May 6th, 2017

So, what about a more market-based Medicare?

Commenter “Big Maq” asks about all the people on the right who are asking for a more market-based solution to Obamacare:

How many, who make these calls here, have been actively convincing their aged cohort to give up Medicare, in return for a more “market driven” solution? …

How are y’all successfully selling that idea?

Are you selling it?

It’s a good question.

Obamacare is taking all the energy and was the subject matter of the 2016 campaign (and even earlier campaigns, as well). Obamacare is very new (as opposed to Medicare), and people have been clamoring for its reform ever since its passage. So naturally that’s what we’ve been talking about lately.

But you can find people who have discussed reforming Medicare in that manner for years, and the arguments they’ve been using. Just Google something on the order of “more market-based solution to Medicare” and you’ll get a host of articles. For example, if you really want to delve more deeply into the subject, there’s this one at the Heritage website.

It would certainly be philosophically consistent to be advocating those things in addition to a more market-based replacement for Obamacare. But there are several very practical reasons why someone promoting a more free-market solution with Obamacare wouldn’t be promoting it for Medicare, and they all boil down to: it’s political poison.

Medicare has been in operation for so long that there probably really is no turning back unless a crisis of major proportions precipitates it and necessitates it. In addition, our tax system (payroll taxes in particular, and/or the self-employment tax) are structured to pay for a significant portion of Medicare (particularly true of Part A, which is the hospital benefit), and between that and the actual premiums people pay for Medicare they feel they’ve directly earned it (see this for the statistics). If you attempted to change the benefits and structure at this point there would be an enormous furor and most people would find it completely unacceptable.

Of course, you could grandfather in those who’ve already paid in for a significant amount of time, and structure the future differently for the young who are just starting out. That’s been proposed at times, if I’m not mistaken, for Social Security, and it never went anywhere. The same would probably happen with Medicare.

In addition, although Medicare is a huge federal tax expense, it actually works pretty well for most people and patient satisfaction is consistently high.

So putting health care for those over 65 back into the private sector is not gonna happen, period. And it’s a waste of time to talk about it.

Of course, it’s not a waste of time to talk about it on the blog. Right?

10 Responses to “So, what about a more market-based Medicare?”

  1. vanderleun Says:

    I CARE about medicare and I care about Obamacare but this stuff is finally getting to the point where all these “discussions” about the this or the that are filling me with inertia.

  2. ColoComment Says:

    I remember in the ‘way back time of Bush 43, when the Repubs proposed “privatizing” part of SS, grandfathering the retired and near-retired, …and the mobs went berserker with claims that granny would be left destitute in her old age.

    AARP was one of the worst, completely ignoring the fiscal facts of SS, to whom the reforms would apply, and that it would benefit AARP’s *future* members, who as of now are unlikely to see *any* SS benefits.

    I doubt that Medicare reform proposals would be treated any differently.

    The political atmosphere is so toxic that rational discussion cannot take place. Analogous to the counterfeit money of Gresham’s Law, hyperbole w/r/t benefit reform overwhelms and drives out reasonableness.

  3. Frog Says:

    Big Maq asks a rhetorical and rather offensive question. Perhaps an ignorant one, to boot.
    There are no market alternatives to Medicare. NONE. I have looked.
    I do supplement my physicians’ paltry Medicare “allowables” with generous gifts at Christmas. They are thus not declarable as income.
    It is not possible to compete with an entity, our beloved and all-caring government, that has the right to seize its funding at gunpoint.
    Which is why the Left loves the single-payer idea: Control over our lives and our assets!

  4. neo-neocon Says:


    Did you read that Heritage piece I linked?

  5. SLR Says:

    yep; medicare is very expensive. The left cherry picks the ‘low administrative’ costs from it (vs its actual costs) when it pays games about picking ‘strong’ points from different gov run medical plans…. The low administrative costs themselves are only even there because the outflows per customer are so high relative to the oversight costs (re: elderly people use more health dollars than other age groups)… plus there is a lot of fraud… due to poor oversight.

    That said; medicare is still mostly private imo. It pays private doctors and hospitals for services. Making all those people part of single payer system or public employees will raise costs even more… Not having it would be the only way to make it private… but it would be too expensive for most people to afford so we just deficit spend it and act like society can afford it.

  6. Frog Says:

    Yeah, Neo, I scanned it. I do not think much of Heritage when it references a 1963 opinion piece as its touchstone:

    “Many economists believe that health care is inherently different from other industries and cannot operate in a normal marketplace. They argue that governmental regulation, however unsatisfactorily it may be administered, is better than allowing a dysfunctional marketplace to misallocate resources and generate inequities.

    “These views generally rest on the theoretical arguments offered by distinguished economist Kenneth Arrow some two generations ago.[5] In a famous 1963 essay, Arrow identified a number of characteristics of health care that, he argued, made it unsuitable for normal competition in the marketplace:

    “Health care expenses are random and therefore not predictable.
    “Health care is plagued by barriers to entry for potential new suppliers of services.
    “Health care requires trust in the doctor–patient relationship.
    “Providers have more information than patients; therefore, patients are not capable of making well-informed decisions.
    “Patients do not see bills until after services have been offered.”

