Misrepresenting Medicare

Liberals seem to be reading from the same broken script with respect to Medicare costs. First, Ruth Marcus and Ezra Klein claim that Medicare costs are “lower than those of private insur-ers” (here and here) and now Matthew Yglesias claims that every dollar the federal govern-ment saves by moving people off Medicare (by raising the eligibility age) would be “offset by about two dollars of increased spending elsewhere in the system.” Liberals apparently are making these claims to create the impression that the federal government somehow operates healthcare more effectively and efficiently than the private sector.

But these claims are hogwash:  total healthcare costs in the system will not significantly change should people be required to work an additional year or two before becoming eligible for Medicare. The source of payment doesn’t affect the total amount paid for healthcare. The same doctors and hospitals who treat Medicare patients also treat privately insured patients and these providers treat each group in exactly the same way. Providers don’t suddenly become less efficient when working with private patients. Also, most healthcare spending is concentrated in the last six months of life and increasing the eligibility age of Medicare a year or two has no impact on this.

The government’s Medicare costs may appear to be lower than the private sector because the government arbitrarily fixes the price at a low level. Providers accept these prices and then proceed to offset them by “shifting” their costs to the private sector, so that employers and employees covered by private insurance pay more than they otherwise would. The higher private sector prices are properly viewed as a hidden tax on private health insurance which then allows government to keep Medicare payments at artificially low levels. Yet this fact doesn’t seem to make it into the liberal propaganda.

Rather, liberals continue to mislead on this point in order to confuse readers and help bring about the liberal “vision” of healthcare (i.e., a vision that places 315 million people under the thumb of the central government). The liberal vision is nothing more than central planning, complete with price controls (for almost 20% of the economy) and restrictions on access to care. Based upon historical evidence, centralized approaches never outperform decentralized approaches (e.g., that rely on markets and competition), and centralization is guaranteed to lead to low quality, stagnation, and eventual decline of the entire industry. Quite the vision, indeed.

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