Cash grants instead of Medicare?

Matt Yglesias tweets:

Yes, I think converting Medicare into a straight cash grant to seniors makes sense.

They might rather have a servant, or a better car, or an apartment which doesn’t require them to drive, or to eat a better diet or join a better gym. Or maybe they would rather live it up, travel, and perhaps die at a younger age.  That’s what pro-choice means.

On the public choice side, this suggestion would turn seniors into an active constituency for health care cost control.

Nonetheless I propose a more modest version of the idea.  When people turn a certain age, allow them to trade in the current benefits package for a minimalistic package (set broken limbs and offer lots of potent painkillers), plus some of the rest in cash, doled out over the years if need be.  For some people, medical tourism will fill the gap.

But if a person wishes, he or she can keep the extant benefit structure and forgo the cash altogether.  No one is forced to take this deal.

Objections?  You might think that “health” has a special moral status of some kind, but keep in mind “health care” is only one way of many to better health care outcomes, so you still can favor increasing the degree of choice.

Paul Krugman calls for a public provision option in Medicare, a bit like the VA system.  He doesn’t mention letting people choose some cash instead.  We have gone from “Free to Choose” to “Free to Choose more government.”

He makes a good point at the end: “And what would terrify the right, of course, is the likelihood that genuine socialized medicine would actually win that competition.”

What would terrify the left, of course, is the likelihood that genuine privatized cash would actually win that competition.


What are you going to do with the elderly who choose the minimalistic package, then need expensive care they can't afford?

1) Pay for treatment. If so, no savings.

2) Not pay. That's what led to Medicare in the first place. It's not politically feasible on a large scale.

3) Is there a (3)?

>>On the public choice side, this suggestion would turn seniors into an active constituency for health care cost control.>>

It will turn seniors into an active constituency for more government money. Again, expensive healthcare for seniors is how we got Medicare in the first place.

Yes there is a 3. Maybe a fun game would be letting people guess what it is.

"It will turn seniors into an active constituency for more government money. Again, expensive healthcare for seniors is how we got Medicare in the first place."

No, healthcare was cheap is how we got medicare. Now that it's not cheap, that's why we are talking about how medicare should end.

Health care wasn't that cheap. Spending on health care in the US was on par with those nations with universal [insurance] coverage of some sort. And it stayed on par with them until 1980. After that, US health care costs rose more rapidly than everywhere else,and while the US outcomes started higher circa 1970, by 1990 the rest had caught up or passed the US.

While the comparisons that opponents of universal coverage prefer is to compare the best US care, expensive subsidized employer care and Medicare, to the worst care in Canada. But what should be compared is the worst care in Canada and the US. In Canada you might have to wait, like a lot of people with the median health insurance and access in the US, but the worst in the US is waiting in the ER if one is available or going to a public hospital clinic, if one exists, or go to the government and wait.

The suggestion is that if the government would get out of the way, as is the case of the working poor, then health care would go down in price. Hasn't happened. or if the government would get out of the insurance it would be cheaper than government.... Living in NH I weigh the option of moving to Mass to get the government run Romneycare which would be a better policy for less than the "free market government out of the way" NH policy that is sold from Indiana in competition with policies from NY and Mass and Conn. The $5000 deductible policy I've had from the same basic insurer for 25 years has gone up 8-10% a year each and every July since 2003 - last July it hit almost $10K a year. A $1000 deductible in Mass would be $8000 without any subsidy.

But when nations cover everyone for 10% of GDP while the US doesn't cover everyone for 16-18% and they had "socialized medicine" well before Switzerland, which adopted it in 1995, (and the Swiss would give Tea Partiers a run on principles, and guns) clearly the US system of non-universal coverage which leads to cutting benefits for them to pay for mine, in both public and private. Medicaid gets cut to pay for Medicare, laborers benefits get cut to pay for management benefits (Wal-Mart, McDs). (Wal-Mart store managers put together help for workers to access Medicaid, public clinics, etc.)

Here's the CBO report that says Ryan's plan would raise healthcare costs.

See page 21.

It says that the CBO estimates a private plan would cost more than comparable Medicare coverage. It gives little explanation for the estimate. Is it relevant in any way to the post?

I don't see that.

Except before, seniors could not afford medical care. Here, they could afford it, they just chose not to pay for it. There might be some sympathy, but probably not a strong push for charity, forced or otherwise.

Foosion's question is precisely what occurred to me. Grandma takes the cash, and then her children are burdened with her failing health.

What would terrify the right (and Tyler Cowen) would be to remember that there are negative externalities.

Having the advantage of having watched a number of older relatives go through their 80s and 90s, I have some question about how credible we can make this commitment on elder healthcare. My older relatives' major health issues have been partially about painkillers and broken limbs, but much more about incontinence, loss of any vision or hearing, and dementia. I think if the plan is "you get cash instead of some super-fancy treatment or expensive drug" I'm all for it, but if the plan is "you get cash instead of expensive care" I'm unclear (to put it mildly) how we will deal with a situation where we have a substantial group of over-80's, with poor eyesight and hearing, senile or demented, limited control over their bowels - with no public or private resources allocated to cleaning their bums and keeping them from sitting in their own waste.

But perhaps I don't fully understand the plan.

That's covered by long-term care insurance or Medicaid, correct?

I believe the plan is for such people to just die already.

Don't try to understand Tyler's plan. He's just playing public choice theory.

There is no credible commitment to die.

I think you would have to offer a bare bones plan that covers this with cash instead of advanced treatment for the rest. It could still be attractive but it would still be fairly costly.

clearly this can be solved by auction markets. just ask robin hanson, everything can. auction off the rights to the excrement of the incontinent, and pay people to deliver said excrement to collection centers with the proceeds of this auction.

>>He makes a good point at the end: “And what would terrify the right, of course, is the likelihood that genuine socialized medicine would actually win that competition.”

What would terrify the left, of course, is the likelihood that genuine privatized cash would actually win that competition.>>

We're already running this competition. Socialized medicine for seniors and veterans, private market for most others. The data suggest socialized medicine is winning.

How can you contend that socialized medicine is winning, given that Medicare in its present configuration and incentive structure is undeniably going bankrupt ?

It gets better results at lower cost and with higher satisfaction than private insurance. Moving away from Medicare would increase costs - see for example, the CBO report on Ryan's voucher plan.

Vouchers is still socialized medicine. Nice sleight-of-hand.

If you consider the Ryan plan socialism, you're really at the extremes.

Medicare's lower costs are only possible through cross-subsidization from private patients. If every doctor were paid Medicare rates 100% of the time, there would be no doctors.

I think that doctoring would be less prestigious and lower paying, but there would still be plenty of doctors. In the end it might be better to import lower paid doctors from other countries to increase productivity.

Good comment. That's why countries like France have to subsidize the training of new doctors and medical professionals.

Have you seriously never heard of Canada, Britain, France, Germany... and every other first-world country? Are there no doctors anywhere in Europe?

EorrFU's response at +1 Insightful

Well look, at some point, someone's going to be poorer. Either Seniors, taxpayers or doctors. Why should we, ex ante, assume that MD's shouldn't bear some of the burden? The cost savings could even be partially re-routed into a loan forgiveness scheme for the newly overleveraged Physicians.

I am a physician, married to another physician, who moved from a Western European country with a socialized system to the US. I won't go into all the reasons we immigrated here , but one reason was that the healthcare in the US is considerably 'better' from the patient perspective - better training, more choices. It is certainly not because we earn more here - because we do not earn more in the US

I'd really really like to see how you measure "better results." Seriously. What does Medicare spend for 1 QALY? What do private insurers spend for 1 QALY?

Medicare in Canada beats everything in the US.... It was passed in Canada covering everyone when the US passed Medicare for 65+ with Medicaid aiding State health welfare programs.

Because the private sector is going bankrupt faster, it is just that they don't operate on a long term basis so no one would consider them insolvent, Instead they just lower benefits, raise copays, and drop coverage, increasing bankruptcy.

We don't have genuine socialized medicine OR genuine privatized cash, so how can we possibly be "running this experiment"?

I think what all the ongoing Medicare and health care arguments are missing is the fact that we have a broken health care market. Let's reduce rent seeking, increase price and quality of service transparency, and introduce more competition. Let's do these things first, and then decide on cash grants or whatever.

This post is why we need a like button.

Explain what you mean. I think some of what you're saying falls under the intent of the health care exchanges - setting up a functioning individual market, reducing employer-based insurance, increasing portability and individual incentives. I think there's some promise to all of that, but there's no magic way to make health care pricing look like a supermarket, or even auto or home insurance. It's always going to be a highly constrained, artificial market.

I won't speak for stuhlmann. But IMHO, those proposals still enshrine the "insurance" model of health care. Which divorces any sort of cost concerns from care decisions, and prevents any sort of real market in health care, as opposed to health "insurance." When I don't get real price feedback, the whole incentive loop breaks down.

Where is the price feedback for accident, fire, and casualty on your house?

What is the difference between setting your insured house on fire and setting your health insured self on fire (like the fruit vendor in Tunisa)? You have personal losses in both cases, and you don't gain from the insurance (it is a crime if you benefit).

Really, how many people chose to have strokes, heart attacks, their house burn down,their car get smashed, their employee smashed in a machine?

