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Health care costs

By Brant Published: June 1, 2011

Medicare is not sustainable, due to spiraling health care costs. Republicans successfully bashed Democrats last fall over the cost control measures in the Affordable Care Act (or "Obamacare," if you prefer); Democrats are successfully bashing Republicans right now over the voucher approach in the Ryan budget proposal. Neither is particularly responsible, in my view, nor unexpected. I defer to Professor Huhn on the details of these approaches. But today I saw something that helped me think about the problem. It was this entry in Ezra Klein's column. It turns out that we're spending $3 billion a year on a common and popular surgical procedure that provides no benefit over a placebo. Should Medicare pay for it? Should your insurance company? If not, would that be rationing?

Democrats tend to prefer regulatory solutions--thus ACA includes a panel of experts to assess the efficiency of various medical treatments and make recommendations. If you fear regulation, you suspect that this panel will eventually abuse its power, leading to rationing.

Republicans tend to prefer market solutions--thus the Ryan plan vouchers would turn Medicare patients into consumers of insurance who would bear more of their own costs and therefore would monitor the effectiveness of procedures themselves, or else be wasting their own money.

Of course, market forces are what we have now, in the non-Medicare sector, and they don't seem to be working, for a variety of reasons. Instead, costs (and therefore premiums) continue to rise, leading to more and more consumers going uninsured. This is a different kind of rationing, but it is rationing nonetheless.

I'm not dogmatic on these issues, although I am probably more skeptical of the magic of markets than many. I just wish we could be having a discussion rather than a holy war.



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