Monday, September 10, 2012

Peter Orszag Is Surprised Neither That the Sun Rose in the East This Morning Nor That Paul Ryan and Robert Samuelson and the Wall Street Journal Editorial Page Have No Idea What They Are Talking About: Medicare Spending Edition


Peter Orszag:

    Private-Market Tooth Fairy Can’t Cut Medicare Cost: The vast bulk of health-care costs arise from an extremely small share of patients, whose insurance will inevitably bear a substantial share of their expenses. That’s why competition in health care doesn’t work as well as in other sectors, and it’s also why the key to keeping costs to a minimum is to encourage providers to offer better, less costly care in complex cases. Unfortunately, proponents of moving Medicare to a private “consumer-driven” system, including Republican vice presidential hopeful Paul Ryan, seem to instead believe in a health-care competition tooth fairy -- that if we just increase the patient’s share of costs and bolster competition among insurance companies, the expense will come down….

    What did the budget office conclude?:

        A private health insurance plan covering the standardized benefit would, CBO estimates, be more expensive currently than traditional Medicare.

    The reason was that:

        both administrative costs (including profits) and payment rates to providers are higher for private plans than for Medicare.

    And that effect was larger than any cost savings achieved by people getting less health care. In any Rove-versus-CBO debate that involves economic analysis, I’d put my money on the CBO….

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