Property insurers since the 18th century in the US proactively managed the insured property to reduce risks. Insurers have banded together in the US to have government manage the risk for them - they use government to enforce insurer dictates on their policy holders. UL approved. Building and fire codes. Fire departments and hydrants. The UL and fire codes are like the regular physicals. Fire inspections for businesses with write-ups for violations are like the checkups with instruction to lose weight, take these pills. Fire Departments like the ER. The supervision of repairs from fires like the oversight of treatment and billing. For autos, the vehicle standards, inspections, road standards, speed limits, police enforcement - all part of the insurance system.

Casualty insurance is for unanticipated events that nonetheless have a chance at happening: a house fire, a car wreck, etc. Underwriters can profitably insure for casualty events by charging individual premiums which, when pooled, will cover the expense for any one event. Insurers have a number of tools for containing costs. If you own a house and it burns down, you buy another house with the insurance proceeds, and then it burns down, you are not going to get any more homeowners' insurance. Same with serial DUI offenders. Insurers do this because they are competing for good risks by marketing their low-risk, low-premium pool. You in turn have an incentive to pay lower premiums so you make sure your electrical system is Code-compliant, you don't drive drunk, etc.

With respect to health care, past a certain age you are an uninsurable risk because the casualty is practically 100% certain to happen. You can be as scrupulous about your health as you want; eventually you will get old, get sick and die. That is the whole idea behind Medicare: to cover health care costs for people who are no longer insurable.

Medicare cannot be run like an insurance plan. The risk is systemic and cannot be "spread." Introducing a third-party payor mechanism into such a situation has led to the predictable result: Medicare is bankrupt. People will spend every penny of OPM to make sure grandma has a dignified dotage. They have ZERO incentive to control their consumption.

The only solution I can see is medical buyer's co-ops: agencies which wield the aggregated purchasing power of their members in order to secure lower prices. Any money left over after expenses and reserves equirements are met gets distributed as tax-free dividends at the end of the year.

Now, I can already hear people screaming about Canada, Sweden, etc. and I'm open to hearing how those systems stay afloat. My own hypothesis is they have (for now) homogenous, comparatively high IQ cultures that discourage rent-seeking. I am also sure they ration health care: granny's not at the top of the list for a new liver, and maybe not even for a round of chemo; if you've got a sore neck, you get an x-ray--when the pain is excruciating we'll think about an MRI. I also suspect they are dealing with falling native birthrates, increased net consumption, and they are at or approaching deficit. Again, I'm open to being educated otherwise.

The cash payment would need to be really large to make it worthwhile. Since someone's life is valued at around $7-8 million and Medicare beneficiaries can expect to live 12-13 of 78 years, bidding starts at about $1 million if you expect to drop dead without healthcare within the year you get the payment. Even if you expect to live most (or all) of those years, the risk of debilitating injury would seriously undermine their expected value. Painkillers won't help too much, since potent painkillers are a severe handicap.

So your payment is going to have to be very high, likely more than the expected retirement savings of most people. A lot more.

How about giving seniors zero-coupon treasury notes that pay full value at the end of 13 years. Seniors own it and can do whatever they want with selling it on the secondary market and using the money to purchase a long-term health insurance plan...or not doing it.

Cash is a zero coupon Treasury note, so I don't know how this would change things.

What makes cash-out proposals interesting are the different ways of structuring them and the amounts you could offer. Tyler's proposal could have odd effects, like leading to an adverse selection issue where both drop-dead soon and drop-dead later seniors take the cash. Obviously, if people in your family tend to die of a single catastrophic failure--like a massive heart attack or stroke--that we don't tend to detect early enough, then you should take the payments since healthcare isn't going to keep you alive. But since those same people aren't using a lot of resources (they were DOA at the hospital anyhow), costs could balloon because everyone else takes normal Medicare.

If you do what Yglesias suggests, then an obvious move is to monitor your health and start buying insurance the year you expect to need it.

But I think in every cash out proposal, you're going to see the best trades being made by people who have a lot of dead close relatives, good medical records and a well-interpreted genetic sequence. Those people have the information needed to play the program if it structures payments as averages.

Most of these comments are off-base, they show how far we are from thinking rationally about such matters!

Sorry Tyler but I think you're off-base. Your mistake is to attempt to define your position when reviewing or responding to other people's positions. Please write a detailed proposal about health CARE reform with a creditable justification, and later --once your faithful readers have understood your proposal-- you will be able to review other people's proposals by highlighting differences.

“What would terrify the left, of course, is the likelihood that genuine privatized cash would actually win that competition.”
The above quote included.

You cannot think that a Libertarian framing of the issue will dominate. Recent polls show that a large majority of self-identified Republicans want Medicare left substantially, or completely, as is; the more leftward leaning of us think even more so.

And the framing goes to the heart of the issue. To take a slight quibble with @foosion's description, the desire to know that our reasonable health care needs will be met, regardless of whether we have some string of bad financial or health luck, is why we have medicare. It is not to reduce costs for the minority of the population who are somehow certain forty years in advance that they will have saved all the money they might reasonably need (a logical impossibility, and thus utterly irrational).

Despite my father's early death, his (private) pension plan meant that my mother lived without financial worry on her Depression-era-induced modest lifestyle, and she left a fairly large estate, not needing Medicare. And I am likely to do the same. But only likely. Many very rational people — the overhwelming marjority, I believe — would prefer their last 30 years with a couple thousand less of consumption per year in exchange for knowing that a major medical event would not bankrupt them and force them to die 10 years early.

The Far Right will have to look to other solutions for seceding from the Union. Perhaps they will next try repealing the 14th Amendment on a state-by-state basis, a perfect example of how Confederacy Thinking ® is attempting to drive the Republican policy agenda.

Tyler's comment here actually gets to the heart of the matter. “Darn it, why can’t people be as rational as me!” But shouldn’t you use the evidence from the health care debate (and the many comments on this post) to see that people aren’t rational in the way economists think? It seems to me that’s what a rational person would do.

What do either of these comments have to do with the post? We are talking about giving people an option, not forcing them to do something. What is the urgent need that justifies taking choices and freedom away from elderly people? "Science proves they're irrational"? So, what then, the rational government decides what is best for everything?

Handing out cash is not a plan that gives more options. Collective bargaining gives more options. Ideology blinds this debate so hard.

I was afraid someone would read more into my comment than they should have. By saying “people are not rational,” this does not imply the opposite and the government should dictate everything in our lives. It doesn’t imply anything actually. The comment is simply to argue against a position that starts and ends with personal choice. I don’t agree with such an approach because (according to the WHO), the best health care systems in the world are not organized this way. In short, all I am arguing for is an evidence based approach (based on health outcomes, wait times, costs, etc) over a “rational” approach based on principles alone. Is it rational to argue based on evidence or is it rational to argue based on principles (assuming they lead to different conclusions)?

here's one way to phrase it:
Beliefs (my beliefs around this):
(1) large numbers of people do incredibly stupid things with money
evidence: subprime mortgages, large levels of credit card debt among well-educated
(2) Americans will not tolerate a large number of seniors getting sick and not getting treatment because they "took the cash option." I can see the CNN report now: "Grandma didn't understand when she took the money!"
as tough as we can be... we aren't going to punish grandma
(3) Politicians will cave when facing seniors demanding benefits. AARP slogan "They are taking advantage of seniors - preying on the weak"

Result: my generation gives them the cash and then also pays for their treatments.

@Michael, I dunno that Tyler's point should be taken as representative of “the way economists think.” Utility theory goes back over a century ago; Samuelson did a lot of work on it, and contemporaneous literature is filled with all sorts of work.

Following Tyler's example of removing health care from being a special category, let me try this purely economic thought experiment on readers here: at age 35, with a small family to support, you are offered two plans to choose from. Plan A will pay you $100K with certainty until you die. Plan B will give you a 50% chance at $300K/year, but a 50% chance at $20K. All figures CPI-adjusted, tax- and sponging/supporting relative neutral.

Obviously, the expected dollar outcome in Plan B has a $60K/year higher expected return, but for most people, losing the ability to live with dignity to a coin toss would not make up for it. When people are asked this question (and variants, since the interest is in what triggers people's sense of risk), the choice is Plan A.

This outcome exactly contradicts the choice Tyler says liberals fear, so I think he is having dogma-induced hallucinations about what people want. We have gotten where we are in part because people are willing to put up with the inefficiencies of socialized expenses, in order to have the socialized benefits in the presence of the overwhelming uncertainty about our individual fates.

What constitutes "reasonable health care needs"? They sell painkillers over-the-counter. Having a broken bone set will cost over a grand but that shouldn't be financially catastrophic. A course of antibiotics for common bacterial infections costs almost nothing.

Hip replacements, advanced magnetic and nuclear imaging, cutting-edge cancer treatments, and inpatient surgery of any kind are not "reasonable health care needs". They are "fantastically luxurious health care wants". Health care is expensive because we've invented a bunch of flashy new technology and then insisted it's a human right, and prevented the market from operating to bring the price down (for what's possible, see the laser eye surgery market). You can have your "reasonable needs" guaranteed affordably if and only if you stop moving the goalposts.

Dr. Google advertises $15K hip replacements while saying the typical US cost is more like $35K.

