Ezra Klein writes:
This morning, I was on MSNBC with Sen. John Barrasso (R-Wyo.), who argued against the public plan by asserting that Medicare was too expensive and bankrupting the country. When I pointed out that CBO projected $110 billion in savings for a public plan attached to Medicare rates, he didn’t miss a beat: That’s because Medicare underpays, he explained, and is subsidized by private insurance.
Only one of those two arguments can be true. As compared with private insurance, Medicare can either be unaffordably expensive, or it can be underpaying for services and saving money. It can’t be both.
I’m not so sure it can’t be both. For example, if Medicare were designed to encourage the creation of efficient provider networks, it would facilitate rather than undermine efforts on the part of private insurers to move away from highly inefficient fee-for-service medicine. Because Medicare represents so large a share of overall medical spending, it’s reliance on fee-for-service shapes the entire landscape.