07 Aug 2006 Medicare for All? No Thanks, Part V

More of the “Medicare for All?” debate between our David Hogberg and Joshua Holland of AlterNet.

From David Hogberg:

Here are various odds and ends, in no particular order:

UK Still a Strawman?: I’ve exchanged a few emails with Joshua Holland of AlterNet about this, and he maintains that my discussion of the UK in my first post was a strawman because he was talking primarily about Medicare, which unlike the UK, has diverse providers. Thus, it should have been obvious to me that he was talking about something that was not like the UK system. I maintain that a particular sentence in his post led to the confusion, so I doubt we’re going to resolve this.

Thinking about it some more, I’m not sure it’s very relevant what type of provider system we have. What matters most is the funding mechanism. If we have a system in which the government is the primary funder of health care, as we would with opening Medicare to all, we’d still end up with the same problems as seen in the UK — long wait times for surgery and cancelled surgeries, among others. The reason is that when government funds something, people do not pay the cost directly. Thus, they often think they are getting something free, leading to overuse. When that happens, the government can raise taxes to pay for it. But since it can’t raise taxes infinitely, and since the voters do get upset if you raise them too much, government has to find another way to deal with health care costs. The only other option is to ration care, as happens in places like the UK. Ultimately, a comparison of Medicare for All with the UK’s health system is appropriate because they have similar funding mechanisms.

One might reasonably question, then, why Medicare doesn’t already ration care, since surely there is overuse there? To some extent it does, as I noted in post three about how slow Medicare is to pay for colonoscopies. Another way Medicare deals with its rising costs is to cost-share with seniors. I’ve noted the rising premiums and deductibles in Part B (see post three). Medicare Part A, which covers hospital stays, requires a $952 deducible for the first 60 days in a hospital. For days 60-90, it requires cost sharing of $238 per day. For days 90-150, it is $476 per day. These cost have been increasing just over 4% per year for the last three years — not a huge increase, but higher than the rate of inflation. And the rate of increase is slowly creeping upward, suggesting that Medicare still can’t control costs. Finally, Medicare does not pay for any days in the hospital beyond 150 — for that you need a private MediGap policy or you pay 100%.

My Goof: In my second post, I wrote, “To put most of our population in Medicare would put them in a system that is lousy at weeding out unnecessary care and fraud — hardly a recipe for ‘efficiency.'” That makes it seem as though I’m suggesting that Holland is advocating forcing everyone into Medicare, which clearly he is not. My bad.

Competition: Next up is this section of Holland’s third post:

The reason why this “senior policy analyst” took the time to write two rebuttals to my humble little blog-post (despite the fact that he really has no leg to stand on) is that I didn’t write that we should go ahead and enroll everyone in Medicare. I suggested opening it up and letting competition take its course. It’s a free-market approach; whichever system can provide the best benefits for the lower cost should prevail. Hogberg and I both know which one would win, and that’s a huge danger for the corporate right. If he really believed the private insurance system would do a better job, he wouldn’t have a problem putting his belief to the test. The problem for him is the estimated $300 billion dollars per year that would be saved with a single-payer system on reduced paperwork and efficiencies of scale alone.

It’s a point that Both David Sirota and Dean Baker made in their recent books: the right falls all over itself lauding the marvels of Big Business and proclaiming its unquestioned superiority over the public sector, and then spends an enormous amount of energy keeping the two from ever competing head-to-head.

First, a clarification. The right does not necessarily laud Big Business, so much as it lauds the free market. They are not the same thing. Indeed, Big Business often interferes with the free market to pad its own bottom line at the expense of taxpayers and consumers. Tim Carney of CEI has just written a great book about this called “The Big Ripoff.” (Holland might also be surprised to learn that Big Business, at least as far as the top 100 companies in the Fortune 500 are concerned, contributes more money to groups on the left than to those on the right.)

Anyway, on to this notion of letting Medicare compete with private insurance. As Amy Ridenour has pointed out, a test of government vs. private business is exactly that, not a test of two or more free-market entities competing against one another. Of course many people are going to choose Medicare since, via taxes, they are already forced to pay for it. I can imagine some guy thinking to himself: “Let’s see, I can go with Medicare which I’m already forced to pay for, or I can go with private insurance in which case I’ll spend more money in addition to the taxes I already pay for Medicare. Yeah, I’m definitely sticking with private insurance. It is better at paying for care for my knuckles which hurt from dragging so much.” I could possibly see letting anyone join Medicare as long as those who didn’t join wouldn’t have to pay the taxes for it. And if you think that the left is going to go for that, stick with private insurance — you’ll need it for your knuckles.

There is also the fact that Medicare will be all the more appealing since many people will think that other people are picking up a good portion of the tab. And since the wealthy will pay more in taxes to fund this Medicare scheme, a lot of people (the ones who aren’t wealthy) will probably be right. Especially for those who are in the individual health care market (where the employer doesn’t pay for part of the cost), this will make Medicare all the more appealing.

So let’s see, forced to pay for it, other people paying much of the cost, what else? Well, since the government gets to both run Medicare and regulate private insurance, it seems the government has a bit of an unfair advantage. Sort of like a referee who both officiates and plays in a game. What do you think is gonna happen the first time private insurance and Medicare come into conflict? You can get a hint by looking at how Congress reacted when seniors who got frustrated with Medicare decided to pay doctors out of their own pocket. Guess what? Congress passed a law saying that doctors can’t treat Medicare recipients who want to pay with their own money unless the doctor decides to forego treating any Medicare recipients for two years. Not exactly that “level playing field” Holland refers to, is it?

To expect the government and private enterprise to compete on an equal basis is to expect “cats to bark,” to borrow Milton Friedman’s memorable phrase. Government starts by holding most of the cards and gets to change the rules of the game whenever it wants. Fair competition is impossible.

Finally, in my first post I said that our current system “over the UK’s any day of the week and twice on Sunday.” While that’s true, it’s a bit like having to choose between generic coffee and Folger’s. I’ll choose the Folger’s, but lament the fact I can’t have Starbucks. So how do we get the Starbucks version of a health care system? I’ll address that in a post later in the week.

Past posts from David Hogberg in this “Medicare for All? No Thanks” series: #1 is here; #2 is here, #3 is here, and #4 is here.