Medicare price controls: the wrong prescription.

Abstract

The cu rr ent de bat e on Medicare is wretched because most proponents of a position do not set out clearly the principles and economic philosophy on which they believe the program should be based. Instead, the pattern usually is to discuss changes in the program merely in terms of “budget savings,” without much indication of how the reform would begin to change the nature of the program. The paper by Theodore Marmor and Jonathan Oberlander is refreshing because the authors insist on discussing basic principles and economic philosophy. That does not make them correct, of course. Indeed, by laying out their framework so bluntly, they do us a service by exposing the weaknesses of more hazy and incremental reforms that start from a similar view of the world. In comparing vouchers with their own plan, Marmor and Oberlander get to the heart of the real debate that should be taking place. It is not a debate about the Hospital Insurance (HI) trust fund. The central dispute is over two questions that should be asked even if the trust fund were projected to be in balance forever. First, should Congress determine and then budget howmuch taxpayers should contribute to Medicare, or should Congress continue to promise retirees that society will guarantee them a certain set of benefits, regardless of cost? And second, which economic system is more likely to achieve an efficient and just Medicare program—the system of central planning or the system of markets and consumer choice? Marmor and Oberlander answer these questions by painting a glowing picture of how a complete regime of central planning, with tighter price controls and budgets, could enable the promise of defined Medicare benefits to be achieved at reasonable cost.