There is no more complicated social issue than how to control rapidly rising medical costs without undermining the generally excellent health care that most Americans have come to want and expect. Unsurprisingly, the Reagan administration's approach to medical cost control will apparently emphasize increasing private competition in the health care market. Nor is it surprising that the first application for that approach is planned for Medicare--the health insurance program covering most aged and disabled people that is now projected to double its already large cost within the next five or six years.
According to Dr. Robert Rubin, assistant health and human services secretary, no final decisions on Medicare reform have been made. One proposal being considered, however, would provide Medicare-eligible persons with a voucher--initially worth, perhaps, the $1,700 that Medicare now costs on average--with which they could purchase a private insurance plan of their choosing. Competition for these vouchers would, it is hoped, encourage private insurers to offer better coverage for the same price and health care providers to restrict their costs.
How radical a restructuring of Medicare would this be? The notion of increasing competition in the health care market is not new--every administration since Lyndon Johnson's has suggested one method or another. The Carter administration, for example, proposed what was essentially a voucher plan for certain kinds of pre-paid group health organizations. The acceptability of the Reagan plan will depend, crucially, on its details. If, as Dr. Rubin suggests is likely, the voucher plan includes provisions that beneficiaries may opt to retain their current Medicare coverage and that no voucher-eligible private plan can provide less coverage than Medicare itself, the potential for harm is limited.
Would the plan do any good for either beneficiaries or taxpayers? Administrative savings should not be expected. Private insurers--not federal bureaucrats--already process almost all Medicare claims and do it very efficiently. Because of the high cost of marketing private insurance, a rise in administrative costs is more likely. If experience with the private carriers who now market supplemental insurance to the aged is any guide, a strong policing effort will also be required to make sure that the aged know what they are buying and get their money's worth. No one who has tried to compare the costs and benefits of health insurance plans will think this an overly paternalistic concern.
Nor are savings likely to come from the elderly choosing to have less insurance protection than Medicare now provides. The great majority of Medicare clients already buy additional insurance with their own frequently meager incomes. If substantial savings are to be had, they must come from the ability of private insurers to do a better job than the government in persuading doctors and hospitals to keep their costs in line without cutting corners on the quality of care or limiting patient choices to a degree that most people would find unacceptable.
Insurance carriers now competing for the still larger business of private employers and individuals already have the incentive and the opportunity to negotiate cost-saving arrangements with health care providers. Whether the added Medicare business would increase their leverage sufficiently to produce some real savings is simply unknown. Perhaps, with proper safeguards--and these are essential--the idea would be worth testing on a limited basis.