Video: Why free-market premium support will save Medicare

posted at 2:09 pm on May 18, 2011 by Ed Morrissey

The debate over Newt Gingrich’s comments have breathed new life into the conflict between central planning and free-market approaches to public policy, especially on existing entitlements. Dan Mitchell explains in his latest video for the Center for Freedom and Prosperity that central planning has been the problem, and it can’t be the solution. The escalating costs associated with Medicare come from a lack of pricing signals to consumers, a problem that exists throughout most (but not all) of the health-care sector. The oft-cited “waste, fraud, and abuse” (WFA, for short) play a role as well, but that exists because of the nature of central planning and government intervention, not despite it.

Fortunately, premium-support reforms such as that proposed by Paul Ryan works to solve both rising taxpayer liabilities and WFA through competition and the act of returning government to a regulatory role rather than that of a monopolist third-party payer. Dan walks through the numbers, and laments only that Ryan’s plan won’t leave him with the choice of selecting a private insurer for his own care:

One point about the IPAB has been somewhat lost. Politicians should love the idea of getting rid of the IPAB, as it lets them off the hook for the consequences of life-and-death denials of care. They may think that the buffers that keep them from overturning IPAB decisions will free them from the political consequences of the panel’s decisions, but it’s much more likely that denials will produce strident demands to eliminate the IPAB and its unaccountable control over the lives of Americans. Passing those decisions onto insurers would be much easier on everyone, especially since seniors would have the ability to switch coverage rather than beg their Congressman for mercy.


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Thank you Ed for posting this.

txmomof6 on May 18, 2011 at 2:12 PM

But if there is choice for consumers, how is Obama going to choose who wins and who loses?

search4truth on May 18, 2011 at 2:21 PM

One thing he didn’t mention: The very presence of Medicare, Medicaid, and the like causes insurance companies to index their own rates of compensation for various products and procedures. Indirectly, Medicare and Medicaid as third-party payers are the reason a Tylenol at a hospital is at minimum ten bucks.

If Medicare compensates squat for X procedure, private insurance compensates squat plus hahaha. To cover the actual cost to the hospital, the hospital is often forced to nickel-and-dime costs they know they can get the third-party payer and consumer to shut up and pay.

Take away the third-party payers, and the hospital can charge what a procedure actually costs to the people actually undergoing the procedure. And charge for a Tylenol what the Tylenol actually costs.

Sekhmet on May 18, 2011 at 2:28 PM

What, letting people shop for the best deal, and perhaps get a cheaper high-deductable plan that will give them incentive to self-police their medical spending?

It would never work.

(I don’t thing the sarc tag is really necessary)

iurockhead on May 18, 2011 at 2:30 PM

Sekhmet on May 18, 2011 at 2:28 PM

Spot on. Reduce the cost shifting, and it will reduce MY insurance costs.

iurockhead on May 18, 2011 at 2:32 PM

The more I understand Ryan’s plan, the more I’m beginning to like it. The hysteria that the left, and some on the right, threw at the plan is being countered effectively.

Until someone else comes up with a better plan, then I’d like to see this get implemented ASAP

Kini on May 18, 2011 at 2:32 PM

The escalating costs associated with Medicare come from a lack of pricing signals to consumers, a problem that exists throughout most (but not all) of the health-care sector.

This cannot be said often enough. Non-covered procedures, like elective plastic surgery and Lasik, have declined in price in real terms over the past decade or more, while covered procedure costs have skyrocketed. Until the consumer of the medical service is involved in the purchase decision, there can be no satisfactory resolution.

Vashta.Nerada on May 18, 2011 at 2:37 PM

One point about the IPAB has been somewhat lost. Politicians should love the idea of getting rid of the IPAB, as it lets them off the hook for the consequences of life-and-death denials of care… Passing those decisions onto insurers would be much easier on everyone, especially since seniors would have the ability to switch coverage rather than beg their Congressman for mercy.

Ed, you’re missing the point of what the Left is doing. The denials of care are never INTENDED to occur. The reason they are put into law is that the rulers WANT their constituents to come asking for favors. The one thing every Congressman wants most is to be able to say to his constituents at re-election time, “Remember what I did for you?” You need look no further than the Obamacare waiver scandal for more evidence of this.

joe_doufu on May 18, 2011 at 2:42 PM

Ryan’s plan won’t leave you with the choice a private insurer for your own care? I didn’t know that.

Did Gingrich have a point?

rrpjr on May 18, 2011 at 2:50 PM

Good post.

