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The conservative case for the Affordable Care Act

at 01:01 PM ET, 03/15/2011

Reihan Salam helpfully has a go at explaining why conservatives are confident in the structure of the Affordable Care Act when it’s applied to Medicare, but not when it’s applied to, well, the Affordable Care Act. The answer, he says, is that in Medicare, we’re “trying to work our way backwards from an unsustainable single-payer system that has exacerbated cost growth throughout the health system.” In the rest of the health-care system, we’re not.

But though that explains why conservatives like the plan, it doesn’t explain why they think it’ll work. Ryan-Rivlin only survives if it holds cost growth to the rate of GDP growth plus one percentage point. If it doesn’t, then the subsidies offered by Ryan-Rivlin quickly become inadequate — and no one is going to allow Medicare to stop paying for the health-care costs of seniors. So the question isn’t whether Ryan-Rivlin is more appealing to conservatives than Medicare. It’s whether Ryan-Rivlin will control costs. And as Alice Rivlin says, the theory behind Ryan-Rivlin’s cost controls is the same theory behind the Affordable Care Act’s exchanges — they even work the same way. So if you believe that the exchange model will holds costs down to GDP+1% in Medicare, why not in the under-65 market? And if it can do that in the under-65 market, then the Affordable Care Act is going to be a wild success.

Reihan also says Medicare has “exacerbated cost growth” throughout the system. I’d say it’s been the opposite: The private health-insurance market has exacerbated cost growth in Medicare. Medicare’s costs have grown more slowly than private health insurance and Medicare’s premiums are about 20 percent lower than private health-care insurance. But Medicare can’t really use its massive bargaining power to hold down costs — which is what’s done in other countries — because doctors can flee to the private system and stop taking Medicare. It gives them a veto over how much cost control Medicare can impose, and they’ve used that veto quite effectively over the years.

It’s true, of course, that Medicare is fee-for-service and has other features that don’t go far enough to impose discipline on the system. But such features exist in other countries, too. And because there’s no separate private market paying vastly higher rates to doctors and hospitals, costs in other countries are much, much, much lower. The reality is that we have a lot of examples where something like Medicare holds down costs. We have basically no examples where something like a free-market insurance system both covers people and holds down costs. That’s why I think conservatives would be smart to embrace the Affordable Care Act structure and try to port it over to Medicare and Medicaid, giving private insurance a central role in those markets and leaving us with a health system that looks more like Switzerland than like Canada. I’d be fine with that — but then, like Rivlin, I support the Affordable Care Act, too. Conservatives, however, are making huge claims for the Affordable Care Act structure in Medicare while simultaneously attacking the Affordable Care Act itself, which just ends up being incoherent.

 
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