$35K might be a lot of money to you, Mr. Yetter, but a 70-year-old with a broken hip might frame that as roughly $2K/year for being able to go out to the store, the park, a friend's house or a play. Almost anybody above poverty levels would spend that amount.

And perhaps you otherwise engaged in research in Antarctica during the Part D debate. While morphine is cheap, many very treatable conditions can suck up hundreds per month.

Some new treatments are just-as-effective, but cheaper alternatives to older treatments. Of course, market incentives for these are less than for marginally more effective but more expensive therapies. Perhaps you would like to engage in a discussion about why market incentives for therapies are perverse, and strengthen drugmakers' marketing to individuals, rather than having informed practitioners set standards.

Yes, the goalposts have moved since 1800. You wouldn't want it otherwise.

This comment is a self-parody, right? E. Barandarian has great advice for you.

Dear Mr. Cowen, I think of you as a very knowledgable and smart person. That is why I'm quite surprised that you came with such a bad idea. Why is it a bad idea to leave to people if they want cash now or healthcare later? Because people tend to underestimate these things. As Thaler would say, it is a particulary bad choice architecture. For example I'm pretty sure that you heard about hyperbolic discounting: and your example is a perfect example of this one in practice. And I'm also sur that you know about people using availability heuristics. So a relatively healthy person at her 60ties cannot reasonably estimate how would it feel to be stricken with some sickness in her late 70ties or 80ties and may just take cash. And I'm not even talking about stuff each one of us hears from time to time, such as of an old person being taken advantage by her cruel relatives and which can be manipulated to take cash on an empty promise of a payback. Only this time it is not her family silver in pawnshop, but her life.

Your idea is so stupid that I cannot believe that there is actually this discussion on your blog.

Your idea is so stupid that I cannot believe that there is actually this discussion on your blog.

Thank you for this comment. So true. When I read the original post I really thought that it had to be some
kind of 'modest proposal'-style joke.

"Most of these comments are off-base, they show how far we are from thinking rationally about such matters!"

Tyler: You set up a debate as a choice between a terrified left or a terrified right, and thought you were going to get rational thinking?

PS Enjoy Brazil.

Let's hear your rational thinking then. Does it even exist?

How about a third option: grants of morphine/cocaine speedballs. Could be cheap.

right! if you've fallen and cant get up, so what! where's your money?

It would make the medicare budget easier to cut. Instead of Reagan's fictional "welfare queen" you would have "medicare bums" who spend our hard earned tax dollars on hookers and blow. Bad idea politically, because of the dynamic it would create in the future.

Why do you say 'fictional'. I think he used that example because people had seen it and could relate.

Because they were the extreme exception whereas the rule of who was and is on welfare are people that really do need a help up. My problem is that, just like every other entitlement in this country, it's a hand out with no requirements to improve the situation. That is where the welfare queen is relatable. Most people just choose to view those on welfare as such hateful things because of this, not because those on welfare want to live off the government. Yes some really do, but again they are the exception, and they wouldn't do well if they were expected to bootstrap.

Depends on your model, whether individuals can make good long term choices about health coverage v. cash now.


They can't. I just listened to one of Tyler's colleagues comment on the difficulties people faced in assessing near-term costs and long-term consequences. And foosion's original point is spot-on: the American public won't tolerate a system where individuals have to truly own the consequences of their own health-related decisions. Part of that is irresponsibility, but part of it also, I think, is an intuitive understanding that there are many forces outside an individual's control that affects long-term health prospects.

Tyler, to your point, whether you think it "rational" or not, heath care is as a social fact accorded a separate moral status compared to other goods or services we might purchase. If you want to convince a majority of your fellow citizens that status is a mistake, then good luck to you. But you should start there, rather than with policy prescriptions that pretend that social fact doesn't exist.

The voters aren't going to have a choice. The question is will we do it with death panels or with consumer responsibility.

Let's try to design the worst resource rationalization system we can. It would be something like 'show up on any given day and be able to ask for anything and get it without having to pay for it.' That's what we have right now.

I would love to have that system. But that's not what I have right now. That's something we only allot to those that are already unhealthy. As a student of history, it is my assessment that a healthy society is predicated on medical care to these very people. Dropping this does not make us a better nation, even if we can balance the budget. We're just exchanging one problem for another.

Tyler, I don't understand how your idea handles adverse selection. Obviously
a senior with loads of health problems will forego the cash and choose health
benefits, and a senior who thinks he or she has not problems might choose
the cash. Nor does it say what happens to a senior who takes the cash but
then runs into health problems - do emergency rooms have to take them? It
sounds to me like the Republican budget plan - all air and no substance.

Krugman's idea (and I am no great fan...) does what it says it
does. In partcular, it does not suffer from an adverse selection problem. So
what's the problem with providing people this choice? You know you won't like
the choice they make?

There is no adverse selection. Currently, we are filling the medical system (if you believe it is a limited resource, which it isn't any more than others and less than many) with people who might find other ways to spend money, raising the costs to people who would still want medical interventions even if allowed to pursue other workarounds. Moreover, we are directing the capital externalities to end-of-life care rather than acknowledging the reliability theory of aging (i.e. avoiding damage early is better than trying to rectify pathology later). Krugman's 'idea' doesn't do a thing about the REAL (technical) problem. It's a financing gimmick to 'fix' a problem that his ideology created- the misallocation of resources to end-of-life miracle-bets.

Emergency rooms are a different thing. They just happen to be situated in a hospital. What's the over/under on how many more times I'll have to explain this?

"What’s the over/under on how many more times I’ll have to explain this?"

A lot - your reply makes no sense to me. Probably this is intentional.

Suppose people are rational and have perfect foresight, etc. so they can know how much they will need to spend on their future medical care. Then they will choose the cash precisely when their health costs are less than the cash. The government then pays those who would have cost it less to treat medically, a cash sum which is greater. That's adverse selection.

"Emergency rooms are a different thing." Emergency rooms are often forced by law to treat all-comers. Are seniors who took the cash, barred from emergency rooms.

my disagreement with you is based on my beliefs about the way that American politics works.

As I said in an earlier post, if this system came into being, I believe that a fair number of seniors would take the money option then have severe medical problems and complain a lot. Which would lead to some argument that "they were cheated by the system, they didn't know what they were giving away". Then, my generation just pays them twice (cash first, then medicare anyways).

Do you disagree with this political scenario? How do you see it working out when large numbers of seniors make terrible choices and end up with no health care and end up on CNN and continue to vote at high rates?

I mean these as honest questions, not as jabs at you.

The basic issue that Tyler misses is that the public is really interested in a capabilities approach: giving people the capability to maintain their health for a full lifestyle. That's why we feel bad about people dying when they can't afford medical care.

The public is not really interested in giving vast wads of cash to people who may or may not need it to use any way they like. The moral hazard is enormous: there would be an even larger industry encouraging them to gamble the money away either at casinos or in bad investments. And more industries encouraging conspicuous consumption. And then they would be stuck needing care, and the public would be dissatisfied.

Make people capable. Then if they want costly "freedoms", they can earn them.

If you really can read the mind of 'The public', then the public is stupid.

If we'd spent half the money we've wasted chasing 'fairness' or 'capability' we'd have made progress against aging. But if the public prefers to keep us all dying at 72.5, though arbitrarily accepting male, etc. shorter lifespans, then they are stupid. I don't think they are stupid, and I don't think you can read their mind. You limit their options to the best of a bad lot.

Given all these comments, it is amazing we give people any free choice over their money at all.

Tyler, the difference here is it's not their money, it's our money, and yeah, we'd like to have some control over how they use it.

Sorry Tyler, who are we? Please show me an ID before answering my question.

I think Tyler was lamenting how illiberal many of the commenters appear to be.

I don't think most commenters are illiberal. Most likely they are old and afraid of how expensive health care could be. I'm old and healthy but not wealthy. I expect to live at least other 30 years (I will then be 100) but --for a number of reasons-- I'm not concerned about the cost of my health care. Since I don't live in U.S., I shouldn't be worried about the cost of health care there, but I have two American grandchildren that live with their parents in California and I'm worried about how politicians are looting their future. As in all democracies, American politicians care only about the next election and children pay the price of their myopia. Thus, I hope most politicians are forced out of office in fair elections after completing just one term (unfortunately incumbents often have too many advantages over challengers).

These comments are 21st century versions of the central 18th-century paternalist-monarchist argument: the people cannot be trusted with freedom. There is no such thing as a new idea; the labels just change from era to era.

I'm fine trusting people and I wish we would allow people to exercise more choice.

I DON'T trust American politicians to tell (some) seniors "you took the money and made your choice. We are not going to give you healthcare now." I believe that American politicians will give in to seniors.

Exactly. In which case "we" are all exposed to their bad choices--because the bottom line is a hospital or ER isn't going to turn away a senior dying on its doorstep. This is reality, apologies to the libertarian fantasists.

I like your food blog, however.

What are you going to do with a large number of the elderly who don't have enough money for adequate healthcare?

What happens to people who take the cash and then later do not have the cash to pay for needed healthcare?

Surely the fact that you (and others) have trouble with this question indicates that, in the case of healthcare, we are dealing with a different good than ipods.

What happens to the people that can't get the healthcare they need right now??

No Tyler, they understand how political economy works. A moral code with no reasonable political economy ain't going anywhere.

