Very Strange Commonwealth Poll

Polling results from the Commonwealth Fund claim that seniors like Medicare better than nonseniors like their private insurance. (I'm sure it was accompanied by the standard-but-hard-to-believe disclaimer denying any desire to influence legislation, including the is-a-public-plan-a-good-idea debate in Congress.)

Uwe Reinhardt sent me the results along with his condolences; and I haven't really looked at them closely. But do I really need to? Why can't I dismiss this nonsense based on economic theory alone?

Remainder below the fold.

One of the building blocks of economics is the proposition that people reveal their preferences through their actions and such revelations are far more reliable than polls. For example, our employees here at the NCPA do not spend $3,000 a year on supplemental insurance to fill the gaping holes in their basic plan. Nor do they pay an additional $350 a year to a third plan to obtain drug coverage absent in the other two.

So without ever getting into the remaining out-of-pocket exposure, the doughnut hole, the refusal of doctors to take new patients, the threat of criminal prosecution if they pay doctors more (horrors!) than the rates the plan allows, etc., etc., etc., may I not conclude on the basis of out-of-pocket spending alone that our employees prefer our plan by at least $3,350 more than seniors prefer Medicare?

Comments (9)

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  1. Ken says:

    Truth is that basic Medicare is much more skimpy than the type of insurance the vast majority of young people have.

  2. Neil H. says:

    I would be willing to bet that the basic Medicare plan would be illegal if you tried to sell a similar plan in the private market in most states.

  3. Ron Greiner says:

    Rasmussen reports that 70% of those with insurance rate their own coverage as good or excellent.

    How to pay for health care reform.

    Rasmussen reports 77% are opposed to taxing employer provided benefits.

  4. Bart says:

    A Ponzi scheme will always be more attractive, until it fails.

  5. Uwe Reinhardt says:

    Another intellectual breakthough for John. He won’t cite results from surveys anymore in the future, because they are not as reliable as revealed preference. I shall hold John to it and shout if ever he quotes a survey again.

    Alright, let’s roll with revealed preference. Medicare beneficiaries are given a choice of staying with traditional, government-run Medicare or a private Medicare Advantage insurance plan. If the beneficiary chooses the latter, the private plan gets from taxpayers on average 14% more money than that beneficary would have cost taxpayers if the beneficiary had stayed in traditional Medicare. Therefore, private health plans can offer the beneficiary more benefits (lower Part B premium, better drug coverage, donut hole coverage, vision care, etc) than traditional Medicare can.

    This choise has been in place for several years now.

    Question for John and his faithful followers: What has revealed preference shown so far?

    a) About 80% of Medicare beneficiary have chosen a private plan

    b) about 80 % of Medicare beneficaries have chosen to stay with traditional, government-run Medicare.

    Pick one of the above.

    Uwe R.

  6. Ron Greiner says:

    Uwe, traditional Medicare only pays 80% of hospital and doctor charges. Medicare’s MSA program pays 100% after the deductible plus the senior gets an MSA deposit on January 1st of each year. American seniors are unaware of the Medicare MSA option because of the media censorship of MSAs and HSAs.

    Uwe, maybe you could list the newspaper stories on Medicare’s MSA program. That shouldn’t take you too long.

    The seniors’ choice.

    a) Traditional Medicare that pays 80%.

    b) Medicare’s MSA that pays 100%.

    Pick one of the above.

  7. hoads says:

    Of course the elderly are more satisfied with Medicare than nonseniors in private health plans. What’s not to like? These seniors would be priced out of a FFS private insurance plan. The taxpayers are subsidizing their low premiums and those with private insurance are filling the gap for Medicare’s underfunding to hospitals and providers. So, sure seniors are happy now but, they don’t realize they have a bullseye on their backs should Obamacare come to fruition.

    To assert that “Medicare for all” would extend these same generous benefits to the whole population is a lie. Benefits would be chipped away, new technologies, pharmaceuticals would be stifled and government propaganda would hail the virtues of low tech “preventative” healthcare while quietly limiting access bit by bit for high tech, expensive, yet effective medical interventions for the sick. What’s worse, the sick won’t have a voice and their plight will be buried in the propaganda as government will then have a vested interest in tooting its horn and placating the public. The government as single payer will rely on government funded research that will serve to give cover for government actions to ration and deny healthcare–all in the name of “comparative effectiveness” which is essentially “cost effectiveness”.

    It will be healthcare for the common good where the common good will be suppressing healthcare costs at the expense of the sick.

  8. Linda Gorman says:

    Revealed preference shows that when people get sick they dump Medicare HMOs. The speculation is that under Medicare FFS they can actually access advanced medical services. See Atherly et al. (2005)

    Morgan et al. (2000) flatly state that their data suggest that Medicare HMOs in South Florida ration joint replacements, and that Medicare recipients return to the fee for service system to “receive quality-of-life enhancing elective care.”

    All that extra spending apparently doesn’t do much good if it isn’t controlled by the patients.

  9. Linda Gorman says:

    Here are the links for my previous comment: Atherly: 

    (His abstract of a paper on insurance choice by people enrolled in FEHBP reads: This paper examines factors associated with switching health plans in the Federal Employees Health Benefits Program. Switching plans is not uncommon, with 12% of members switching plans annually. Individuals switch out of plans with premium increases and benefit decreases relative to other plans in the market. Switching is negatively associated with age due to increasing switching costs associated with age rather than decreasing premium sensitivity. Individuals in preferred provider organizations are less likely to switch, but are more responsive to premium increases than those in the managed care sector. Those who do switch plans are likely to switch to a different plan in the same sector.)


    Morgan also apparently has done work on Medicare FFS versus HMO behavior on hospice use. Yes we’re all gonna die, but HMOs look like they give up on people a lot sooner.

    Abstract says: This study compares use of the hospice benefit in Medicare fee-for-service (FFS) and Medicare risk-health maintenance organization (HMO) options in South Florida in 1992. A higher percentage of deaths occurred in hospice in the HMO option than in the FFS option. Compared to individuals in the FFS option, HMO-enrolled hospice users had longer lengths of hospice stay, lower 7-day mortality and higher 180-day (6 month) survival. These differences are consistent with the physician's financial incentives associated with the two programs. 

    And one’s interpretation of an abstract of a paper looking at differences in care for Medicare patients might differ depending on whether or not one had read preceeding abstract. Fonkych et al. (2008) of RAND say that “During their last 2 years of life, decedents in IPAs and Kaiser used approximately 34% and 51% fewer inpatient days, respectively, than decedents in FFS.  Taken together, I think that these results suggest that one should be suspicious of general cost comparisons of FFS versus HMO when outcomes are general things like length of inpatient stay. But all that is for another time.