Do private vouchers help control health care costs?

Basically not.  Austin Frakt writes:

Why is the market-based Advantage voucher system not helping to control Medicare costs? The answer is that health care cost control is tough, technically and politically. Provider groups typically resist it. When it pertains to Medicare, beneficiaries resist it too. By adding another private-sector layer to the program–health insurers–the Advantage program invites a third source of political pressure. Rent-seeking by providers and insurers, as well as the power of the beneficiary constituency, align in their encouragement of higher Advantage payments. Congress, apparently, is willing to yield to that encouragement.

So, it’s really no surprise that Advantage plans have not, to date, been part of a Medicare cost control solution. Congress has not consistently been willing to say no to the combination of powerful interests that advocate for higher payments to private plans. Given the track record, it is also not unreasonable to conclude the mandatory voucher program Ryan advocates wouldn’t save money either. As Krugman suggests, it could even be worse because in time 100% of beneficiaries would be enrolled in vouchers, not the 24 percent that are enrolled today.

The politics of Medicare are such that Ryan’s idea, paying for care entirely through private plans, costs more. That’s not due to a market failure, but a political one. Congress likes to spend money; insurers, providers and beneficiaries like to receive it. Congress spends even more when it can satisfy those interests under the guise of a seemingly pro-market, pro-competitive program.

Yglesias and Krugman have a good public choice critique of this aspect of the Ryan plan.  Ezra says the Ryan plan will end up reviving Simpson-Bowles, and more comment here.  Here is praise for the Ryan plan from Chris Edwards.  Here is Arnold Kling on morality.

The way to turn the Ryan plan into genuine cost control is to offer people a choice of 5-10 “public options,” some of which involve converting future Medicare benefits into current or future cash.