THE STATE CAN'T COMPETE:

Issue of Competition Causes Widest Split Over Medicare: In the current debate over Medicare, no issue excites more passion than a proposal for it to compete directly with private health plans. (ROBERT PEAR, 11/10/03, NY Times)

Under the proposal, the government would, in effect, offer a fixed amount of money to each Medicare beneficiary to buy comprehensive health insurance under traditional Medicare or a private plan.

"Taxpayer costs will be driven down through the forces of competition," said Representative Patrick J. Toomey, Republican of Pennsylvania, who sees private plans as more efficient and innovative than traditional Medicare.

But Representative Pete Stark of California, the senior Democrat on the Ways and Means Subcommittee on Health, said the proposal was "a cockamamie scheme" to privatize Medicare, and he asserted that it would not save money.

Debate on this issue has overshadowed Congressional agreements on the structure of drug benefits to be offered to 40 million elderly and disabled people. That is somewhat surprising because the competition would not start in earnest until 2010, and no one knows whether private plans, which have been leaving the Medicare market, would return.

Medicare is already open to competition. Health maintenance organizations meeting federal standards can sign contracts with the government and serve Medicare beneficiaries anywhere they want to do business. But in many places, competition is anemic or nonexistent. Fewer than 5 million of the 40 million Medicare beneficiaries, about 12 percent, are in private plans.

Bryan E. Dowd, a professor of health services research at the University of Minnesota, said, "We herd people into traditional fee-for-service Medicare" by heavily subsidizing the program and by limiting the ability of private plans to offer cash rebates. As a result, he said, beneficiaries do not save if they choose a private plan that is less expensive than traditional Medicare.

The proposal for "premium support" has its roots in the work of a federal advisory commission that ended four years ago in a brutal deadlock. Ten of the 17 commission members wanted Medicare to compete directly with private plans. That was one vote short of the number needed to make a formal recommendation to Congress.

One of the main accomplishments of Bill Clinton was going to be to prove that the Democrats too had finally come to understand the 20th Century demonstration project--that Statism doesn't work, that free markets and competition are prerequisites of thriving economies and that market forces can be harnessed to force efficiencies and discipline costs. In fact, one of the few genuine Clinton legacies is the adoption of both the NAFTA and GATT free trade treaties. [Of course, those treaties had been proposed and negotiated by prior (Republican) administrations and passed Congress only because Republicans--still the minority party then--supported them. White House strategy relied on Newt Gingrich to deliver the bulk of the votes necessary for passage, which he did.]

But Bill Clinton's gone and, whatever good he may have done the nation, he left no footprints behind in his own party. On the key issue of the 21st Century, whether market forces will be applied to public education and the social welfare state, Democrats remain just as Statist as they ever were, as the above story shows. Indeed, the best opportunity we've ever had--or may ever have--for reforming Social Security and Medicare and the like was when Mr. Clinton had a Republican Congress, which would have passed major reform provided the political cover of a popular Democratic president, who likely could have dragged along enough Democratic votes in the Senate to break the inevitable filibuster by his own party. Realistically, any significant reform now will require that the GOP get to, or very close to, 60 seats in the Senate or that they revise Senate rules to disallow filibusters.

Posted by Orrin Judd at November 10, 2003 9:04 AM