What people should realize is that SS itself is a voucher. Seniors get a check every month. No bureaucrat tells them how to spend it. You don’t have to beg your congressman (or Sebelius) for a waiver to spend it on whiskey if you want to.

You can do whatever the hell you want with it. Medicare should be the same. So politically I don’t see why it’s so scary to Congress–except they like that power over us.

PattyJ on May 18, 2011 at 3:06 PM

I’m always waiting for him to say, “Ya think ya hate it now… wait til ya drive it.” He is a dead ringer for Eugene Levy.

jeffn21 on May 18, 2011 at 3:11 PM

Ryan’s plan won’t leave you with the choice a private insurer for your own care? I didn’t know that.

Did Gingrich have a point?

rrpjr

Incorrect. Have you read the Roadmap, or are you just repeating DailyKos talking points?

“The tax credit is available solely for the purchase of health care. A family or individual may apply the credit to an employer-sponsored plan, if available, or to an alternative plan that better suits their needs. Employers continuing to offer insurance continue to claim contributions as a business expense deduction.

The payment will be made directly to the health plan designated by the individual, allowing those who use the health care to choose the insurance that best suits their needs. Any individual who obtains health coverage that costs less than the credit will receive any leftover amount as a payment from the health plan, to be used for other health expenses. ”

Gingrich didn’t have anything to add to the debate other than careless mudslinging.

chimney sweep on May 18, 2011 at 3:25 PM

Incorrect. Have you read the Roadmap, or are you just repeating DailyKos talking points?
chimney sweep on May 18, 2011 at 3:25 PM

I jumped the gun on Morrissey’s quote. I did read the Roadmap, which is why I found the quote odd. But Mitchell’s lamentation had to do with his wish to get the Ryan plan installed sooner rather than later. I was hasty.

But thanks for the charming response.

rrpjr on May 18, 2011 at 4:14 PM

But if there is choice for consumers, how is Obama going to choose who wins and who loses?

search4truth on May 18, 2011 at 2:21 PM

By auditing your political contributions, of course!!!
…and taxing you if you get it wrong…
/sarc>

(Thanks for the slow pitch right in the strike zone…)

landlines on May 18, 2011 at 5:59 PM

The escalating costs associated with Medicare come from a lack of pricing signals to consumers, a problem that exists throughout most (but not all) of the health-care sector.

This cannot be said often enough. Non-covered procedures, like elective plastic surgery and Lasik, have declined in price in real terms over the past decade or more, while covered procedure costs have skyrocketed. Until the consumer of the medical service is involved in the purchase decision, there can be no satisfactory resolution.

Vashta.Nerada on May 18, 2011 at 2:37 PM

The other problem is that when the consumer is not involved, the medical delivery system becomes perverted.

EXAMPLE: There is currently a lot of pressure from both Medicare and Insurers to avoid detailed pictures produced by MRI, CAT, and other advanced diagnostic devices in favor of the 70+ year old fuzzy X-RAY…because it is cheaper. Medicare and Insurers do not put enough weight on the clarity and accuracy of the result, because they are blinded by the cost.

If the patient was the primary decision-maker, this dysfunctional pressure to avoid new and more effective technology would be replaced by patient pressure to make the BEST diagnostic technology less expensive and more available!!!


Anybody who has bought computers over a long time period knows how consumer choice works. But if the government was in charge of providing all of us with computers, we’d still be using Radio Shack TRS-80′s…with no Internet…and the government would be paying over $4000 apiece for them!!

landlines on May 18, 2011 at 6:30 PM

Anybody who has bought computers over a long time period knows how consumer choice works. But if the government was in charge of providing all of us with computers, we’d still be using Radio Shack TRS-80′s…with no Internet…and the government would be paying over $4000 apiece for them!!

landlines on May 18, 2011 at 6:30 PM

Yeah, but imagine all the campaign cash that DC would be getting from Radio Shack!

slickwillie2001 on May 18, 2011 at 9:45 PM

I wonder what role unnecessary procedures play in all this (costs)? Cause and effect-as the health system has become increasingly privatized, the health care has become more expensive and less satisfactory. Just because our current health care system sucks less than Canada’s or England’s is nothing to crow about.

I don’t remember folks complaining about health care thirty-forty years ago. I also remember that it was easy to tell who the nurses were, who the doctors were, and who the janitors were…now you have to just guess.

Dr. ZhivBlago on May 19, 2011 at 12:17 AM