The Right Way to Reform Medicare

Donald Berwick, Medicare’s chief administrator, is rightly convinced that Medicare has to be reformed. And he is just as correct to point out that there is, as he writes in a recent article in the Wall Street Journal, “a right way to reform Medicare and a wrong way.”


Why does Berwick think that Medicare needs to be reformed?

He gives two valid reasons:

First, under the current state-run Medicare regime “millions of unnecessary medical injuries and tens of thousands of deaths” happen. Patients, he writes, are not safe under Medicare. It inflicts suffering and kills: “Reducing medical injuries and complications for patients will save lives and prevent suffering.”

Berwick describes treatment under Medicare as poorly coordinated and poorly communicated with the result of duplicative tests and “procedures that hassle patients and do them no good at all.”

Second, the US deficit and debt are out of control. A main reason for deficit and debt are the high and ever higher rising costs of state-run Medicare. As Berwick puts it: “Washington doesn’t agree on much, but we all agree that we need to reduce our deficit and debt. Reforming Medicare and reducing health-care spending is crucial to meeting that goal.”

In other words, he considers Medicare not only a lousy healthcare system – but an unaffordably expensive lousy healthcare system.

What a verdict against state-run health care! Here he is, the chief administrator of Medicare, telling us that Medicare is a shoddy and harmful healthcare system that will bankrupt the country.

Berwick – this is astonishingly promising! Now tell us about your solution. What’s the right way to reform Medicare?

Berwick: “We” (I guess that’s him together with Obama and some unnamed co-wizards) – “will hold down Medicare cost growth, improve the quality of care for seniors, and save an additional $340 billion for taxpayers in the next decade.”

Ok – but how? How will you do it?

Berwick: “The right way is to help bring costs down by making care better and improving our health-care system.”

And how, Berwick, does improving the health care system lead to lower costs?

Berwick: “Improving quality while reducing costs is a strategy that’s had major success in other fields. Computers, cars, TV’s and telephones today do more than they ever have, and the cost of these products has consistently dropped. The companies that make computers and microwaves didn’t get there by cutting what they offer: They achieved success by making their product better and more efficient. We can do the same when it comes to health care.”

Yes! You are right. I agree. That’s the beauty of the free market where competition among firms leads to better and cheaper products. You did notice, did you not, that computers, TV’s, telephones and cars (… well, most of them anyway) are not manufactured by state-owned enterprises? Berwick, I never would have guessed it but there seems to be some entrepreneurial spirit hidden inside you. You have seen market forces at work, you just described them here convincingly. So please – tell us: will you bring the free market to do its job in the health care sector?

Berwick: “The Patient Protection and Affordable Care Act laid the groundwork for us to take the right approach. We’ve already started our work with a historic partnership that includes businesses, doctors and hospitals who are committed to transforming the way we deliver care and making patients safer…. Last month, we announced another effort that will reduce costs by improving care: a proposed set of rules for doctors, hospitals and other providers who want to work together as Accountable Care Organizations, or ACOs. ACOs will coordinate better care for patients…”

Oh, Berwick, what a letdown! Historic partnerships? Sets of rules? Coordinating? Accountable Care Organizations? Do you really think that we have cheap and excellent mobile phones because of historic partnerships and Accountable Phone Organizations? The only reason we have such phones is to be found in the fact that the market is allowed to find solutions on its own – without someone like you, Berwick, enforcing, planning, supervising, coordinating.

I grant it’s difficult to come to terms with the fact that one-self and one’s co-wizards are the main problem.

And you were so close – pity! You let your ideology blind yourself to an obvious truth. Your love for an all-powerful state-run health care system – and the crucial role you yourself are playing in it – is far greater than your desire for the well-being of seniors. The efficient allocation of scarce resources is impossible outside of free markets. If prices are not set by competing health care providers, but by a state owned monopoly – then health care will be rationed. And the ones who need health care the most will suffer the most. Unless they have enough money left to buy the care they need from a parallel health care system that will undoubtedly arise at the side of a rationed state monopoly system. Just look at the UK or at Canada.