Here's the simple truth, people don't want to die early because they can't afford treatment. And children don't want to watch parents die early. So as long as they don't have to pay themselves, which they can easily do by voting for it, they will demand these treatments. Democracy is not about the enlightened wishes of policy wonks, its about the will of the mob. If you gave people cash payments for their Medicare they would gamble it on slot machines and then demand free health care anyway, and vote for it. The guilt and emotions of the younger generation combined with the direct beneficiaries will be enough to cobble together a voting majority, and it will happen.

Is this really Tyler?

Yeah, this whole thing seems pretty trollish for what's generally in the top tier of reasonable opinion blogs.

No control over money is just as equally bad as total control over money. Neither situation is good, nor sustainable. People work best in a closed system with simple rules. Medicare, single-payer coverage, and any number of healthy lifestyle incentives create such a system. Giving people the choice between cash and good health will create a whole lot of unhealthy people with cash. That is not good or sustainable.

Do not pretend that an appreciable number of people who need that cash for their healthcare will choose the quality health care.

This is _not_ an economic issue. It is a cultural issue. Frame it away from that and you lose the conversation outside objectivist circles.

This is what he was talking about when he says he finds it amazing that there is any support for free choice over money. You have said that giving people a choice over what they do with their money will lead to them spending money on things that you don't want them spending money on, instead of health. I'm not sure you've ever spent any time with relatively young seniors; they're quite aware of the risks that they face in growing older since many of their friends and family have gone through just those things. You're characterization of a choice between "good health and cash" is completely incorrect. It's "bad health with lots of people poking you and wiping your ass" vs a potentially more enjoyable, but shorter, life. It's only a cultural issue because some think that forcing people into living as long as possible regardless of the quality of life is somehow morally acceptable, which has only become a cultural issue with the advent of long-term insurance and medicare.

You're new here, aren't you?

"Given all these comments, it is amazing we give people any free choice over their money at all."

That's silly. I'm an American citizen. I make rational choices to invest elements of my national "association fees" into a trustee/executor package for my declining years, much as I wish some of my ancestors had done rather than attempt to continue administering their own wealth after their mental facilities had begun to slip. Nor is this necessarily an objectively irrational way to do things. My mother, correctly concerned that her mental facilities would deteriorate before her body did, wisely setup and contributed to a trust fund for herself, administered by an, um, trusted local bank. Said trustee made the entirely rationally-self-interested decision to invest my mother's trust in a series of instruments that yielded very high loads and other "administration" fees.

Now one could argue, as, say, Paul Ryan and Tyler does, that the banker's decisions made no less economically inefficient use of my mother's savings than Medicare and Social Security does. The difference from my point of view, however, is that bad investment and disbursement decisions made by Medicare and Social Security trustees tend to be discussed on the front page of the New York Times whereas my mother's trustee's decisions -- disclosed in the form of financial statements that make synthetic CDO prospectuses look simple -- were pretty much discussed by no one.

Mmm, safety nets!


Funny, I'm not terrified at all. I guess that means I'm neither left nor right.

Maybe you're this guy

If they start playing these speeches at Gitmo, I'll bet many confessions will be forthcoming. But would it be torture? Eric! Eric Holder!

Andrew: Don't tell me we're dragging you over to the "Dark Middle"? See how nice it feels after the pain stops.

If you feel these are off base, you need to point out why. Otherwise, you are just calling us all schoolyard names.

What seems strange to me is that Yglesias seems to have a rank order of something like this: cash, state supplied medical care, current system, voucherized system. I can't make sense of that.

I think this is the key point. If you support this, why do you disdain vouchers over the outright provision of care? Why oppose hard caps on Medicare spending, as this is just one form of such a cap? Why have Medicare at all, you can just roll the grant and funding into SS - it's just more SS. I would like to see a Matt Y explanation of his thinking.

That was my thinking too. My understanding of the voucher system is that the margins are ugly and that the vouchers can be completely worthless in certain situations. That is a way to destroy the system entirely not sustainable funding.

"Tyler, the difference here is it’s not their money, it’s our money, and yeah, we’d like to have some control over how they use it."


Tyler is smart, so "letting stupid people die" does not seem threatening to him. It's a ringing endorsement of moral freedom! See ya at the "Atlas Shrugged" premiere!

"Letting stupid people die" is not very popular politically when the people are elderly and have a lot of political power.

That's the major flaw in Tyler's argument. Aside from the moral issues, of course.


Welcome back! Matt is going to be making some of his former friends mad. Ryan's plan is making headway, while Obama is "blah, blah,blah, Bush is bad, Republicans evil."

"They might rather have a servant, or a better car..."

On one hand sounds reasonable.
On other hand sounds a lot like "maybe those public school teachers would choose *yet another* villa in Hawaii? Why don't you let them choose? You want to deny them that villa?"

Is this a negative externality? Let's say two-thirds of seniors opt for the basics+cash scheme. These people are now in the same market for other goods that seniors consume - apartments in Florida, or walking frames, or grapefruits - and have more cash at their disposal. If prices for such goods rise, does this place additional pressure on others to opt for the same scheme?

... And really, many of these comments seem to show how far *Tyler* is from thinking rationally about "such matters."

Public money is spent to make the public happy. Sick old people without medical attention makes the public sad. Old people who would like better cars or houses don't make the public sad.

To make this really work, there needs to be holes in the 'final net.' Charities, for example, will probably hold the final line; they must be free to make decisions - any decisions - about whom they will give free health care to, in what manner, and for how long. It essentially becomes a jury of your peers. If you do something inexcusable - drinking, driving, killing a baby in a stroller - and then come in with no money to pay for your long term rehabilitation from the incident - you should expect no mercy from the charities.

So if we give seniors these large piles of cash don't we necessarily have to exclude them from ER treatments so they don't game the system?

It's more likely that the "basics" plan they get in addition to the cash would include coverage of emergency room treatments. Presumably the main thing excluded would be heroic end-of-life treatments, chemotherapy for likely terminal cancers, etc.

Transfer payments into HSAs would do just fine and then tax them if they take the money out - like HSAs already do. What we really need is to turn Medicaid into this kind of a system, and downgrade Medicare altogether

Tyler, your whole argument just downright ignores the important question of WHAT treatments, exactly, you plan for your "cash grant" to ignore. Cancer treatments? Bypass surgeries? This is a crucial distinction that all the GOP plans for healthcare just sweep under the rug in the name of "choice." Have you forgotten the Emergency Medical Treatment and Labor Act, which just turned 25 this month? Signed by none other that Ronald Reagan? We, as a country, are not comfortable denying emergency healthcare to people. The EMTALA was passed because we did not like the fact that private hospitals were refusing charity cases and causing deaths.

What treatments will seniors actually choose to forgo in your privatized Medicare world, and which will they not? If they will still get bypasses and hip replacements but not cancer treatments, perhaps, are we actually going to save any money?

These comments are strange. Sorry. The plan Tyler proposes may be in some sense economically optimal, but it is simply not feasible (for the same reason many economically optimal policies are not adopted). The reasons why are simple.

Suppose a rational, intelligent, healthy elderly person takes the cash because he doesn’t have too much money at hand and optimally decides to fix his leaky roof instead of taking out a high quality package of health insurance. Unfortunately, two years later he has a heart attack (the probably of which he took into account in his original optimization calculation) and needs some health care. But too bad for him because he chose the roof.

The reason Tyler’s proposal is infeasible is because it requires that people be willing to let other people die if their past choices turned sour. I am not American, but I don’t think American society thinks this way (as evidenced by the popularity of Medicare and Medicaid and heck, even bankruptcy law). So some government provision of health care, not just the choice to receive insurance, will be inevitable.

Freedom of choice is great, but to claim that it is the only value one should care about is nonsense. People care about all sorts of values, including not letting people die EVEN IF they made an optimal choice to take that risk at some point in the past.

Nope. It's perfectly feasible. Your pathetic caricature will simply get emergency care which is pretty cheap and not what we are talking about. He simply won't get the heart transplant because someone doesn't get the heart transplant and he has chosen to be that guy.

What about cancer treatment over 6 months? It's tough luck or emergency room?

For Andrew to gibe at other commenters about "pathetic caricatures" is pretty ironic.

I don't claim to be a genius, but it's remarkable how much mileage I get simply using words for what they actually mean and being semi-rational.

If by perfectly feasible you mean in blog-comment-land, then yes, I agree fully. My point is that even if a person makes an optimal decision ex ante, if it turns out bad, people wont sit on the sidelines and let other people die. *Should* they let people die, because of the ex ante optimal decision? Maybe, but I don’t care what people *should* do, I care about what they *actually* do. And what people actually do is support programs such as Medicare and Medicaid very strongly, which is direct evidence that people don’t want other people to keel over and die because of potentially rational ex ante decisions (such as eating poorly, not exercising, etc). So if you think Tyler’s proposal is feasible, it’s only because you feel that it *should* be feasible. I am afraid it is not because people (including myself) don’t look at ex ante decisions in the same way economists do.

Is the earlier death of old people meant as drawback or a selling point of such a plan? Bribing old people into clearing out sooner may be the hope of some for more reasons than just controlling medical expenses.

The first comment from foosion is the essence of the problem.

