|President Barack Obama talks with Treasury Secretary Jack Lew on the Colonnade of the White House, March 13, 2013.|
Dr Peter Morici: Republicans are losing elections
they could win by slavishly clinging to untenable solutions for skyrocketing
federal health care costs that voters reject. The House Budget Committee,
chaired by Paul Ryan, is drafting a plan to balance the budget in 10 years. That
requires lowering the trajectory of Medicaid and Medicare costs, which account
for 24% of federal spending.
He proposes offering seniors the choice of a subsidy to buy private insurance or
continuing in the existing Medicare system, and giving the states block grants
to manage Medicaid.
Conservatives believe seniors could shop for health insurance, as they do for
groceries, to drive down prices. The states, freed from excessive federal
oversight, could similarly drive down costs.
That’s absolute fantasy.
Seniors would confront large insurance companies armed with too little
information, and limited choices or monopolies when they purchase drugs and
Already, large employers operate in a similar market space—free to negotiate
with health insurance companies—and even they have not been able to harness
rising health insurance premiums.
Granny will not do any better than GM jawboning Humana and Walgreens. Federal
Medicare spending could only be cut by providing inadequate subsidies that would
require seniors to pay much larger premiums and out-of-pocket costs than they
currently bear with traditional Medicare.
Similarly, it is doubtful that the states, acting individually, can do a better
job of negotiating reimbursement rates for Medicaid services for the poor than
does the federal government. In fact, the Ryan solution could drive up prices,
because providers could play off states against each other.
The Ryan approaches were incorporated into the 2012 GOP presidential platform
and rejected by voters.
If the House budget plan incorporates these approaches, Republican Senators will
be forced to choose between supporting those or abandoning the House budget in
favor of Senate Democrats’ plans for higher taxes. That could prove poisonous
for Republican Senators seeking reelection and House Republicans considering
runs for Senate seats.
Sometimes markets don’t work—that’s why we don’t have private fire departments
selling subscriptions and taxi fares are regulated in major cities. Every other
major industrialized country has given up relying on competition to harness
health care costs.
When confronted by those facts, conservatives often point to single provider
systems in Britain where some citizens complain about long lines and inferior
Germany has a private provider system quite similar to the one evolving with
Obama Care—everyone has to play and most folks are covered by mandatory
government-subsidized, employer-based insurance; however, unlike Obama Care,
that system aggressively regulates prices through private-sector consensus
Germany caps health care spending, and sets provider prices through a complex
system of private sector negotiations that divides up the pie.
Americans spend nearly $10,000 per person on health care, while the Germans
spend half as much. By most measures, German health care is as good or superior
to what Americans receive.
Just like the government doesn’t always know best, markets and competition don’t
always contain costs effectively and provide the best outcomes.
Germans get it but conservative Republicans don’t.
Moreover, a German solution, by costing the federal government so much less,
streamlining the morass of regulations and reporting requirements, better
engaging private providers, and reducing federal and state costs, would actually
reduce and better limit the bureaucratic burdens insurance companies and
government agencies impose on health care providers.
As long as unbending conservatives like Paul Ryan control Republican thinking on
fiscal policy, the GOP will not offer solutions to the nation’s budget woes that
attract popular support, it won’t win back the Senate, and it faces terrible
difficulties winning the presidency.
Professor, Robert H. Smith School of Business, University of Maryland,
College Park, MD 20742-1815,
703 549 4338 Phone
703 618 4338 Cell Phone
Check out our new subscription
, at a low annual charge of €25 - - if
you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to
support the service.