Gail Wilensky says she’s “troubled” by my criticism of her recent post on the Health Affairs blog:
David Catron seems to be saying that everything would be fine if we would just let the market work …
This ignores the main thrust of my comments, which involved her seeming inability to imagine a market-based alternative to the ever more Byzantine system of price controls and regulations that constitute the Medicare program. A further excerpt from her response tends to confirm my assessment:
The Medicare fee schedule coupled with a spending limit is particularly perverse in the incentives it provides, but an unconstrained fee schedule would be even more perverse. If Catron has a whole new world he is proposing in place of Medicare, that’s different, but he needs to tell us how that world would work.
Believe it or not, physicians and hospitals did actually deliver care before 1965—and without CMS to micromanage every step of the process. But Wilensky knows perfectly well that I didn’t suggest eliminating Medicare. She deploys this straw man because it is easier than dealing with the more fundamental question about the role of the market. Still, I’m more than happy to provide a glimpse at how a market-oriented Medicare program might work. Or, more accurately, I’ll quote a recent article by Joseph Antos on the way market-based competition has worked in the Part-D program:
When Congress created Part D, the delivery of prescription benefits was left to private insurance plans which must compete for a share of the market … Despite initial skepticism from political opponents, the competition strategy has succeeded beyond all expectation … seniors and taxpayers are saving money. Premiums averaged just $24 a month in 2006, one-third lower than experts had predicted. As for its budgetary impact, the Medicare drug benefit cost nearly $13 billion less than expected in its first year — 30% below the $43 billion that had been budgeted.
The market works. It really does. It will not, of course, solve all of the problems plaguing Medicare, but it will do a much better job than any group of bureaucrats and policy wonks trying to manage the system from on high.
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