What do you do with the folks that choose to take the money and then need care? People could invest more through out their lives and live in less nice houses, drive less nice cars or take public transportation, eat beans and rice, and take no vacations, and they would have more protection against poverty in their old age, but experience has proven that the majority of humans are just not capable of that sort of delayed gratification, so we make it mandatory in the form of taxes and social security b/c we don't like watching old folks die in abject poverty with no medical care. On Medicare, do we provide too much? Probably yes. But we haven't educated our citizenry about healthcare costs and tradeoffs, so they can't make the decision to have more or less care on their own, and we can't trust them to take the money and save it for when they get sick.

The other problem with this is that Medicare is an insurance product that averages risk across a pool. If we remove the pooling component, some will make out like bandits (die suddenly of a heart attack) and some will run out of money (Alzheimers, heart failure, etc). Are we really willing to let the heart failure patient get no care? Right now, EMTALA requires a hospital to take all comers. Will we change that for Medicare age beneficiaries that took the money?

Any public plan must have strict cost-benefit standards to be workable. If people don't like that then they should have the option of using a voucher for a private plan. Getting cash is silly from a political perspective. Do YOU want to hear stories about people who took cash and are now dying in the street? There would be nothing immoral about this (people suffering the consequences of their risks) but the political system would come to their rescue with all the consequences of that. The root of the problem is that there is "too much" expensive medical technology and everyone wants it. In fact, one "trick" the FDA has used is to withhold approval of the most expensive but least effective treatments/devices. If it is not approved, they the "poor" can't complain too much about not being able to afford it. After all, the FDA says it "doesn't work" or at least that is how it can go down. No matter what is done we are headed for a period of political instability. Out of that may come a new sense of self-reliance and new institutions in our society.

The problem with privatized healthcare is that, in a society with easy access to credit, there can be no free market on lifesaving healthcare treatments. The last day of life in the USA costs people an average of $50,000 in medical care, because the sky is the limit when it comes to lifesaving treatments (and, more germanely, the costs of lifesaving treatments). People would rather go into debt and have a small chance at life than die in a cost-effective manner.

Cash grants wouldn't solve this problem, because people would still ask for care on the last day of their life. Life with crushing debt has more utility to most people than death.

I don't really why that would be a problem. Presumably a person with no income and no assets would not have an easy time securing a $50,000 loan to pay for marginal surgery. If they do, that's really on the lender. The problem with someone who's at risk of death is the pricing power of the service provider, not the consumer's access to credit.

Yes. And if it is a contagious diseases, the people that get infected from someone that doesn’t have a medical insurance shouldn’t be treated either, since the taxpayers otherwise have to pay anyway.

And while we’re at it, why wouldn’t we allow someone to sell himself into slavery now again – if the choice is between slavery or slow agonizing death, the choice doesn’t seem that hard.?

Cash grants instead of defense.

I won't ever need it, and promise to surrender.

About as logical as this post.

It does make sense Bill. However your example is apt as most of what the government calls defense is not actually defense and the actual goal of defense can be achieved by

Just because someone calls something a public good (even if it actually is a public good) does not automatically spell "good game" that they now get to do whatever the hell they want. You have to achieve the actual public good objective, which is NOT what the government is doing.

I agree. Labeling something a public good does not end the inquiry.

We probably would have some defense system to protect us from ghosts if Boeing or Lockheed could make a buck on it.

This is a completely inane suggestion that amounts to an argument for cost shifting.

What happens when an uninsured senior who has opted out of Medicare and spent their Medicare dollars on lavish personal consumption shows up to the emergency room with advanced pneumonia, requiring immediate intubation and a long stay in the ICU (these are the people who cost Medicare real money)? Of course we treat them - regardless of their ability to pay. In the instance that the senior in question could not pay his bill (and no - their cash grant would not be sufficient to pay at cost for a two week stay in an ICU, that's the whole point of insurance and risk pooling) the cost of this treatment is shifted to the hospital which then passes it on to other health care consumers. Private insurance companies - who must bargain their payment rates rather then set them administratively - in particular would be forced to pay higher rates and thus charge beneficiaries higher premiums.

Is that an outcome that you want Professor Cowen? Spiraling private premiums in order to provide a lavish cash grant to seniors?

It's really disheartening to see two sharp commentators - from the neo-liberal left and from the neo-liberal right no less - get something so simple so badly wrong.

Absolutely agreed. I'm simply astonished that Tyler just shown that he is completely ignorant of the piles of research on human cognitive biases. Given the fact that these are at the core of long optional/mandatory pension discussion I'm just totaly shocked.

This isn't about emergency if emergency rooms haven't already been turned into chronic care waiting rooms by our government. But that's another story.

As someone pointed out above, taking the money and foreswearing medical care in the future is not a credible commitment. You will show up at the ER, will have your relatives raise money for you etc.

But, there might be a way to make this proposal into a credible commitment.

The US could enter into an agreement for another goverment to take care of the healthcare of its citizens at a lower cost. If you traveled and lived abroad, the USG would pay Costa Rica or Canada a fixed payment for taking over your healthcare just as they do for their own citizens. You would be denied the right to visit or return to the US, and be denied a US passport.

That's a credible commitment.

"taking the money and foreswearing medical care in the future is not a credible commitment."

It absolutele is a credible commitment. You people keep talking about emergency care and that is not what we are talking about. If we unbundle, you lose. And we are going to unbundle.

Wouldn't it make more sense to find all the citizens who want national healthcare, set up a reserved part of the country for them and let them have Obamacare? Isn't that what they what? That way they wouldn't have to deal with all this dissent and the mean people.

Talk about your adverse selection! They'd have to call out the National Guard to keep the elderly from streaming into more liberal states. It would be like the Battle of Bull Run, but with canes and walkers. Oh the humanity!

Actually, Alan, that would probably happen with Medicaid block grants.
States like Florida, Texas, Arizona and other southern states that lured old foks to the warmer climes are going to have to take care of them, and provide nursing home care.
But, if they can shift those retirees back to their original home states and THEIR nursing homes, they would have the best of both worlds.
Sort of like welfare migration. Only old geezers who come back home to the state they left because those states will get inundated with taking care of old folks.

Rich, You shifted into Obamacare when we are dealing with medicare.
If you want to opt out of medicare, take the money as Tyler proposes and go someplace where I will not have to take care of you later when you come back crying that you spent all the money and don't want to die in front of the ER.

You're going to take care of me in my dotage? What a swell guy! Where should I send the bills? I feel better and more secure already.

I am ever so sorry I didn't stick to your topic, But, as the kids say: "You're not the boss of me". The grownups are ruder but we can't have that, can we?

Rich, I know, I know. I have a soft heart.

You may claim YOU are not going to be at the hospital's doorsteps demanding care, and me to pay for it, but your children, who face the choice to taking you in and changing your bedpan, may choose to vote to have me take care of you. Credible commitment has to extend to you and those around you, though, maybe your children would want you to die at the hospital doorsteps. Could be, but in any case, you'd better hope they have a room in the basement for you.

I'm unclear under what theory we're now working under that would prevent seniors (and those who then have to support them) from spending the money outside of health care, then demanding health care anyway.

"What would terrify the left, of course, is the likelihood that genuine privatized cash would actually win that competition."

Actually, what terrifies me is that we'll even attempt it, because under those conditions:

a) Republicans will be in charge, and therefore

b) the private market will be constructed almost entirely to the disadvantage of consumers.

You know as well as anyone that health care doesn't work like a normal market. You don't seem to want to admit that no one on the political stage is willing to construct a completely privatized market that works: Democrats want a bigger role in government, and Republicans just want to hand the money to insurance companies without requiring that they insure anyone.

You guys are a victim of your own lack of vision. Even going back to a previous post, let's say Tyler falls down the stairs and breaks his knee caps (not how it works, but bear with me). He has forsworn knee replacements.

OMG! Now we have to buckle and give him a knee replacement and we can never get all those quiches back from him!

Sorry, no. He gets a wheelchair. No problemo. And that is the worst case you folks are talking about.

You guys can't accept that there could be a world where not everyone gets the absolute most expensive premium option. In fact, in your world there are no options. This is why you can't fathom choice.

So, this is infeasible, but your guys alternative is to keep the expectation infinite and let the death panels be the bad guy. Good luck with that.

So it is Andrew's belief that the American people will credibly commit to force/allow hospitals to: a) check whether or not a senior dying in the ER has opted in or out of Medicare (can't know a priori whether or not the geezer is an opt inner or opt outer - or maybe we should brand the opt outers so that hospital security knows not to let them in?) and b) if the senior has opted out force hospital staff to forswear life saving treatment and watch the senior die?

Sorry, but not only is that a morally vile outcome to desire, but it is a ludicrous reading of the political economy of any developed country and of the United States in particular.

There is a simple solution for this. Everybody would get an electronic ID and there would be two lines in the hospitals. One would open door to actual hospital, and the other one would be morgue. Your opt-out insurance would just cover a death injection. And the good thing is that there is no need for death pannels, Whole process may completely automated just like a car wash.

I count 6 times so far. I'll start the over/under at 20. Any takers?

Stupid comments. 80 percent of medicare expenditures are on life-extending treatments like cancer treatment, dialysis, etc.

So you give seniors a plan that has catastrophic coverage, and that's it.

Um. Am I the only one in this thread who's heard of DNRs? Hospitals already have to contend with this kind of thing. It's not like there's not already procedures in place.

