A Leftwing Idea for Privatizing Medicare
This is Matt Yglesias, writing at his blog:
Here’s an idea. Right now, if you’re over 65 in America and you have a health problem, you’re entitled to have the federal government pay for your treatment. These treatments are often expensive, and are also often a pain-in-the-ass to undergo. What if in addition to being entitled to get the treatment you were also entitled to just pocket the money. Maybe at the margin you’d rather have a vacation in Paris and a shorter life than spend more time in the hospital.
If I had suggested this, Paul Krugman and Johnathan Cohn would have accused me of heartlessly exploiting the poor.
Great idea. Maybe the left and right can come together on this.
There would be implementation problems, but overall I like it.
Matt Yglesias may be suggesting this as just a mental exercise. But this is precisely the type of trade-off that policy wonks need to discuss. Resources are not infinite. Yet, society could literally spend hundreds of thousands of dollars on each Medicare enrollee over the course of their lives. The marginal costs of many medical treatments may far exceed the benefits received (or far exceed the opportunity costs of other uses for the money).
Most Americans may not want to trade a cancer treatment for a trip to Paris. But they may be willing to trade a bigger house and a higher standard of living throughout their lives (i.e. lower taxes) in return for giving up a final year of life (at age 90, while plagued by mental and physical disabilities).
Pocket the money AND will it to your heirs. In other words, let Medicaid contribute to an HSA with no restrictions on how one spends the money.
Like the idea. Don’t know how you work out the details, though.
Mike seems less concerned about increasing the utility of individual patients than “freeing up real health care resources” and reallocating them. Goodman is right — e.g., if Mike had said, allow them to use the cash for that big funeral they’ve always wanted, he would be condemned as racist. But apparently it’s OK to suggest old people have better things to do than consume health care.
The idea doesn’t go far enough. An economist, whose name escapes me at the moment, came up with the following. Between Medicare, Medicaid and tax deductions for company sponsored health insurance and various tax sheltered health savings accounts and flexible payment plans cost the government some 10% of GDP. Give every citizen a health care insurance voucher that’s capped at that 10% of GDP. At the same time, the insurance companies offer a comprehensive plan that makes that part of their business operate like a regulated public utility (the way Switzerland deals with health insurance) and they accept all comers for that voucher amount. At the same time, if you want enhanced coverage, you or your company can purchase that, but its cost is not tax deductible. It solves all the problems. No more inequality of access between Medicare, Medicaid and private insurance. Needed care isn’t rationed by your income. Since most of the cost of malpractice is a result of the lifetime medical costs caused my medical mistakes, it eliminates the large awards that fuel the malpractice industry.
artk–Your idea doesn’t go far enough. The Swiss system, which served as a model for the people who have been developing ObamaCare over the last few decades, has created a number of serious problems created by the attempt to make everybody buy the same thing.
Why not aim for an actual efficient health care system with lower costs by letting people keep their money, stop telling insurers and physicians what to do, and, if subsidies are still needed, directly subsidizing people whose infirmities are judged serious enough to make other people pay for their care?
artk:
You have either forgotten to state something or misunderstood the Swiss system. If everyone gets the same voucher and health plans compete for them, then the sick will get ignored as health plans compete to enrol the healthy. You need a mechanism for risk adjustment plus (because that will be flawed) very heavy restrictions on marketing.
With respect to Mr. Yglesias’ idea: We already transfer income to old people that they can use to travel to Paris if they want, or buy cigarettes, or subscribe to an expensive sports package on cable TV. It’s called Social Security.
Taxpayers will not give equal dollars to discretionary spending that they will to medical spending. That may be nonsensical but I believe it is pathological to democracy.
Now, if you discounted the pay-off, you might have an effective idea. E.g. a Medicare beneficiary who is diagnosed with a disease that costs an estimated $100,000 to treat could be paid $75,000 cash instead of receiving treatment.
I’d love to see that debated in Congress! It would have to come from a left-wing analyst, so as to be labelled “compassionate” instead of “greedy”.
Mental masturbation. I bet conservatives will love this idea? Pay poor people to die.
Well John, I know that you exaggerate the smallest flaw in any other medical care system and at the same time defend the largest abominations in ours. That fixed price payoff for the poor to forgo life saving medical care sounds too much like a command and control communist method. Why don’t you propose a more family values free market approach. Have each heir bid to get the entire payoff. Lowest bid wins.
I think it’s a neat idea, but I agree that it has its problems. In general, any policy that gives people the right to chose is good, especially when we are having trouble paying for everything.
In defense of artk:
This is rare for me. On the demand side, what artk is proposing is essentially what the NCPA has proposed for years. In fact you can find the idea in Patient Power.
On the supply side, it’s true that the Swiss system has many of the defects of “managed competition,” but so does our “guaranteed issue” employer-based system.
The ideal insurance system is something along the lines that John Cochrane hs proposed and we have discussed it here (“rational insurance”). The principal difference is that Cochrane gets everyone’s incentives right at the margin, whereas managed competition does not.
Importantly, though, in the Cochrane insurance world individuals would have the almost all the protections that artk is worried about. We should not dismiss those concerns. In any acceptable insurance reform (getting form A to B) they have to be acknowledged and dealt with.