Tyler Cowen on the Paul Ryan Plan
By Arnold Kling
We all know that health care spending has to be restrained in some manner. There are (at least) two approaches:
1. Have the federal government take a more active role in shutting down or limiting some reimbursements, based on efficacy studies (“death panels”).
2. Turn some or all of Medicare into a fixed voucher program and let individuals choose which set of restrictions they will accept from private suppliers (“grandma bangs on HMO door”).
As I understand Ryan’s approach, he is putting a great deal of emphasis on #2, whereas most Democrats favor #1.
I wish I could say that “we all know” this. Some of the critics of Paul Ryan’s plan seem prepared to argue that we can have the same health care services at lower cost by squeezing health insurance companies, drug companies, doctors, and hospitals. Most of the savings promised in Obamacare come from this squeezing. I think this is unlikely, but one man’s flim-flam is another man’s fervent belief.
Someone who favors (1) could say that consumers will make horrible mistakes if they are given health care vouchers, choosing unnecessary procedures and foregoing necessary ones. Someone who favors (2) could say that government will make horrible mistakes if medical practice is dictated by a central bureaucracy, because local information is important. Robin Hanson could say that medical services are as likely to do harm as to do good. So you cannot make horrible mistakes by cutting back on medical services. Cut them back any way you like. Even randomly cutting back services would be fine.
Here, Paul Ryan defends his plan. [link fixed]