Herschel wants my thoughts on this weeks Atul Gawande piece in The New Yorker. Here they are. But this gives me a chance to respond to something that Wisewon wrote in comments:
But, you might argue, the choice isn't between Medicare and Aetna. It's Medicare and a regulated private market with lots of enrollees along the lines of the Federal Employee Health Benefit Program. You'd be right. So let's compare apples-to-apples:
Same story. Medicare holds costs down better than its competitors. The mechanism here is no secret. Medicare uses it massive bargaining power -- most all seniors -- to essentially decide its pay rates. And they set them lower than physicians would like. This saves Medicare money and pisses off physicians, which is why they sometimes applaud each other for refusing to take Medicare patients because that's "the only thing that will teach Medicare that no they cannot pay well-below market." This doesn't save enough money, but it saves more money than anything the private sector has been able to do. And if all Americans were in Medicare, rather than just 45 million Americans or so, this strategy would save yet more money, because their bargaining power would be near total (this will not happen, obviously). So why does Wisewon call Medicare "a sugar daddy?" Well, Medicare extracts savings from providers rather than patients. So patients don't feel much hurt even if doctors do. The prevailing conservative idea right now is the opposite: High deductibles and increased cost-sharing and similar policies extract savings from the patient. Where Medicare makes health care less profitable for the doctor, the conservative approach makes health care less affordable for the patient.
People are comfortable with Medicare because it pretty much does one thing: it pays the bills. It has close to no utilization controls, provident payments have been heavily controlled the medical specialty societies-- its been everything to everyone, except that stubborn cost thing. Saying that "Americans like Medicare" is a little disingenuous-- there is nothing not to like, because Medicare really doesn't do that much. Its the sugar daddy of the health care system. The moment the sugar daddy runs out of money, Americans won't like it nearly as much.There's some truth to that. But only some. Insofar as no one in American health care really holds down costs, Medicare doesn't either. But insofar as people "like" private insurance -- and we are choosing between private and public insurance here -- Medicare has done a better job than the competition at holding down costs. The following graph comes from Jacob Hacker's brief (pdf) in favor of a public insurance option:
But, you might argue, the choice isn't between Medicare and Aetna. It's Medicare and a regulated private market with lots of enrollees along the lines of the Federal Employee Health Benefit Program. You'd be right. So let's compare apples-to-apples:Same story. Medicare holds costs down better than its competitors. The mechanism here is no secret. Medicare uses it massive bargaining power -- most all seniors -- to essentially decide its pay rates. And they set them lower than physicians would like. This saves Medicare money and pisses off physicians, which is why they sometimes applaud each other for refusing to take Medicare patients because that's "the only thing that will teach Medicare that no they cannot pay well-below market." This doesn't save enough money, but it saves more money than anything the private sector has been able to do. And if all Americans were in Medicare, rather than just 45 million Americans or so, this strategy would save yet more money, because their bargaining power would be near total (this will not happen, obviously). So why does Wisewon call Medicare "a sugar daddy?" Well, Medicare extracts savings from providers rather than patients. So patients don't feel much hurt even if doctors do. The prevailing conservative idea right now is the opposite: High deductibles and increased cost-sharing and similar policies extract savings from the patient. Where Medicare makes health care less profitable for the doctor, the conservative approach makes health care less affordable for the patient. 
