The Agenda

Bill Kristol on Medicare

Ezra Klein has taken Bill Kristol to task for saying the following:

“One reason the price of health care is going up so fast is because of government programs,” says Kristol. “The price of Medicare and Medicaid have gone up faster than private insurance. That’s well-documented.”

Klein correctly notes that in fact the price of Medicare has increased at a slower pace than private insurance. Yet the first part of Kristol’s statement is true: “one reason the price of health care is going up so fast is because of government programs.” 

Most Medicare beneficiaries are enrolled a fee-for-service insurance arrangement. Co-payments are high, but so-called Medigap policies insulate beneficiaries from real cost-shoring. As James Capretta has observed, the FFS insurance model thus does an extremely poor job of containing costs. Pretty much everyone in the healthcare debate, on the right and the left, wants to encourage integrated care, in which efficient provider networks would be focused on delivering good outcomes rather than maximizing the cost of treatment by ordering more tests and procedures, many of them useless, many of them positively harmful. 

If it were up to employers, physicians would organize themselves in these networks, the better to lower costs. But physicians have very weak incentives to do so — after all, Medicare will keep reimbursing them without compelling them to organize more effectively. That’s one of the reasons I think IMAC is an excellent idea: it might change that.

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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