Alain Enthoven on Ryan's Medicare Plan

Alain Enthoven, pioneer of "managed competition" and esteemed authority on health-care economics, has an excellent column on Ryan's premium support plan (What Paul Ryan's critics don't know about health economics). Echoing arguments made by Alice Rivlin and Henry Aaron, he argues that the premium support approach would encourage the spread of accountable care organisations, and that these could make a big contribution to improving efficiency and lowering costs. Ryan's indexation formula is too severe, Enthoven says, but the basic idea is sound.

At the root of the waste and excess is Medicare's open-ended fee-for-service system, which pays health-care providers for doing more and more costly services, whether or not they're in the patients' best interests. Last year's health-care reform legislation acknowledged that fundamental change is needed from the traditional fee-for-service model to a system in which doctors and hospitals team up to offer coordinated care and are held accountable for per-capita cost and quality. Hospitals and suppliers may participate in this Shared Savings Program by creating or joining an Accountable Care Organization (ACO).

Unfortunately, the incentives to form ACOs and to dramatically cut costs are far too weak and the regulations far too complicated...

A better way to encourage accountable care is the "premium-support" model proposed by House Budget Committee Chairman Paul Ryan, among others. This is a managed competition model in which government would make a defined contribution and beneficiaries would have a choice from a variety of health plans with no discrimination based on health status. Standard coverage contracts would make comparisons possible for ordinary people. Competition would drive health plans to innovate in ways that cut waste and improve quality. And the use of exchanges would drastically reduce marketing costs, so insurance companies would not be taking 20% off the top, as is currently the norm.

This is not "the end of Medicare," as some would have you believe.

One thing I don't understand is why Enthoven, like Ryan, takes such exception to the use of the term "voucher" in describing the premium support approach. Premium support is, to all intents and purposes, a voucher. What's wrong with calling it that?


Presented by

The Blacksmith: A Short Film About Art Forged From Metal

"I'm exploiting the maximum of what you can ask a piece of metal to do."

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

Riding Unicycles in a Cave

"If you fall down and break your leg, there's no way out."

Video

Carrot: A Pitch-Perfect Satire of Tech

"It's not just a vegetable. It's what a vegetable should be."

Video

An Ingenious 360-Degree Time-Lapse

Watch the world become a cartoonishly small playground

Video

The Benefits of Living Alone on a Mountain

"You really have to love solitary time by yourself."

Video

The Rise of the Cat Tattoo

How a Brooklyn tattoo artist popularized the "cattoo"

More in National

Just In