Fee-for-service is open-ended reimbursement; the government’s main tool to control Medicare’s costs is to hold down reimbursement rates. Doctors and hospitals respond by ordering more services to offset the rate limits. For all its flaws, say Ryan’s critics, this system beats his. Indeed, the Congressional Budget Office has estimated that in 2022, Ryan’s plan would be more than a third costlier than the status quo, because Medicare’s size makes it more effective at restraining reimbursement rates.
If the CBO is correct, Ryan’s plan fails; beneficiaries’ out-of-pocket costs would roughly double to cover the added expense. But the CBO may be wrong. When a voucher system was adopted for Medicare’s new drug benefit, the CBO overestimated its costs by a third; the Centers for Medicare and Medicaid Services’ overestimate was 42 percent. When fundamental changes are made to a program, the green-eyeshade types can’t easily predict the results. Moreover, as health expert James Capretta notes, “managed care” plans in the Medicare Advantage program in 2010 did not have higher costs than Medicare’s fee-for-service for similar coverage.