But yeah, like Nick says, the whole emergency care argument is a side-show. The real money is in the chronic care costs.

It would interesting to have the actual Medicare beneficiaries in the comments above tell us their ages, and whether they would take a cash deal to forgo the right to use Medicare, and how large that deal would have to be up front in up front cash. For example, though I am too young to use Medicare, at age 44, I would accept $100,000 today to forgo Medicare and Medicaid coverage in the future.

As I have gotten older, I have watched several older relatives and other acquaintances each consume multiples of that total in the last 3-5 years of their lives before dying- an amount that vastly exceeds the discounted value of all their contributions via Medicare taxes and premiums. I have often wondered whether they would have found the expense worth it if they had had to cover, let's say, 1/3 of it out of pocket at the point of consumption. I think Tyler is right- a cash offer significantly less than the expected expenses otherwise would probably be quite attractive to many over the age of 65. Death comes for us all in the end, whether we spend $100,000 to fight it, or $10,000,000, and the returns on the margin decline. Also, take note of this part of Tyler's post, which I did not see noted in any of the 50 comments I read:

keep in mind “health care” is only one way of many to better health care outcomes, so you still can favor increasing the degree of choice.

That's rich. How much do you think "catastrophic coverage" would cost for the 65+ population? Remember, over 25% of Medicare outlays are made in the last year of a beneficiary's life.

Furthermore, how would you define catastrophic coverage? Does an acute episode of anoxia caused by a tumor pressing against the trachea count? You've already said you'd refuse to treat cancer, but how about the symptoms of the disease? Diabetes and DKA? Etc., etc.

How about a hip replacement? The costs just go up and up.

This whole conversation is absolute lunacy. I don't understand how any sane person could desire to live in a country where millions of people walk around with treatable tumors the size of baseballs.

No one does, but just like they think cash now is an increase in options, they think a balanced budget now is as well. Some people don't want to see how "fiscal responsibility" can lead to horrific outcomes.

Catastrophic coverage pays doctors to fulfill their Hippocratic oath and nothing more.

In that case you are committing them to treat whoever shows up in the ER. FYI, patients who are given dialysis, started on a regimen of chemotherapy if diagnosed with cancer, etc.

I wrote a longer blog post about the problems with this proposal here, but to put it succinctly: People are really, really, colossally bad at predicting their future health care needs and there is a moral imperative (that presently exists, anyway) insisting that we provide care to those who need it. This proposal sets and baits a trap in which people gamble on their future health and leaves the losers of the gamble to die early, bankrupt themselves, or be supported by society. We've already, as a society, decided that letting people die isn't acceptable, which leaves the latter two options as outcomes for many whose gamble doesn't pay off.

OK, then let's define what health care services are included in that moral imperative and which are not.

Those services outside of the moral imperative will not be paid and cash payments will be made out to seniors instead.


Sure. Except that limiting care to only acute interventions that save lives only increases the overall cost of a healthcare system. Thus making it individually optimal (you aren't paying for the fantastically expensive interventions, and you reaped the reward of the cash out) and collectively catastrophic.

Your replies are a little to sphynx-like. I am not wise for a word is not sufficient.

Here's where I got caught up, Tyler. You say "plus some of the rest in cash, doled out over the years if need be" as if the solution you most preferred (after, of course, collecting no taxes and distributing no benefit at all) would be tossing a really big lump sum over the transom at, say, age 65 and then walking away. Except for ER visits plus asprin/morphine for traumatic injury.

Since you can't possibly mean that, and since I can't really read it any other way, I'm actually pretty sure I'm just not wise.

If on some remote chance that is what you mean then...

Despite my dad's teacher's salary I might have afforded Harvard instead of a state college but for a lamentable tendency for my immediate ancestors to a) accumulate very large amounts of wealth in their primes and then b) lose them to grifters and con artists who specialize in identifying the onset of mental decline maximally efficient ways to wring their targets dry.

The best and/or worst example, though by no means the only, was my great uncle's handyman who persuaded him that a) a bulldozer would sure make maintaining the driveway a lot easier, that b) a man with his background and experience new the importance and value of buying the right equipment to expedite completion time, and c) that if he'd just write a check he'd make sure the bulldozer was delivered by the following Monday. Since my prominent-Harvard-alum great uncle, like way too many on that side of my family, was physically healthy as a horse except for an inclination to long-onset, non-Alzheimer memory loss, he made that aaalllllmost "of sound mind and body" decision to fund the bulldozer approximately once a week for nearly a year.

Now in a strictly libertarian/economics sense that's actually a pretty neutral outcome: my great uncle wasn't utilizing his wealth in an optimal fashion, and the handyman and his fellow gang members surely spent the proceeds no less wisely than I, my siblings, cousins, and aunts and uncles might have -- indeed, had they not departed to a country without an extradition treaty they might have sent their own children to Harvard!

My children, in turn, probably would never have gotten an alumni-assisted in at Harvard, but they might have had a fair shot at affording to attend my father-in-law's alma mater, Notre Dame. In his final year, however, after an extraordinarily long series of consultations with his clergy, he made an extraordinarily large "donation" to his local church to build a small new wing of his local church. Which would have been fine for several reasons, since again the contractors who got the job, and eventually the bulk of the donation, no doubt stimulated the economy at least as well as my mother-in-law, siblings-in-law, and various other offspring would have. So again from a libertarian/economics perspective my father-in-law, like my great uncle, and like many others when they reach that age, made a rational, informed decision about how to spend money that was lawfully theirs. Fortunately my mother-in-law had money my father-in-law had no access to, so she got to stay in their home after he passed away. (It was a beautiful wing, though. The very nice ladies of the church bereavement committee were able to feed on the order of hundreds of mourners in it after both his funeral and, a few years later, my mother-in-law's.

And finally, the first house I bought had been owned by an elderly widower who wasn't wealthy (by any means) but who'd nevertheless been a well-respected if salaried white-collar bank employee. Judging from the hundreds and hundreds of targeted bulk-mail solicitations for donations I continued to receive even years later he must have been a very "generous" donor to the "don't let them take over America" right-wing organizations. Again, they were no doubt able to spend checks he used from his social security and other savings better than he might otherwise have done. But based on the condition of his house and comments from the neighbors, he might have been a little better off had he kept a little more for himself.

My concern is that at a certain point any cash-option voucher system for healthcare for the elderly is going to look as attractive to home handymen and clergy as it does to medical quacks. Only with much lower barriers of entry. Particularly if it's released, as I'm sure you don't really mean, in a single lump sum instead of "doled out over the years if need be." A phrase that I'm really, really having a hard time parsing any other way.

Now you might argue that, a-ha!, I've already admitted that social security money is often bled from the elderly and yet that's a cash-disbursement system I don't seem to be objecting to. The difference being, however, that social security is generally a) "doled out over the years" and b) isn't actually a lot of money at all compared to nearly all recipient's monthly expenses. So while there's opportunities for minor perfidy with social security it isn't and won't present the opportunities for fraud on the grand scale Medicare-alternative distributions would be.

Anyway, that's all a long-winded way of saying that at not every point but definitely at some point a substantial fraction of the medicare-aged population in question actually really is likely to need to have decisions made on their behalf. And in terms of gross efficiency it just seems a lot more cost-effective to have a single, very large executor/trustee with fairly uniform policies than millions or tens of millions of less-closely-monitored smaller ones.

And that, in turn, is a long-winded way of saying "I don't get that part about 'plus some of the rest in cash, doled out over the years if need be.'"


figleaf, You are a truly gifted writer.

Thanks for your kind words, Bill.

One would really need some idea about how much basic care and advanced care cost. Most advanced care really isn't offered to the elderly not due to costs but due to age and weakness to withstand them. What is the age for transplant cutoffs? For intensive chemo? Diagnostics are probably not that expensive. How much of the cost is basic but chronic? How much is basic but frequent? Medicare is probably most along these lines which means little in the way of cost savings is possible except perhaps drugs under patent but that could be handled by current prescription drug policies.


If a 90 year old comes into the emergency room after a snowboarding accident needing a knee replacement are we just going to let them die in the streets!?!

Actually that is (almost) a very common way that old people die. They have a fall, and die before they get to the hospital.
Even if they did get to the hospital, they may be too old to undergo surgery (since the anethsia will kill people who have a weak heart).

There are plenty of chronic conditions that are manageable with drug regimens (that are expensive in and of themselves), or conditions which require frequent laboratory testing (which can add up quite quickly). Devolving the issue to a select set of cases and then concluding all expensive interventions for chronic conditions would be unsuitable for older people is silly (also wrong, since many elderly patients with chronic conditions [e.g., cancer, autoimmune disorders, GI problems, etc.] are healthy enough for even those more invasive interventions).

Tyler, your system will work the minute we decide that turning people away at an emergency room for lack of funds is a reasonable thing to do: You spent your money, now all you get is morphine until you die'.

Convince the public that a plan like that is a good thing, and your idea becomes practical. Fail, and you get the current system, where emergency treatment of people without insurance is more expensive than just handing free early treatment. In a way, it resembles the financial crisis: When people are doing well, they keep the profits of not being insured, when they are doing badly, they get bailed out regardless.

Are you sure it is more expensive? Emergency room treatment is a tiny fraction of healthcare costs. Unnecessary procedures are probably a significantly higher percentage.

