The politics and realities of Medicare

Public Interest, Summer, 2004 by Eric Cohen

Liberals and conservatives

The MMA debate also made clear that liberals and conservatives have fundamentally different ideas about the relationship between medicine, the state, and the elderly. They disagree both in their assumptions about how the world works and their priorities regarding what is most important. Neither side is finally happy with the Medicare bill as passed, but more conservatives than liberals perceived MMA as better than nothing and less disastrous than it could have been. It was, overwhelmingly, a Republican bill. That said, there were many exceptions--including conservative lawmakers who bitterly opposed the legislation as excessive, unnecessary, and misguided, and liberal lawmakers who supported it as a way to put a drug entitlement in place that could be expanded in the future.

The conservative idea of Medicare reform is rooted in three basic principles: First, government control over medical pricing and inadequate incentives for individuals to control their own health-care costs lead to waste and inefficiencies. Conservatives seek to replace traditional Medicare with a "premium support" system--which basically means giving all seniors vouchers, then allowing them to purchase the private-sector health-care plan that most suits their needs. They believe this will improve the "efficiency of health care delivery," as Antos has put it, and thus maintain or improve the quality of care while both cutting costs and freeing resources for investment in new medical technologies.

Second, conservatives believe that government control over drug prices--whether by purchasing Medicare drugs directly or setting prices for drugs the way Medicare sets prices for physician services--would cripple the pharmaceutical industry. They argue that the price of many drugs is artificially high because such profits are necessary to recoup the money spent on past research failures and to make the investments necessary for finding more and better drugs in the future. If government sets drug prices too low, investors will pull out of the drug business for fear of making abnormally low returns. The result would be a great slow-down of medical progress.

Finally, conservatives believe that medicine must be balanced against other human goods--both by individuals and by society as a whole. They worry that the benign tyranny of medicine will crowd out other public necessities or limit other human aspirations. And they believe that a more privatized system would ensure adequate public resources for defense, education, and other priorities, and allow individuals to decide whether to put their own discretionary income toward marginally better health care or toward other goods (education for grandchildren, vacations, home improvements, for example) that give them a higher "subjective value." A voucher or premium support system, they argue, would better balance the obligation of society to provide "basic health care" for the elderly with the need for individuals to make personal decisions about always limited resources.