Choice-based Medicare cost controls

Let’s say it’s 2027 and I’ve just turned 65.  I fill out a Medicare application on-line and opt for a plan with superior heart coverage (my father died of a heart attack), not too much knee coverage and physical therapy (my job doesn’t require heavy lifting), no cancer heroics (my mother turned them down and I wish to follow her example), and lots of long-term disability.

Is that so terrible an approach?  Is it obviously worse than having the Medicare Advisory Board make all of those choices for me?

Over the next few days you will read a lot of “downgrade and dismiss” directed at Paul Ryan and his plan and indeed it is quite possible his proposal is not a workable one (I haven’t read it yet).  But don’t fall for the downgrade and dismiss bait, keep on returning to the question of how much individual choice should be allowed into health care cost control.  Why not divvy up the cost control work between the Board and some degree of individual choice across Medicare benefits?  You don’t have to combine that choice with the cost-increasing aspects of Medicare Advantage-like plans.

Many ACA defenders simply do not want to enter into a debate where the framing is “we’re all for cost control, when it comes to Medicare benefit selection it’s a question of government board vs. individual choice.”

I can think of a few reasons why individual choice will sometimes fail as a method of cost control:

1. Individuals have serious misconceptions about the science, or the badness of a particular condition, even in light of government or other third-party advice.  Or perhaps individuals simply do not understand the nature of all of the choices at hand.

2. Perhaps an individual will choose “no coverage for lung cancer,” but the government cannot precommit to the outcome of no coverage.  Of course as cost control becomes more pressing, we’ll have to learn precommitment for at least some issues, one way or the other, so this cannot be a decisive objection. The entire premise behind the discussion is that we cannot cover all treatments through government subsidy.

3. Over time, perhaps a government Board can rebalance the mix of coverage better than an individual can.  People age, possibly lose some mental faculties, science advances, costs change, and so on.

Those are good arguments.  They are good arguments for a mixed system.  They are not good arguments for ruling out all individual choice of benefits.  They are not good arguments for ruling out a scenario like that outlined in the first paragraph of this blog post.

Here is Megan McArdle on the difference between boards and individual choice:

It seems quite likely to me that vouchers are going to be better at controlling health care cost growth than a central committee.  Every committee decision that cuts off a potentially useful treatment (and I’m afraid it can’t all be back surgery and hormone replacement therapy) will trigger a lobbying explosion from affected groups.  Each treatment is a decision with a small marginal cost to the taxpayer; it’s in aggregate that they become expensive.  Which means that the congressional tendency is always going to be to override–and while there are supposed to be structural barriers against this in the bill, they aren’t very strong . . .

Whereas if you put the decision about what treatments to cover in the hands of the patient, the lobbying you face is to increase the overall value of the voucher.  To be sure, this will have a larger (and therefore more powerful) group behind it.  But it will also come with an enormous pricetag, making it much harder for our politicians to rationalize the decision.

There are lots of comments from Reihan here.  Ezra associates the Ryan reforms with Medicare Advantage.  Maybe so, and maybe that’s bad, but we return to how much individual choice should we allow into health care cost control, with or without the cost-increasing aspects of the Ryan plan.

We shouldn’t let “downgrade and dismiss” distract our attention from that fundamental question about individual choice.


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