NCPA - National Center for Policy Analysis

The Case for Competition in Medicare

September 21, 2011

Rapidly rising Medicare spending is a major cause of the federal government's budget problems.  Analysts who have offered proposals to slow the pace of rising Medicare costs tend to fall into one of two competing camps, says James C. Capretta of the Heritage Foundation.

The first camp believes that central government management of prices and government reengineering of how services are delivered by doctors and hospitals can control Medicare's costs -- as well as costs in the wider health system -- without harming the quality of care.

  • Over the past three decades, the camp that favors government control and regulation has been calling the shots in the Medicare program, without success.
  • Proponents of the 2010 health care law observed the problem and concluded that better technocratic solutions were needed.

The other camp argues that strong competition in a functioning marketplace will work far better than more government micromanagement to improve quality and reduce costs.

  • A well-functioning marketplace would set in motion the forces needed to transform American medical care, including in the Medicare context, into a model of efficient patient-centered care.
  • The government can and should play an important oversight role in such a reformed system, but the difficult organizational changes and innovations needed to provide better care at lower cost must come from the bottom up, not from the top down.
  • In other words, changes should come from those who are delivering services to patients, not from Congress, the Department of Health and Human Services, or an appointed board of remote and unaccountable "experts."

Source: James C. Capretta, "The Case for Competition in Medicare," Heritage Foundation, September 12, 2011.

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