The choice
in 2012 Presidential Election, Medicare
President Obama says that this election presents Americans with a very clear choice. He is right. Mitt Romney and Paul Ryan believe that America can prosper economically the way it traditionally has – through free markets and competition. This is what they mean when they talk about unleashing the private sector.
Obama, though, calls this approach the same “snake oil trickle-down economics” that “caused the mess in the first place.” It is also, of course, the same economics that helped make America’s economy the envy of the world. Regardless, Obama purports to reject the traditional American approach to achieving and maintaining prosperity – an unleashed private sector – on pragmatic grounds, i.e., because it won’t work going forward.
In reality, Obama’s objection to the traditional American model is ideological, not pragmatic. We know this because Obama didn’t favor that model during the nearly three prosperous decades before we found ourselves in the current “mess.” He didn’t favor it because, whatever rate of economic growth it produced, he considers the traditional American economic system unfair. Joe Biden was speaking for Obama when he claimed, and I’m paraphrasing, that unleashing the private sector will operate to the great disadvantage of “y’all,” i.e., those towards the bottom of the economic ladder, as opposed to the rest of us.
But if one rejects unleashing the private sector, what does one support? Here, Obama, for all his talk about a stark choice, is reluctant to reveal his cards. Nonetheless, there can be no doubt about what he has in mind – a private sector heavily constrained by regulations and other limits on free markets and competition. In short, the European model, not the American one.
Nowhere is the choice between the two visions clearer than when it comes to Medicare. As James Capretta explains, there are two ways to slow the pace of rising costs in Medicare. The first is to rely on the federal government to impose price controls and otherwise try to micromanage how healthcare is delivered to patients. That’s the approach Obama favors.
The second approach is to rely on the power of consumer choice. Future entrants to the Medicare system who currently are under the age of 55 would be entitled to a premium support payment which they would direct to the plan of their choice. They could choose to enroll in a private insurance option, or in the government-administered fee-for-service program. This change would, in Capretta’s words, “give the beneficiaries strong incentives to find the best value for their money, which in turn would force the insurers and those providing medical services to find ways to cut costs and deliver better care.”
The first approach – reliance on federal government control – is, to borrow Obama’s phrase, what got us into this mess in the first place. By contrast, the second approach – relying on consumer choice to generate competition – has already shown itself to be part of the solution. As Capretta points out:
President Obama says that this election presents Americans with a very clear choice. He is right. Mitt Romney and Paul Ryan believe that America can prosper economically the way it traditionally has – through free markets and competition. This is what they mean when they talk about unleashing the private sector.
Obama, though, calls this approach the same “snake oil trickle-down economics” that “caused the mess in the first place.” It is also, of course, the same economics that helped make America’s economy the envy of the world. Regardless, Obama purports to reject the traditional American approach to achieving and maintaining prosperity – an unleashed private sector – on pragmatic grounds, i.e., because it won’t work going forward.
In reality, Obama’s objection to the traditional American model is ideological, not pragmatic. We know this because Obama didn’t favor that model during the nearly three prosperous decades before we found ourselves in the current “mess.” He didn’t favor it because, whatever rate of economic growth it produced, he considers the traditional American economic system unfair. Joe Biden was speaking for Obama when he claimed, and I’m paraphrasing, that unleashing the private sector will operate to the great disadvantage of “y’all,” i.e., those towards the bottom of the economic ladder, as opposed to the rest of us.
But if one rejects unleashing the private sector, what does one support? Here, Obama, for all his talk about a stark choice, is reluctant to reveal his cards. Nonetheless, there can be no doubt about what he has in mind – a private sector heavily constrained by regulations and other limits on free markets and competition. In short, the European model, not the American one.
Nowhere is the choice between the two visions clearer than when it comes to Medicare. As James Capretta explains, there are two ways to slow the pace of rising costs in Medicare. The first is to rely on the federal government to impose price controls and otherwise try to micromanage how healthcare is delivered to patients. That’s the approach Obama favors.
The second approach is to rely on the power of consumer choice. Future entrants to the Medicare system who currently are under the age of 55 would be entitled to a premium support payment which they would direct to the plan of their choice. They could choose to enroll in a private insurance option, or in the government-administered fee-for-service program. This change would, in Capretta’s words, “give the beneficiaries strong incentives to find the best value for their money, which in turn would force the insurers and those providing medical services to find ways to cut costs and deliver better care.”
The first approach – reliance on federal government control – is, to borrow Obama’s phrase, what got us into this mess in the first place. By contrast, the second approach – relying on consumer choice to generate competition – has already shown itself to be part of the solution. As Capretta points out:
This is exactly how the prescription drug benefit in Medicare is structured today, and it is working tremendously well. The average premium in 2013 will be $30 per month, which is the same as it was in 2012 and 2011. Moreover, it’s just $7 more than it was in 2006.
Overall, spending on the drug benefit is now more than 40 percent below what was expected when it was enacted. Costs are under control because competition works.
Why, then, does Obama oppose importing the competition-based model that is working so well in the drug benefit into the rest of the Medicare program? He opposes it for ideological reasons, his same basis for opposing the rest of the Romney-Ryan program. And that’s why, as Obama insists, the choice this year “couldn’t be bigger.”
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