Not to mention that emergency treatment is only "free" if the patient is completely flat broke.

I don't think Tyler's plan is workable for the reasons others have mentioned. If you let some people take cash instead of health care, you have an adverse selection problem. And if the people who take the cash still impose on the system when their health fails, you have a free rider problem.

But how about this for a modification: rather than letting people take out cash years in advance of a problem, we simply buy them off after the requirement for treatment is established?

Let's say grandma's knee is failing, and it's painful to walk. Right now, she's going in for knee replacement surgery because it's free. There is little downside for Grandma, and no cost containment incentive on her part.

But if we know a knee replacement costs $100,000, we could simply go to grandma at that time and say, "Look, you can have the knee replacement surgery, or you can take this cheque for $50,000. With that, you can buy a powered wheelchair, or you can walk with a cane and give the money to your children, or whatever you want. Your call."

Faced with those choices, We will be able to filter out the marginal cases - people who value a knee replacement at under $50,000. No one would be denied the surgery, but they would be given additional choices, and the choices would be structured such that they always save money over the primary option.

This type of payoff doesn't affect future, non-knee ailments, so we don't have the free rider problem. There's no adverse selection problem. And, no one loses any treatment option, so it should be politically feasible.

Once the principle is established, we can go further. End-of-Life treatments could range from full life-saving efforts to DNR orders with a small cash return, to a replacement with palliative care and drugs with a bigger cash payment. If I know I'm in the last year or two of my life, but it costs me nothing for doctors to go to heroic effort to try to extend it by another year or two, I'll choose that option. But if I'm given the option to give up the remote possibility of an extra year or two in exchange for $100,000 for my daughter to give her a better start in life, it would be an easy choice for me, and I suspect a lot of people would feel the same way.

That's what he said.

We can also legalize payment for human organs! Hey grandma, need money for the roof? Want not sell your liver?

The other realistic option for medicare reform is to means-test it. The simplest way to do that is to have a deductible amount that is indexed to your wealth. If you're worth a million dollars, the annual deductible health care treatments might be $50,000. If you're worth $100,000, the deductible might be set at $5,000. If you're poor and destitute, there is no deductible. If you're a billionaire, you get no coverage at all.

This would have the advantage of capping the risk of insurance providers who want to provide gap insurance, which should make such insurance relatively cheap, and cheaper for people with less wealth than those with more. If my wealth is tied up in my home and I don't want to have to take a reverse mortgage or second mortgage to pay for health care, I can buy gap insurance, and the insurance company would know that they'll never be out more than my deductible amount in any given year.

Adverse selection problems go way down when insurance company risk is capped, and the deductible ensures that I have some incentive to contain costs (gap insurance might just cut the deductible in half, or turn a $5,000 annual deductible into $500).

You don't need to means-test it, just make its benefit progressive like Social Security:

you would do this by making people that earned over a certain amount of income (or net worth) pay a premium that increases up to millionaires that pay 100% of the premium for medicare. Another beautiful feature of this is that the government can define annual spending increases for the program and simply shift the premium curve if costs are too high.

The problem I have with this is that it does nothing to contain costs - it just provides additional revenue. A good reform should contain incentives to control costs. By putting part of the burden of treatment back onto people who consume it, you give them an incentive to contain the costs, and you give producers an incentive to innovate and compete on price. By allowing low-cost medical treatments to exist outside of the medicare bureaucracy and the insurance bureaucracy, you cut paperwork overhead.

If you just force everyone to buy insurance, then you have the same situation you have today - treatment decisions are made by third parties instead of by producers and consumers. Cost containment doesn't happen other than through fiat by central planners - essentially rationing and price controls. Those are never efficient.

In fact, by injecting more money into the system you'll ultimately reduce the pressure on government to contain costs. Rent-seekers in the health-care industry will find a way to absorb that revenue, either through increased insurance premiums or increased fees for service.

No solution for health care is ultimately going to work unless you restore the incentives inherit in market transactions and provide a mechanism for information regarding supply and demand to get back to the people demanding the service and those providing it. The trick is to retain as much of that as possible within a system that protects people from medical or health disasters due to market failures.

I want private grants to work, but my guess is that people would spend the cash and later vote themselves some form of coverage. It's a similar problem to social security. It doesn't do the same thing as a 401k exactly, it has the feel of a guarantee that you won't outlive a fixed pot of savings. You can offer private annuitization in the retirement realm that does essentially the same thing - you can have an account to spend as you like and another "insured" income stream. I don't know how the voucher idea solves that second demand, even if I agree that the demand is unrealistic. You spend your money, and it isn't enough. Do you just die? How can a politician deal with that outcome?

Opt in or Opt out.

Tyler actually framed the question in the wrong way. If he had framed it differently, he would have recognized the duality of pricing, payment and coverage.

Here is a different way to frame the issue:

EVERYONE gets death panels, UNLESS you want to pay for the Non-Death Panel Coverage as an optional additional plan. You pay for that additional insurance out of your pocket; otherwise, you get some type of rational rationing (ie, if a drug doesn't extend your life by at least a year, you don't get it; if you go to the ICU with no greater than 20% chance of recovery, your family pays, etc.). You can cover this tail risk by buying insurance if you want that kind of extra coverage.

To make it even easier, instead of linking coverage standards to our political system, we link it to Germany's, Swedens Japan's or Canada's standard coverage. That way the AMA can't lobby Congress to include some new procedure in the standard coverage.

That's a great way to screw poor people while dressing it in the garb of free choice. "I'm sorry that you had to cash out your insurance policy to fix your car/pay for gas/buy food; it's really too bad that you've now got only a 15% chance of recovery in the ICU; off to hospice with you!"

Except your neat opt-in strategy means they need to amass the money in order to opt-in in the first place. This way it seems less cruel, while actually raising the barrier to entry, clever!

Petulant, Actually, I'm trying to highlight the costs of futile care, and the stupidity of those who oppose "death panels". Let them pay for futile and useless care. Not me.

Upon relfection I would also add one other feature to my proposal: drug costs paid for by medicare would be at price offered other to governments (Germany, etc.) and the difference would be picked up by the medicare recipient. See how fast, then, consumers would be asking the government to get the same deals as offered our other trading partners. If we want the luxury of overpaying, we should see how much we overpay.

A little price discovery doesn't hurt anyone.

So Americans should be able to pay the same amount for drugs as, say, the government in Ethiopia? The end result of that would be that drug manufacturers would take drugs off the market in those countries, leaving the Ethiopians without any drugs at all.

Drug companies offer drugs to other countries at different rates because they are using price discrimination to maximize profits. This actually HELPS Americans. Maybe it would help if you pivot your thinking - the drug companies are not screwing over Americans by overcharging them - they are offering the drugs to poor people at reduced prices to extract a little extra profit, which actually helps to subsidize American drug users.

The key issue with drugs is that they are hellishly expensive to develop and bring to market, but the marginal cost of production is generally trivial compared to the sunk R&D costs. Therefore, drugs benefit tremendously from economies of scale. Because the actual pill for a drug costs pennies, if they can be sold to a country for a dollar, that helps underwrite the R&D cost. There's no way these companies can charge American prices in other countries, because they simply aren't wealthy enough. So they optimize pricing by targeting different prices at different countries.

Remove their ability to do that, and they'll simply stop selling to poor countries. The end result could easily be that they would be forced to RAISE prices for Americans to make up for the lost revenue. Or, in the worst case scenario, some drugs that are profitable on the world market with price discrimination would simply become unprofitable, and R&D in those drugs would stop.

There are no simple solutions to high drug prices, except perhaps to cut the cost of R&D by removing some of the regulatory requirements. My answer would be to drop the efficacy requirement from FDA certification, and only test drugs for safety. Let the market decide if the drugs work or not. In fact, many drugs tested for efficacy for their 'on-label' use are rarely used that way - once they are certified, doctors are free to prescribe them for anything without any efficacy testing. So let's just get rid of that, shorten the certification time frame and reduce the cost of certification. That's the fastest, easiest way to contain drug costs.

What price do you think you would get for some drugs if the government didn't pay for them?
What is the rate of non-compliance (that is, person doesn't use the drugs) when they have to pay for them?
Do we really have a market in drugs if the government can't say no or bargain for a better price?

As for removing efficacy requirements, how many more commercials can I listen to on television? Imagine how many more commercials we would have! If you want to say "Let the market decide", let's first have a rational buyer on the other side. One who bargains. One who is informed.

And, by the way, I didn't say that drug companies couldn't get more, they would just have to bargain with the consumer to get the higher price, the difference between what other developed countries pay and what they want. If the drugs are worth it, why wouldn't the consumer be willing to pay the difference?

Actually, the British have a non-death panel can buy supplemental insurance to cover other stuff.

I am curious: what does that non-death panel option include as coverage? Do people purchase it? Do the premiums increase with age?

The obvious solution is to end the concept of insurance..costs would quickly fall. Without home insurance, homeowners would be forced to practice less dangerous practices such as barbequeing on the deck or keeping an Xmas Tree too long after the season is owners would drive more carefully...individuals would be forced to take of themselves and become more conscious of preventative medicine. The Right would surely agree since insurance is inherently Socialistic, being that it is a collective, it's purpose to share risk. . It's time to save America and the first step is to rid ourselves of the insurance industry. Who needs it?

you are a moron. insurance protects investments. banning it would be beyond idiotic.

