenance, gas, or repairs of things that just break or wear out. It pays for catastrophic costs incurred from crashes.

Fourth, if your accident is your own fault because of negligence or reckless driving, your insurance will not pay for your damage.

Fifth, if you have a lot of accidents, the insurer can raise your rates.

If health insurance were structured and priced this way, everyone would be able to afford it and everyone would buy it. Old people would buy more of it, and it would be more expensive, but it would be available. Everyone would have a financial incentive to live healthier lives because insurers could jack up rates for people who smoke, are overweight, don’t exercise, etc. People would be responsible for their own “routine maintenance,” i.e annual physicals, minor procedures. Doctors would probably shift toward all-cash practices so they could reduce their costs and see more patients instead of watsing half their days doing paperwork.

Employers, rather than being forced to provide or subsidize health insurance, could simply require employees to have an individual policy as a condition of their employment.

rockmom on April 15, 2011 at 4:25 PM

You mean the random made up thing about the thing you made up about something? Yes. Exactly like that.

Dave Rywall on April 15, 2011 at 2:53 PM

It’s not made up. It happened to a coworker’s father-in-law.

ladyingray on April 15, 2011 at 4:26 PM

You mean the random made up thing about the thing you made up about something? Yes. Exactly like that.

Dave Rywall on April 15, 2011 at 2:53 PM

Probably not the story LadyInGrey was referring to but I think it makes the same point.

http://www.cbc.ca/news/canada/montreal/story/2010/03/08/mtl-quebec-heart-surgery-wait.html

OBQuiet on April 15, 2011 at 4:30 PM

Unfortunately medical care falls into the ‘craftsman’ category and there are certainly things than can be done to make it cheaper there is only so much you can do. Certainly routine medical things can be done relatively cheaply but open heart surgery will always be expensive.

Also unfortunately liberals have fostered a culture where people feel entitled to things without considering the real cost. They chant that healthcare is a right without regard to the craftsman who has to provide this ‘right’. Ultimeately this road leads to forcing the craftsman to provide his service which means we’ll have fewer craftsmen and it’s a downward spiral from there. Most the time a liberal rants about ‘rights’ it’s a good bet that ‘right’ will only be albe to be ‘provided’ by infringing on the freedom of others.

gwelf on April 15, 2011 at 4:14 PM

Costs are spiraling because of an “arms race” in hospitals. Every hospital has its own MRI and they cost $100k. Nobody washes or sterilizes anything anymore, everything is disposable one-use products, including the cafeteria trays. Analog scales with weights are perfectly fine for weighing people, but hospitals want the latest $5000 digital scale, which breaks down twice a year.

This is all happening because Other People’s Money is paying for it. The only way to stop it is to force people to start spending their own money directly for health care, especially hospital bills. That, and impose limits on medical liability to stop all the unnecessary tests and insistence on state-of-the-art machines.

rockmom on April 15, 2011 at 4:35 PM

Dave Rywall on April 15, 2011 at 2:53 PM

I’m curious Dave how Canada has dealt with it’s doctor problem – you know where the government needs to curtail their tendencies to cut peoples feet off and perform tonsilectomies just to make a quick buck?

gwelf on April 15, 2011 at 4:37 PM

Costs are spiraling because of an “arms race” in hospitals. Every hospital has its own MRI and they cost $100k. Nobody washes or sterilizes anything anymore, everything is disposable one-use products, including the cafeteria trays. Analog scales with weights are perfectly fine for weighing people, but hospitals want the latest $5000 digital scale, which breaks down twice a year.

This is all happening because Other People’s Money is paying for it. The only way to stop it is to force people to start spending their own money directly for health care, especially hospital bills. That, and impose limits on medical liability to stop all the unnecessary tests and insistence on state-of-the-art machines.

rockmom on April 15, 2011 at 4:35 PM

I agree that many things can be done to make healthcare actually cheaper and that the solution at it root lies in exposing people to the actual costs – my larger point is that at some point we need to get rid of the mentality that everyone is going to have guaranteed access to every possible medical procedure.

