Medicare’s Bias

One of the alternatives to a single payer universal healthcare that has been proposed by Yale's Mark Schlesinger and Jacob Hacker (Hacker has been a key adviser to both the Clinton and Obama campaigns on health policy and also was an adviser in the Massachusetts plan) is an expanded Medicare system. The thinking is that since a single payer system is not politically viable, we need a public/private partnership for healthcare. Their proposal is quite long but well thought out Secret Weapon: The “New” Medicare as a Route to Health Security, Journal of Health Politics, Policy and Law, Vol. 32, No. 2, April 2007) and basically argues that this public/private partnership already exists in modern Medicare. After discussing the merits of an expanded public/private hybrid like Medicare they have the following discussion:

Although competitive hybrids have attributes that can enhance their effectiveness
and political stability, it is important to recognize that this program design also embodies some sources of tension. Precisely because competitive hybrids allow for public and private insurance to coexist, partisans of each will constantly contest the appropriate boundaries between the two and seek to amend the program in ways that favor their preferred form of insurance.
These ongoing political tensions can reinforce some of the administrative challenges inherent in a program that combines public and private insurance. Programs that offer beneficiaries a choice between the two forms of insurance have typically experienced favorable selection by private insurers, who adopt practices that encourage enrollment by relatively healthy beneficiaries and disenrollment among those who are chronically ill (Medicare Payment Advisory Commission [MedPAC] 2000). In the short run, these patterns of selection lead to slightly higher costs
for a hybrid program than for pure public insurance.
The longer-term political implications, however, may be more consequential. Were hybrid programs to adopt policies of fixed contributions (socalled “premium support”
arrangements), existing cost differentials could induce more beneficiaries to select private plans, even if their performance was no better than conventional FFS Medicare (Oberlander 2000). If politicians view the higher costs in the public component as an indication of inefficiency rather than selection, they could lose faith in the public component and try to move beneficiaries and resources to private insurers.

Well, today there was an editorial in the NY Times that we feel confirm these limitations of inherent competition in modern Medicare, and why we believe it may be difficult to simply expand Medicare. Instead of having the private and public system co-exist, we believe that they need to be separated. In our system, private and public coverage exist together (allowing for universal coverage) but separated so that there is no inherent competition.
Gil