DANA GOLDMAN, director of USC’s Schaeffer Center, ADAM LEIVE, graduate student at University of Pennsylvania and DANIEL MCFADDEN, senior fellow, Schaeffer Center.
This op-ed originally appeared at the New York Times.
One question at the center of the Medicare debate is whether private insurance companies have a future role to play in the huge federal program. Paul Ryan’s 2012 budget proposal gives private health plans a starring role in the form of a voucher program. But some economists would give them the hook, citing the failure of Medicare Advantage to control costs. Some perspective is in order.
Medicare Advantage has historically cost 7 to 12 percent more than traditional Medicare, according to the Medicare Payment Advisory Commission. But to conclude that this cost difference proves that private health plans have no place in Medicare misreads the Medicare Advantage experience in an important way: It ignores the decisive role that government has played in driving up the program’s costs. Medicare Advantage is only partly about reducing costs. It is also designed to increase choice for beneficiaries. And the incentives that government gives private health plans to expand choice end up undercutting efforts to save money.