Orszag, Political Polemics, Ryan And Health Care


If it were only as easy as the partisans make it sound…

The federal budget proposed by Representative Paul Ryan, the Republican vice-presidential nominee, extols the benefits of “promoting true choice” for Medicare beneficiaries. In truth, though, the Ryan plan would substantially reduce choice for many people on Medicare — by cutting them off from their current doctors.

Doctors see Medicare patients, despite the relatively low payments they receive for doing so, partly because Medicare represents such a large share of the health-care market. If a substantial number of beneficiaries moved out of Medicare and into private plans, as Ryan proposes, doctors would have much less incentive to see Medicare patients. And the elderly who want to remain in traditional Medicare would risk being stranded.

Did you understand what Peter said up there?

Let me unwind the hairball for you (because Peter “gets it”, but he damn sure won’t speak of it, just as neither will Ryan or anyone else in the political sphere)

  • Doctors agree to see Medicare patients despite being able to receive less than they allege is the cost of providing the care.

  • They do this because Medicare is such a large part of the health care market.

  • Since nobody ever goes into business — any business — with the intent of making a loss, this can only happen because they then can lawfully shift the cost of that care onto private-party patients and force everyone else to eat it.

Note that without the ability to force you to pay for this act it could not occur.  Were there an actual free market for medical care you would never pay Granny’s Medicare-funded visit through mandatory upcharging of your visit — you’d find a doctor that didn’t do that, patronize him or her, and your bill would go down (a lot.)  This would result in Medicare either going bankrupt immediately or the underlying problem with medical care would have to be addressed.

But this does not happen because anti-monopoly laws are either not enforced or, in many cases, have written into them specific exemptions for health care that make legal the forcible shifting of Granny’s cost to you.

This is the 900lb gorilla in the room that is now threatening to smash everything, most-particularly and most-importantly our economy and government.  The refusal to deal with this honestly on both the left and right is what leads to political polemics like this along with the one that Howard Fineman wrote two days back (and which I will be debating onHuffington Post Live at 11:00 ET today — tune in and join the conversation.)

It also drives the other 900lb gorilla in the room — the fact that we have run a ~10%+ deficit (in terms of GDP) for the last four years, and absent that we’d be in a formally-recognized economic depression.  (I remind readers that the economist definition of a depression is a 10% decline in real GDP from top to bottom.)  Evading that declaration and refusing accountability for how we got into this mess via unbridled counterfeiting of the currency via unbacked credit creation is, at the core, the answer to the question of “how is it possible that these outrageous distortions and their destructive impact on the American economy occur?”

Discussion (registration required to post)