Social Security and Medicare have gone from providing some sort of safety net to the most vulnerable among us to a massive fishing net that catches everyone it possibly can because “we’ve got a right to X”.

gwelf on April 15, 2011 at 4:40 PM

They’ll be more than happy to get an annual government voucher.

mizflame98 on April 15, 2011 at 4:41 PM

They could bundle some of the young in with the old and call them insurance derivatives. Oh, wait, maybe that’s not such a good idea. What ever it turns out to be, getting the govt outta our lives and health care/insurance will be worth it.

Kissmygrits on April 15, 2011 at 5:05 PM

I am as much of a free market capitalist as you are ever likely to find, but health care will never be a truly free market as long as it is considered a right, meaning that hospitals aren’t allowed to turn away a patient because they don’t have insurance and/or can’t afford to pay for the care. As long as that is the case (likely forever), someone has to eat those costs – either hospitals (who pass them on in the form of higher charges to paying patients and insurers), insurers (who pass them on in the form of higher rates to customers) or taxpayers (who subsidize Medicare and Medicaid).

In this not-so-free market, the health care industry is a victim of its own success. With demand unconstrained by the ability to pay, it steadily churns out more and more expensive treatments for more and more ailments. Health care was much less expensive in the past because you simply suffered and died from many things for which they now have expensive treatments.

That juggernaut will probably continue to consume an ever increasing percentage of national GDP until the country as a whole runs out of the ability to pay for it all through any means. The third world is already there and is still waiting for treatments for many diseases that primarily affect them. The first world is getting to that point about
now (see Avastin). As jodetoad said, “As a society we can’t afford what we wish we could do”.

Best to be honest the fact that some form of rationing to control costs is inevitable and we need to explicitly debate and decide how its going to be done.

cool breeze on April 15, 2011 at 5:09 PM

Costs are spiraling because of an “arms race” in hospitals. Every hospital has its own MRI and they cost $100k. Nobody washes or sterilizes anything anymore, everything is disposable one-use products, including the cafeteria trays. Analog scales with weights are perfectly fine for weighing people, but hospitals want the latest $5000 digital scale, which breaks down twice a year.

This is all happening because Other People’s Money is paying for it. The only way to stop it is to force people to start spending their own money directly for health care, especially hospital bills. That, and impose limits on medical liability to stop all the unnecessary tests and insistence on state-of-the-art machines.

rockmom on April 15, 2011 at 4:35 PM

Little confused here.

If you’re talking about a privately owned or run hospital, I would expect them to have the most up-to-date equipment and best people (hired at competitive salaries to get them in the first place), thus a higher cost for (and better) treatment.

The gov’t hospitals are the ones I’d expect to have all the cheap, outdated crap and the bottom of the staff barrel as they’re taxpayer-funded and more than likely have unionized help.

We can’t expect top quality health care unless we’re willing to pay for it as these companies are in it to make money and maximize profit and please their shareholders.

Those who receive treatment and can’t pay will (already have been) adding to the cost.

And one way or another…we’ll all pay for it.

Dr. ZhivBlago on April 15, 2011 at 6:12 PM

OBQuiet on April 15, 2011 at 4:30 PM

Don’t you know? I made up that story!

/

ladyingray on April 15, 2011 at 6:26 PM

rockmom on April 15, 2011 at 4:35 PM

I work in the healthcare industry and I a few questions:

Do you prefer substandard testing equipment?

Do you prefer “sanitized” needles and tubing?

I can assure you that we don’t have disposable cafeteria trays, but we just won a national award for our ZERO count for infections resulting from being in a hospital.

It sure is a waste to use disposable needles, instruments, tubing, etc…

ladyingray on April 15, 2011 at 6:31 PM

“Would vouchers for Medicare create an insurance market to meet demand?”

I don’t know.

Kevin M on April 15, 2011 at 6:43 PM

The problem is in the hidden cost.

A 100% private insurance system for those 65+ would only mean that everyone below 65 pays higher premiums to subsidize the true cost of insuring those over 65.

Fact is you don’t get to be 80 without pre-existing conditions, heck your life is a pre existing condition.

The actual health care cost for a person 65+ is more than 3x more than someone under 65. That cost goes up 60% at 75 and the cost of a person at 85 is 150% of that at 65, you get the point. Not insurance cost but actual cost to treat.

Who’s lining up to insure this group?

NextGen on April 16, 2011 at 10:14 AM