Sunday, August 19, 2012

Privatized Medicare We Could All Probably Live With, Part 1

Quick post today, but I felt like sharing an idea that I've been mulling over in my head fairly recently. The more I think about it, the more I begin to like it. The idea isn't a new one by any stretch of the imagination, but it certainly may seem novel to people who don't fancy themselves as policy wonks. In any case, the idea I'm referring to is the privatization of Medicare. I know, for me to say something like that may strike many of you as particularly hard to believe. But there's a specific way that Medicare could be privatized that I think would be a fairly decent idea, at least on paper. 

The idea would be, in short, something like this: eliminate the distinction between over- and under-65 health insurance markets. How might we do this, you ask? Well, I think a great way to pull something like this off would be to expand Obamacare's health insurance exchanges to be available to everyone over 65 as well. This way, someone who has purchased private insurance most of their lives can have continuity of coverage from their preferred insurer. Ordinarily, insurers wouldn't have to necessarily worry about the long-run health of the people they cover, since at age 65, most are just covered by Medicare. With the two markets integrated, there's much more incentive for insurers to invest in the long-term health of their clientele, rather than waiting to pass off costs to Medicare.

What sort of relevance does this have to current policy debates? Well, ironically enough, Paul Ryan's plan for Medicare privatization is effectively Obamacare for people over the age of 65. Now, I don't support Ryan's particular plan, because it provides seniors with a federal subsidy that has been shown to be too small to cover the costs of seniors' health care. However, Ryan's plan does do one thing that Obamacare does not do--it has a public option in it. Basically, this means that in Ryan's plan, traditional, government-funded Medicare would compete with private insurers in an exchange for people over the age of 65. Ironically, it is Obamacare that lacks a public plan. Oh, and Ryan's plan also includes a mandate.

Now, what I think could actually end up being a viable system of universal health care in the U.S. would be one in which the health insurance exchanges would incorporate the over- and under-65 insurance markets, with people being given adequately-sized federal tax credits/subsidies to purchase the insurance of their choice. Ideally, these exchanges would also contain a public option, like Medicare, competing with private insurers. I could honestly live without it, though, provided that all other criteria are met.

Obviously this is just me rattling off ideas right now, rather than citing hard facts, but like I said, this is pretty preliminary stuff. I feel like this is the kind of idea that Democrats and Republicans could agree on, assuming, of course, that the latter party was feeling reasonable.

We economists do so love to assume, though, don't we? And you all know what happens when you assume.