Path Dependency in Health Reform: The Case of Medicare

June 17, 2011
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I think I first learned about path dependency when studying physics — but it surely applies to public policy, too. Despite the scholarly disputations about health reform, what drives most voters are not questions about the solvency of Medicare or beneficiaries’ access to care, but fear of change. Arguments will not change this fact: People change when the pain of not changing becomes greater than the pain of changing, but not before.

I think I first learned about path dependency when studying physics — but it surely applies to public policy, too. Despite the scholarly disputations about health reform, what drives most voters are not questions about the solvency of Medicare or beneficiaries’ access to care, but fear of change. Arguments will not change this fact: People change when the pain of not changing becomes greater than the pain of changing, but not before.

This can be the only explanation for the majority of respondents to polls (described here) which ask the foolish question whether “Medicare should remain as it is today” versus Paul Ryan’s proposed reform. Surely the majority, which prefers that Medicare not change, are waxing nostalgic for Medicare as it existed prior to the slashing and burning of the March 2009 Patient Protection and Affordable Care Act (ObamaCare), the consequences of which they have not yet experienced.

In a sense, what Paul Ryan is proposing for Medicare is something we already have done with another revered institution: Social Security. People under 65 years of age pay money in and people over 65 receive money out. Deroy Murdock has summarized a marketing plan for the Ryan Medicare reforms. Look carefully at the “MediChoice” grant depicted in the graphic. It doesn’t look like a voucher, or coupon, or stamp, of anything of that ilk. It looks like a check from the U.S. Treasury — which is exactly what it is.

Image designed by KeybridgeCommunications.com

Would this be enough to sway the voters? Look at it this way: Suppose I stood up and announced that seniors were too near-sighted, hard-of-hearing, and easily confused to decide where to live, or buy groceries, or which car to drive. Therefore, the U.S. government will cease depositing Social Security payments into seniors’ bank accounts. Instead that money will be allocated to the U.S. Department of Housing and Urban Development to rent and assign housing for seniors, to the U.S. Department of Agriculture to negotiate contracts with supermarkets and the like where seniors could pick up government-approved groceries for little or no money, and to the U.S. Department of Transportation to lease and assign appropriate vehicles for seniors’ use.

New offices within these departments will be established to determine what the right prices should be for all the relevant goods and services, and providers will not be able to “balance bill” (except within approved limits, and with strict oversight) seniors who value their goods and services more than others.

Such a proposal would not last one day in the court of public opinion. And yet, I suspect that if FDR had set up Social Security like that, any plans to “voucherize” it today would draw the same charges as those leveled at Ryan’s Medicare proposal: Seniors are simply incapable of navigating these complex systems, and need federal “protection.” And if LBJ had originally established Medicare via “MediChoice” grants, no politician today would be able to impose the current, insane, Medicare bureaucracy on top of it.

   

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