A Bipartisan Health Care Bill

Congressman Paul Ryan and Senator Ron Wyden have released a blueprint for Medicare reform, which has raised a little stir since it's bipartisan.  It's also not as extreme as Ryan's earlier plan which would have destroyed Medicare and replaced it with a voucher system.  In the liberal blogosphere people are upset with Wyden for giving Republicans some cover and making it harder to hit them with the details of the earlier plan in next year's election.

The plan is essentially to privatize Medicare, while still allowing the use of the old-fashioned system for those who want it.  There are still vouchers, but they would grow at a more realistic rate, and there would be safeguards to make sure insurance wasn't unaffordable for low-income seniors.  People would be allowed to choose more expensive plans, but would pay the difference.

Liberal wonks say this won't save any money.  Conservatives say that the free market will work its magic and generate innovation and efficiencies that will lower costs and increase value.

The issue comes down to what level of free market influence is most efficient in health care. But here I think that conservatives suffer from basing their belief in the free market for health insurance on Faith rather than evidence. Medicare Advantage has been an experiment in privatizing Medicare, and its costs are higher than traditional Medicare. In fact, Medicare's per patient costs are much lower than private insurance. The fact is that we already have a private health insurance system in the US, and it has led to much higher health care costs than you see anywhere else in the world, where government is more involved in every case.

This isn't because conservatives are wrong about the free market being more innovative- it certainly is- it's because the unusual nature of the health care industry seems to have caused the innovation to go into new and high tech treatments that are probably more effective but clearly not increasing efficiency. How many people will be willing to pay much less money for treatment that is a little less efficacious? I'll buy a Dell computer that costs half as much as a Mac even though it's only 75% as good a product, but I wouldn't do the equivalent transaction with my heart surgery.

The burden of proof that a market solution will save us money really rests with conservatives, and so far there's just not much evidence in their favor.