    This is really all wet.
    Point one is about insurance; the risks are eminently predictable. The data are abundant.
    Point two, about barriers to entry, just keeps out the slop…which we have been importing from abroad for decades. What do you know about medical schools in China or Egypt or Croatia or Poland or the Dominican Republic? Fortunately we have an exam foreign graduates must pass, the ECFMG.
    Point three, the trust requirement, is economically irrelevant.All two-way market transactions require trust and obedience to rules.
    Point four, about knowledge imbalance, applies to auto mechanics and mufflers as much as it does to medicine. There is the well-established doctrine of full informed consent, too. And patients have indeed educated themselves!
    Point five is partially correct. Because of insurance, patients have had few concerns about costs as you know.

    Medicare was 8 years old in 1963, and going strong!
    So much for Heritage.

  7. TommyJay Says:

    About SLR’s comment.

    An old 60 Minutes piece (2009), showcased 10’s of billions in Medicard fraud and only 3 people employed by the system to track it. Yeah, the overhead is really low, but I wouldn’t call efficient.

    To Neo’s point on Social Security: None other than FDR proposed that SS be transitioned to a strict annuity program administered by government.

  8. neo-neocon Says:


    My point was that your assertion that Big Maq’s question was offensive and perhaps ignorant was uncalled for. You may not agree with the market-based alternatives, but it’s not as though no intelligent person has ever asserted there are any.

  9. Big Maq Says:

    “I’m highly doubtful that the trends toward ever more socialized medicine can be reversed. As the emotional content drowns out all reason. … Socialized medicine takes from those with the ability to pay and gives to those without. – GB

    But in our modern society, for every one of her (Neo), there are maybe 5 people who would have had good health, if they had lived right, but they didn’t and they don’t. … The entirely cogent point has been made many times, that the people won’t tolerate their right to healthcare being rolled back. I say maybe. But we will never find out if that is true, because the GOP establishment will never let any of it happen – TommyJay

    I know of no nation that provides equitable, efficient medical care. We have been on the slippery slope since 1965. The slope gets more slippery month by month, year by year. – Parker

    That just doesn’t make sense (that medical care is a different service, unlike most anything else), in terms of Economics. Some of the comments here have gone on at length about ‘wasting’ money on the elderly, the incurable. That is purely an economic argument, though disguised by hand-wringing about irremediable suffering. End it, don’t spend it. – Frog

    The American people just want it all; and they want someone else to pay for it. – Oldflyer

    The “right” to health care is just a stalking horse, from which our increasingly totalitarian government will eventually seize the reins and provide “health care” to all, as part of their total control of the population. – Frog

    But the Congress must start. by dismantling Obamacare (piece by piece if necessary) and working toward a more market driven, more cost transparent, more efficient medical care model – JJ

    Covering people with pre-existing conditions is not insurance but charity. … When the politicians force insurance companies to cover pre=existing conditions they are forcing the insurance companies to take a sure loss and engage in charity. – Ray

    It’s not “insurance” when a responsible parent takes a child for a routine immunization or a checkup; it’s a guaranteed expense. … I’m not sure how, at this point, if it’s even possible to get people to see the benefit of individuals paying less for their own everyday needs than paying more than what a service is worth for the perception of that service being provided to them. – Kyndyll

    Fewer and fewer parents are responsible parents. And excuses are made for the irresponsible parents – GB responding to Kyndyll”

    These are but the more recent comments from just a few folks who have been lamenting, or, in other cases, indicting the system in rather harsh terms.

    First, let me say, there have been several good points made by these folks and others in recent comments.

    But, this is not about disagreeing on much of the substance. It is asking, so what? What’s the call to action? What are we each individually doing about it?

    I find it rather disheartening that many are so adamant that obamacare should reflect a free market (or some solution nearly so), yet are rather meek about Medicare, when, in fact, that is precisely one of the core programs that will be a heavy contributor to this country’s future bankruptcy, at current course and speed.

    To bring about political change, in our republican (not the party) democracy, takes persuading enough people to have a majority on side for the changes we seek.

    But is it ONLY the politicians job to do this?

    Don’t WE have a responsibility too?

    Of course, today it looks neigh impossible to budge on Medicare. Fine.

    But does that mean we bury the discussion, because we assume “it’s a waste of time to talk about it.”?

    Isn’t it rather lame to say “There are no market alternatives to Medicare” as an excuse not to be an advocate for changing even that?

    Shouldn’t we be putting our money where our own mouths are?

    The other part about this is that it is easy to make bold or ominous declarations about the free market, personal responsibility, free riders, population control, the four horsemen of the apocalypse, etc., on obamacare, while being a “beneficiary” of one of the largest category of expenditures this government has.

    If the shoe was on the other foot, wouldn’t it look downright disingenuous if Medicare doesn’t get the same argument / treatment?

    Easy to make the statements. It is MUCH harder to try to SELL your ideas.

    Yet, that is what we need.

    Are folks selling the ideas to those they can reach?

    Or… what?

    It’s too tough, never gonna change, anyway, why bother?

  10. Ymar Sakar Says:

    It’s the other way around.

    The people who are hooked on gov care, doesn’t want to talk badly about it.

    I never got one cent for certain programs, so I’m free to bad mouth em, but that doesn’t mean the rest of America is that free.

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Previously a lifelong Democrat, born in New York and living in New England, surrounded by liberals on all sides, I've found myself slowly but surely leaving the fold and becoming that dread thing: a neocon.

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