Jared Bernstein explains why the Medicare privatization plan that Charlie Dent supports will double health care spending for seniors:
Importantly, the value of those vouchers start well below where they need to be to enable seniors to afford coverage comparable to Medicare today (in fact, beneficiaries costs would have to double), and their value falls increasing behind coverage costs over time.
Suppose you send me to the grocery store to buy you a gallon of milk. Milk costs $3.50 a gallon but you give me $2. I spend the whole day “denying business to inefficient providers”—i.e., grocers who all charge more than that—and at the end of the day, bring you back a pint.
Now, instead of milk, where I’ve got the information I need to be a smart shopper, suppose you give me the same under-priced voucher but ask me to bring you back a plan for treating that strange pain you’ve been experiencing on your left side on humid days.
There’s no “denying business to inefficient providers” in the Ryan plan because there’s no market discipline that average folks with incomplete information armed with an inadequate voucher can enforce on a private health insurance market that’s…well, different.