The fraud and fallacies of "Ryancare"

Jared Bernstein, former chief economic advisor to Joe Biden, offers this critical commentary on a Paul Ryan Youtube touting the GOP's plan to kill Medicare:

The basic flaw is that Ryan and his video pretend that the R’s Medicare plan gives consumers the power to negotiate directly with health care providers, who can thus use their voucher-driven bargaining clout to hold down prices.  But, in fact, that’s not how his plan works at all.  Under his plan, seniors get to negotiate with insurance companies, not service providers (doctors, hospitals, etc.).


(Some of you may be wondering at this point why any of this negotiating over health coverage or care is a selling point…if so, you don’t understand the “power of the marketplace”—enroll in Chicago University Econ, do not pass go…oh, it’s also the case that the voucher loses value relative to health costs over time.)

A few minutes in, the graphic complains that under the Affordable Care Act, a panel of “15 unelected, unaccountable bureaucrats decide how much, or how little, Medicare will pay doctors and which services Medicare will, or will not, pay doctors to provide for their patients.”

OK, that’s the IPAB (Independent Patient Advisory Board), and it’s the most important mechanism in the ACA to control costs.  We can and should debate how effective it will be.  But it will be medical professionals and patient advocates suggesting cost effectiveness measures to slow cost growth.  If Congress doesn’t like their ideas, they must come up with their own, or the IPABs will be enacted.

Ryan...creates the impression that his plan is different in that it lets Medicare recipients decide what health care services to pay for, and thus control costs through that old market chestnut, consumer sovereignty (“No my good sir, I shall not pay $16,549 for that appendectomy!”)

But in fact, his plan is to let seniors choose which set of unelected, unaccountable insurance company bureaucrats they want making decisions about their care, not the actual service providers.  Here’s the money line:

“…insurance providers, competing for patients’ business, will look to lower the costs and increase quality for their services – the way it always works when the consumer is in charge.”

Now, private insurance companies already have every incentive to lower costs and increase quality.  If they could do so we wouldn’t be in this mess.  But they can’t because the private health insurance market doesn’t work like a normal market.

A good example of this is the Medicare Advantage program—over to Ezra (Klein of "Wonkbook"):

“…this isn’t the first time we’ve tried to let private insurers into Medicare to work their magic. The Medicare Advantage program, which invited private insurers to offer managed-care options to Medicare beneficiaries, was expected to save money, but it ended up costing about 120 percent of what Medicare costs.”