Why Simple is Better for Old-Age Insurance Programs

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.

Matt Yglesias on one reason that it’s probably not a good idea to turn Medicare into a voucher program:

We all know that some cognitive impairment tends to be a part of the aging process….That’s why elder fraud is a recognized problem. A great study by David Labison finds that about half of 80-somethings have “significant cognitive impairment, effectively rendering them incapable of making important financial choices.”

….[This is one of the problems] with the Romney/Ryan plan to replace Medicare with a system of subsidies for the purchase of private health insurance on regulated exchanges. This is essentially the same idea as what ObamaCare will do for the non-elderly, but in the opposite direction. In the case of the Affordable Care Act, it’s not clear to me that there are sound non-political reasons for doing it this way rather than constructing a single public program. But in the case of a program targeted at the elderly, the case for consumer sovereignty is clearly weaker. Insurance forms are confusing, and calculating the real actuarial value of different offers is difficult. This is not an ideal task to assign to a 92 year-old. It’s possible to make it work with adequate regulation, but you really are counting on building a very effective regulatory agency to manage the program. So why not just build an effective agency and manage Medicare?

If private competition among insurance companies were truly likely to lead to substantial cost reductions, it might be worth doing this regardless. But the evidence we have suggests that competitive bidding, at best, would lead only to modest savings. The reason is simple: The high cost of healthcare in America is mostly related to the high prices we pay to providers — hospitals, doctors, drug companies, device manufacturers, etc. — and only slightly related to insurance company efficiency. There’s just not much reason to think that competition among insurance companies will have a big effect on provider prices.

It might still be worth trying. That’s a judgment call. But everyone should understand both the tradeoffs and the likelihood that, at most, it will produce only modest savings.

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate