Robert Samuelson devotes his column today to misrepresenting a new article in the Journal of the American Medical Association, claiming that it shows the Ryan-Romney Medicare plan would save money. In fact, the article compares costs of Medicare Advantage plans with the current traditional Medicare plan. It notes that in many cases the former are lower, however it does not attribute the savings to the more efficient delivery of care. It notes that lower costs may be due to healthier patients, which has been the finding of other research, such this study by Kaiser via Jared Bernstein.
There is nothing in the new study that should lead Samuelson’s readers to believe that the Ryan-Romney plan will save money.
Interestingly, Samuelson makes the standard conservative argument that the use of private insurers to provide the Medicare drug benefit was the reason that the cost has been far below projections, holding this up as an example for the larger program. In fact the main reason that costs have been far lower than had been projected was that drug costs in general have risen far less rapidly than had been projected. The reason for the slower than projected increase in drug costs has been a reduced pace of new drug development.
The Food and Drug Administration rates new drugs as “priority” reviews or “standard” reviews depending on whether the drug is potentially a qualitative breakthrough over existing drugs. While it might be expected that the number of priority drug approvals would increase through time due to the increase in the money that the industry claims to be spending on research, it actually has fallen sharply in the years since the Medicare drug benefit was approved. While it is unlikely that the decision to use private insurers to provide the Medicare drug benefit is the reason for this slowdown in innovation, Samuelson has at least a prima facie case if that is what he wants to argue.

Source: FDA and Knowledge Ecology International.
Of course it is possible for the government to save money by introducing choice into Medicare. It could allow beneficiaries to buy into more efficient health care systems elsewhere in the world and split the savings. Based on current cost projections, in a couple of decades this plan could have the government and beneficiaries splitting tens of thousands of dollars a year in annual savings. Unfortunately Samuelson, like most proponents of vouchers, is too hard core of a protectionist to consider this sort of plan.
Dean Baker is co-director of the Center for Economy and Policy Research. He also writes a regular blog, Beat the Press, where this post original appeared




6 Comments

Samuelson is an idiot.
(I took a hack at his BS last week when you were concentrating on the WaPo0 and Casey Mulligan.
Medicare for all, aka single payer, aka HR 676.
Everything else is vastly inferior. That includes HeritageFoundationcare, aka Hillarycare, aka Romneycare, aka Obamacare.
Thanks for this post and the links. It really helped me understand some of the bs floating around out there, especially the ” savings” offered by the Medicare advantage plans. We need more of this kind of bs deflating posts so we all know what is going on. The 716 million is one of them. I have had several of my retired friends telling me that Obamacare was cutting Medicare.
you state:
“In fact, the article compares costs of Medicare Advantage plans with the current traditional Medicare plan. It notes that in many cases the former are lower, however it does not attribute the savings to the more efficient delivery of care.”
In your statement “the former” would refer to Medicare Advantage. But, the graph shown as Figure 3 shows that ALL forms of Medicare Advantage are more costly than “the latter” of traditional Medicare.
I don’t see any case in the graph that shows the “former” are lower than the latter. So, I don’t understand what you are talking about.
I’m also puzzled by a comment. I thought Medicare Advantage plans were prohibited from cherry picking, other than marketing more vigorously to healthy patients. If a sick person actually applies, don’t they have to take them?
I was diagnosed with thyroid cancer in 2006, had a thyroidectomy and follow up ablation treatment, and seem to be cancer free. However, last year when I was checking out Medicare Advantage plans it was next to impossible to find out how any further treatments would be covered, in terms of co-pays, what kinds of lab work had co-pays and which didn’t, etc.
It was just like working with an HMO in that one rep would have one answer, the second another, the third yet another, and supervisors would differ as well.
After two months I gave up and went with regular Medicare, Plan F supplemental, and a drug plan.
I think they may have been trying to dissuade me from taking one of their MA plans. This was done by more than one company offering MA, btw.