Code Red: Two Economists Examine the U.S. Healthcare System

June 9, 2011

What Harry Potter Knows

Filed under: Uncategorized — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 8:35 am

Having seen them play all year, I can understand why Chicago Bulls’ fans want another superstar to join Derrick Rose. Having watched American Idol, I can understand why that show’s fans wish that Simon Cowell had never left. And having studied Congressman Paul Ryan’s proposal for overhauling Medicare, I understand why the majority of seniors want “Their Medicare” to stay the way it is. But the Bulls don’t have room under the salary cap to land another superstar, Simon Cowell has launched his own show, and, with its finances in peril, Medicare will never be what was. Those ships have sailed.

We tend to be realistic about these transitions. Bulls’ management doesn’t pretend that the next Michael Jordan is just a trade away, and fans remain hopeful that a lesser star will be good enough. Fox Television doesn’t claim that Simon Cowell is coming back so viewers are getting used to Steven Tyler. Would that we were that realistic about Medicare. But on May 23rd, when Kathy Hochul won a special election to fill a Congressional seat in a traditionally Republican district, all hopes of a realistic debate about Medicare went out the window. That night, Democrats learned that allowing seniors to cling to the myth of “Their Medicare” is a big vote getter.

This week’s Reuters/Ipsos poll tells the tale. A slight plurality of all respondents oppose Ryan’s overhaul. But more importantly, given their outsized impact on election politics, a solid majority of seniors are opposed, despite the fact that all current Medicare beneficiaries, and anyone who enrolls before 2021, would continue to receive “Their Medicare.” Perhaps seniors see this as the thin end of the wedge, with further tampering to follow. That is certainly what Democrats want them to see.

But seniors seem to be looking with their eyes wide shut. Ryan’s proposal addresses a budgetary mess of gargantuan proportions. Thanks to that mess, “Their Medicare” is no longer an option. Under Democratic management, seniors are going to see a very different Medicare well before Ryan’s plan would kick in. Provider fees will be slashed and access will be compromised. Costly new technologies will be scrutinized and some will be unavailable. Seniors will be shunted into ACOs, only to discover that they seem awfully like the HMOs that they once dreaded (perhaps unfairly.) I wonder what Reuters/Ipsos would have discovered if they had posed this scenario as the stark alternative to the Ryan plan. Maybe next time.

Early in the Harry Potter series, we learned that wizards can kill with a wave of their wands, but try as they might, they cannot bring the dead back to life. Democrats can kill Ryan’s plan with demagoguery, but they cannot give seniors back “Their Medicare.” Why do we let them pretend otherwise?


  1. It seems to me that universal heath care and medicare for seniors are inextricably linked. To be against one means to be against the other. Let me explain. “Their Medicare” is suffers because it bears the consequences of bad health & lifestyle decisions made during the life of the recipient. Insurance companies have played a role in transferring the burden of care as a result of eligibility restrictions, namely preexisting conditions but there are many more. The inability to access preventative care combined with under-treatment and late intervention results is a sicker patient whose cost of treatment increases logarithmically during the passing of time.

    In my opinion, the way to strengthen a medicare for seniors program is to improve the health of its members before they become eligible for the program. This would be accomplished via an improved emphasis on personal responsibility coupled with a safety net afforded by the universal healthcare program. An active and healthy populace seems the best cure for an ailing government program and this is what we should be discussing. In summary, a universal healthcare system strengthens medicare because it improves the base level of care of its members.

    The Paul Ryan plan, on the other hand, does nothing to address the problems of medicare but it has the potential to pass the buck (once again) to members who are least able to afford it. Under a privatized medicare system, healthcare delivery becomes subject to corporate interests whose profit incentive weighs heavier than the moral imperative of healing the sick. Seniors (or anyone under 55) are right to be against such a system because they are at risk of being on the short end of a life or death profit decision. On it’s face, it is nothing more than a transfer of wealth scheme that disadvantages the poor, the unlucky and the genetically disadvantaged.

    The measure of a society lies in the way we treat the least among us. While I don’t believe the Paul Ryan proposal to be mean-spirited or evil, I do believe he can do better. America can do better and we deserve better. Thoughts?

    Comment by Hermann Mazard — June 13, 2011 @ 9:27 am

    • In 1932, the Committee on the Costs of Medical Care argued that prevention was the best way to hold down medical costs. Nearly 80 years later we are still singing the same tune. Perhaps it is not so easy. (Or perhaps it doesn’t work. Consider that we have gone a long way towards preventing heart disease; now we live long enough to have cancer and strokes. Our spending goes up as a result. Is that anyone’s fault?)

      The Ryan plan is silent about passing the buck to “members who are least able to afford it” and whether it is a “transfer of wealth scheme.” That will depend on the size and progressiveness of the vouchers. Will future Congresses use vouchers to transfer more wealth to seniors than the current plan? Or will they take back from seniors? Will Ryan’s plan be more or less regressive than the Democrats “slash and burn” trajectory for Medicare Who knows? Feel free to be suspicious because Ryan is Republican. But one can believe in markets and also believe in subsidies. I do.

      By the way, if private health plans give financial rewards to seniors who stay healthy (for example through medical savings accounts), then Ryan’s plan will go a long way towards encouraging better health behaviors.

      Comment by David Dranove — June 13, 2011 @ 9:39 am

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