Except there is no way to provide "insurance" for geriatric care, since we're all 100% certain to get old and sick. So we've ended up with a Ponzi scheme that is running out of suckers to plug in at the bottom.

The most reasonable way to provide medical care is for the government to tax its citizenry and then allot a certain amount of that revenue towards providing free or low cost, universal health care. There are different methods of deploying this paradigm (e.g. Switzerland vs. UK), but it is what every other rich, Western nation does and it works.

But in America it's socialism (which, in another anomaly in the Western world, is a dirty word) so we have otherwise intelligent people dreaming up schemes whereby the government taxes it's citizens throughout their lives and then offers to pay them large cash stipends as seniors with the proviso that they do not have recourse to government health insurance if they accept the offer. When it is pointed out that this won't work because of our desire to not see our fellow citizens die on the streets or needlessly suffer - regardless of their cash vs. insurance decision - this is described, by those same people, as a fallacy of our political will rather than a fallacy of their horrible plan!

It's garbage. Right wingers just don't want to pay taxes and don't want government until they need it or it explicitly advantages them. All of their bullshit rationalizing (like that found in this thread) is just a thin veneer for those three inconsistent truths.


The problem is when Grandma shows up at the hospital with a treatable form of cancer but not enough money for the expensive treatment (she spent her cash transfer on tickets to LA to see Jeopardy! live) - someone has to tell her she is going to die because she is short a few thousand. And Grandma is a very sweet old lady. So no one is going to tell her no. And soon we have another budget crisis.


"We have gone from “Free to Choose” to “Free to Choose more government.”"

Who is we? Wasn't that the name of a Milton Freidman book?

Andrew, your trolling is absurd. Our healthcare system is not being bankrupted by 90-year-olds breaking their knee snowboarding, or Tyler falling down the stairs. It's 70 and 80-somethings getting bypasses after having heart attacks, pneumonia treatment in the IC, cancer treatments, and similarly expensive treatments that are in many cases treatable but expensive. A bypass surgery costs easily into the 10s of thousands of dollars and is out of the range of affordability for most people in the country, but these treatments save seniors' lives (especially surgeries like bypasses). Seniors with these conditions will have to be ignored and allowed to die early in a cash payment system that Tyler is proposing in the event they forgo the coverage at age 60. Or, we'll choose to have catastrophic coverage of some variety and basically be back to square one in this debate (i.e., how much treatment should the government provide, whether by direct payment, voucher, etc.).

Public options: the government can finance operations through taxes, undercut or outright prohibit competition, limit options, obtain favorable regulations for itself, make it illegal for people to charge them the market rate, create tax incentives, brute force buy critical mass, Federalize databases, subsidize losses with its bottomless pit of funds, etc. How could they possibly win in a fair fight? They wouldn't make it fair.

Oh it would win the competition in the sort term. But bankrupt us when the first wave of seniors came back after making bad decisions and demanding the government bail them out.

Personal responsibility and your stupid use of "pro-choice" only works in this case if we really have the stomach for seniors dying on the street.

What is fascinating in these comments is that so many seem to think there is no actual solution to controlling the escalating costs. Let's take the major criticism of Tyler's proposal- that the ones who choose the cash will have to be cared for anyway when they show up at the hospital. This is a valid criticism, however, this same criticism applies to all present systems of government supplied medical services- all of them, without exception. There are always treatments above and beyond what can be universally applied simply due to the finite nature of the world, and yet me must find a way to say no to those who require them but cannot afford them. Tyler's proposal is just another method of saying no to public provision of medical procedures, but doing so at a lower level of care provided at the recipient's choice. If we really can't stomach not saving the life of a person, at public expense, who took the cash (or to charge him the limit of his wealth), then I don't understand how limiting care provided below the absolute premium can ever work to control costs.

Sooooh. Anybody get any work done today?

I keep wondering: has any country or state tried the voucher/cash idea? I'm not aware of any, certainly not on the scale that would be valuably demonstrative. We have, of course, myriad examples of socialized medicine in practice.

The theory is superficially appealing, but it's not at all clear how the "game" would play out, what unanticipated properties would emerge from the system.

Given all that, the proposal strikes me as the opposite of "conservative." A pretty radical libertopian notion. And we know how planned utopias have turned out over the centuries.


All OECD countries have the exact same problem, but are simply on different parts of the cost curve vs time (but the trajectories are very similar). Perhaps we just haven't waited long enough to see this kind of proposal adopted. Until antibiotics were discovered, there was almost nothing medicine could do for you anyway, so this is a very recent political problem.

I will now take the under 15.

The issue I see isn't the financial maturity of the recipients, it's the immaturity of the political system. I can't imagine that we'd turn away a sick senior no matter how they had spent their money. If so, financial fiasco. To turn our society into one that could handle this, we need to take baby steps like increasing rather than limiting copays and deductibles on ordinary insurance.

Further, wouldn't the rational move for a generally healthy senior be to save the first year's premium, and then spend the following years' money? When they eventually sicken, they buy insurance with the savings and from then on they're "inside" the system, renewing their insurance as they reach end of life where most actual costs come in. Isff.

If you granted each person a lifetime amount of money, then you have a finanial lottery. Those whose care costs are more than average are screwed, while those whose costs are less are both healthy and financially happy!

Health insurers don't want to insure seniors for the same reason home insurers don't want to insure beach front homes: high risk.

thats a dumb comment. before Medicare, about 50%-60% of the over 65 crowd had private insurance. now its less than 5%. the industry will offer them insurance, they will just pay more or less depending on their current health conditions. there are 70 year old's in better health than 30 year old's. someone who is a heavy smoker, overweight, etc. will pay for their life choices.

this is the thing ive never understood about Democrats. they complain about how the financial industry privatizes profit but socializing losses. is this not the exact same situation we have with health care? the healthy people subsidize the unhealthy. not to mention the liberal movement to legalize drugs. how would that coexist with single-payer healthcare? would non-drug addicts have to subsidize the meth head and cokeheads? it just doesnt make any sense at all.

thats a dumb comment. before Medicare, about 50%-60% of the over 65 crowd had private insurance. now its less than 5%. the industry will offer them insurance, they will just pay more or less depending on their current health conditions. there are 70 year old's in better health than 30 year old's. someone who is a heavy smoker, overweight, etc. will pay for their life choices.

this is the thing ive never understood about Democrats. they complain about how the financial industry privatizes profit but socializing losses. is this not the exact same situation we have with health care? the healthy people subsidize the unhealthy. not to mention the liberal movement to legalize drugs. how would that coexist with single-payer healthcare? would non-drug addicts have to subsidize the meth head and cokeheads? it just doesnt make any sense at all. you cannot let people destroy their health and expect society to pay for the costs.

Why only for the old, and why stop at healthcare ?

In principle, you could have people opt out of any of the services of the state, and either get a tax-break or a cash-payment of equivalent average value. There are however multiple huge problems with this:

First, people who expect to be on a certain side of the average, will rationally choose the better option. That is, people who have reason to believe they will require a lot of expensive treatment, will choose that treatment, while people who have reason to believe they'll require very little treatment, will choose the cash. This, paradoxically, drives the cost UP, despite the offered cash-payment being identical to the average treatment-costs.

Second, the voting public plainly does not *want* to let people live with all the consequences of their choices. Instead, they want a certain minimum to be offered to everyone -- even those who are lacking it because of earlier choices of their own. If a drug-abuser got sufficient money for food earlier this month - but spent it all on drugs and is now hungry, we're not willing to let him starve. If a older person earned sufficient money in his life that he -could- have saved up enough for retirement, but choose instead to spend it all -- we're not willing to put him on the street with zero support.

Third, there's a lot of things with huge influence on health that you can't do anything about. You cannot avoid being born with genes that make you more exposed for breastcancer, or more likely to suffer heart-disease, or which make you likely to get diabetes. Thus person A has diabetes because of a genetic disposition for this - and thus opts for the package which gives treatment. Person B is born luckier, and not only does he get the joy of living in a healthy body - he gets a nice million from the state in addition, to celebrate his health and have fun on Bahamas with tall drinks.

Being sick is, to some degree, bad luck. (to some degree, it's bad choices) Compounding this bad luck by making you "sick and poor" as opposed to merely sick, isn't a worthwhile way to use tax-money.

Yeah! i agree with that point if you have cash and you will go any kind of amergency in your life your treatment quickly start on the other hand with out cash you may be ignored by the staff of any hospitable.

Here's a guess at option 3: If a Medicare benefit is worth $5000 a year for a senior, then they have the option of getting back up to half of that, depending on how much they consume in the year.

Seniors consume $1000 of care, they get back 5000-1000=4000/2=$2000. $1000 has been spent on the care. Gov't keeps the other $2000 for the inevitable year when said senior spikes WAY over $5000. Rationing end-of-life care is a different question, but this might lead to efficient choices for all besides the last 2-3 years of life.

This provides bounded incentives to control costs, and protects in the event of a calamity (over $5000 in spending a year). Boundary effects could lead to some bad plays, but it seems like it grabs a lot of benefits of rewarding people to ration their own care. Preventive care could also be considered as deductible (i.e. "free"), to encourage other cost savings


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