Arnold Kling  

Tyler Cowen on the Paul Ryan Plan

Macro Doubtbook, Installment 1... Nobody Invited Me...

He writes,

We all know that health care spending has to be restrained in some manner. There are (at least) two approaches:

1. Have the federal government take a more active role in shutting down or limiting some reimbursements, based on efficacy studies ("death panels").

2. Turn some or all of Medicare into a fixed voucher program and let individuals choose which set of restrictions they will accept from private suppliers ("grandma bangs on HMO door").

As I understand Ryan's approach, he is putting a great deal of emphasis on #2, whereas most Democrats favor #1.

I wish I could say that "we all know" this. Some of the critics of Paul Ryan's plan seem prepared to argue that we can have the same health care services at lower cost by squeezing health insurance companies, drug companies, doctors, and hospitals. Most of the savings promised in Obamacare come from this squeezing. I think this is unlikely, but one man's flim-flam is another man's fervent belief.

Someone who favors (1) could say that consumers will make horrible mistakes if they are given health care vouchers, choosing unnecessary procedures and foregoing necessary ones. Someone who favors (2) could say that government will make horrible mistakes if medical practice is dictated by a central bureaucracy, because local information is important. Robin Hanson could say that medical services are as likely to do harm as to do good. So you cannot make horrible mistakes by cutting back on medical services. Cut them back any way you like. Even randomly cutting back services would be fine.

Here, Paul Ryan defends his plan. [link fixed]

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COMMENTS (7 to date)
Ted writes:

The debate about future health care costs can be thought of in two simple questions: do we want health care rationing? And if so, who do we want to do it?

If we don't want health care rationing, get ready for really, really high taxes to finance an expansive health care system. If we don't want those high taxes, then we have to decide who is going to do the rationing - the individual or the government? If we are going to go down the rationing route, I'd rather ration my own care than some government official who probably doesn't understand my medical needs as well as I do.

By the way, Paul Ryan is being completely dishonest. #2 is misleading. I would personally love to see Medicare turn into a voucher program designed only for the truly needy (we're never getting rid of it, so let's accept the least-bad result). But what Ryan does is turn Medicare into vouchers - which I'm fine with - but then he gradually shrinks the vouchers until they basically become worthless. I don't like people who try to deceive the public about their plan. If he wants to eliminate Medicare - then say it. Don't do some shady backdoor crap like reducing the vouchers value over time so that they never cover any health care insurance in the future and then pretending like your preserves Medicare. I know he's a politician so he would be murdered if he came out and said that's his plan - but that's what it is and I have no respect for a charlatan like that.

Steve writes:

The last link appears to be pointing to the wrong URL.

Foobarista writes:

Ultimately, this is a trust question, as are most questions involving government policy of this sort.

Do you trust bureaucracy or do you trust the market?

Lefties generally trust bureaucracy because in the ideal case, bureaucrats are supposedly looking out for the collective interest and are ultimately answerable to a democratic polity. Also, since they're domain experts and supposedly study these sorts of things carefully, they don't fail.

Others generally trust markets because in the ideal case, if market players screw up, they fail, and fail "fast", freeing resources for better players and leaving behind a "market lesson".

I'm an "other", but I can see why these aren't easily resolvable with rational arguments. If you got screwed by a non-government entity, you're more likely to trust the government. If you got screwed by the government, you're more likely to trust the market.

Hyena writes:

My fear is that if you choose option two, you'll just have the government come in and define what sort of care has to be provided anyhow.

While I'm fine with regulations that amount to fraud protection, I'd be worried if a patient couldn't buy a policy which refuses to cover procedures without proven efficacy.

If they can't, then some obvious positive effects of competition quickly disappear.

Various writes:

Before today, I've not heard of Ryan's plan. But I think it is excellent! I worked as a health care consultant and banker for many years, and I can tell you that MediCare, as currently set-up, is a very very bad system. Among other things, it uses a price fixing system to figure out what is covered, and how much providers get paid. It creates many distortions in the provision of medical care. For example, it causes patients to overutilize many services and procedures they don't need.

Steve Roth writes:

> argue that we can have the same health care services at lower cost by squeezing health insurance companies, drug companies, doctors, and hospitals.

Don't now about drug companies, doctors, and hospitals, but insurance companies?

If we had single payer that operated as efficiently as medicare does now (3%) instead of private insurance (ca. 25%), we could save something like 20% in health costs.

That government and private spending would be more efficiently allocated to other goods.

Is that a "flim-flam"?

Yancey Ward writes:


Have you seen the amounts even supporters of Medicare and single payer claim is outright fraudulent claims? That isn't included in the 3% number you cited, nor is much of the administration of the program itself which is handled by other departments, like Justice and Treasury.

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