How to reform Medicare with faith in market principles – including vouchers
As Americans debate proposals to reform Medicare, they should know that all of them involve trade-offs. Where the current system and the Paul Ryan plan fall short, a true voucher system provides choice, coverage, and cost-efficiency.
(Page 3 of 3)
Another problem is that the new plan does not solve the whole health care problem. It continues the status quo of segregating the problem of insuring the elderly from the problem of achieving universal coverage. What, for example, will keep the exchange from issuing mandates that ultimately shift costs to young people, thereby distorting their market for health insurance? The exchange regulators are only responsible for keeping Medicare costs within budget. This would cause distortions that we are all too familiar with already (for example, $20 aspirins and $40 ace bandages). Finally, separating the elderly health insurance problem from the universal coverage problem interferes with transparency.Skip to next paragraph
Subscribe Today to the Monitor
Why vouchers are the ideal approach
A voucher system, especially one financed by a national sales tax, provides a very transparent connection between costs and benefits. This is good for society and bad for those wish to manipulate health care policy for political gain. Those who want to argue that vouchers aren’t generous enough will have to convince the majority of voters to increase the sales tax rate. By comparison, the premium support program’s funding is very complicated. A murky connection between costs and benefits in government programs has interfered mightily with our ability to solve problems through political channels. It allows people to convince themselves that they can get something for nothing, which they then demand of their elected officials with predictable result.
Vouchers are the ideal approach, but we don’t live in an ideal world. The answer to the question of whether the premium support plan is the best possible solution in the real world will likely come down to details. The biggest detail will be avoiding regulatory capture by insurance companies and social engineers.
Still, one wonders why Paul Ryan didn’t come forward with a more genuine voucher proposal. I suspect that the root of the problem is a lack of faith in markets (witness Newt Gingrich’s claim that even Ryan’s new plan is too radical). The market doesn’t tell you beforehand how it will solve a problem. Policy wonks, on the other hand, do, and can also assure you that because they will be “in charge” there will be someone to deal with unforeseen problems, too. But what assures us that they will know what’s best, that they will know better than the market?
Food is more important than either health care or education, but we don’t have a food crisis while we do have a crisis in health care and in education. Ever wonder why? I submit it is because we were smart enough to put our faith in market competition and therefore clever enough to deal with the hunger problem with vouchers.