Medicare: Where’s the evidence that vouchers save money?

The National Journal seeks some, and comes up empty

Margot Sanger-Katz, a National Journal reporter who has been brave enough to question conventional wisdom surrounding health policy—she reported that elements of the Affordable Care Act “designed to lower costs will likely raise them instead”—has now taken a hard look at the claims and rhetoric sloshing around about vouchers lowering the government’s Medicare bill.

She asked a reasonable question, one the media haven’t examined much: Will vouchers, which will likely result in seniors and disabled people paying more for their care out of pocket, really save money for Medicare, as some politicians, mostly Republicans and notably Mitt Romney and Paul Ryan, have claimed?

According to the theory, Medicare beneficiaries would be able to take their government subsidy, or voucher, and venture into the private insurance market. Sellers would then compete for their business and thus, in theory, lower the price of insurance and create downward pressure on medical costs.

How can the press report on this theory? Instead of relying on a tiresome and not very useful he said/she said formula—the Dems say vouchers won’t work; the GOP says they will—Sanger-Katz dug in and asked, “Where’s the beef?” when it comes to vouchers. Here’s what she found:

The logical-sounding notion of vouchers bringing more competition and thus lower prices is

so untested that even the experts who are the most enthusiastic about the approach say they don’t know to what degree competition will slow spending. No one this cycle—not the Congressional Budget Office, not the Heritage Foundation, not even the Romney campaign—has estimated the effect. Romney’s plan could generate savings, but even proponents admit that it would amount to a huge gamble on a yet-unmeasured mechanism for slowing growth.

Sanger-Katz checked in with some voucher advocates. One academic booster she interviewed was Roger Feldman, a professor at the University of Minnesota, who has written a lot about vouchers. In a recent paper for the conservative American Enterprise Institute, a think tank that has long been a voucher enthusiast, Feldman estimated that Medicare could save more than $339 million over 10 years, most of it coming from a few large markets where the government apparently overpays for care.

But here’s the problem: In a few markets, it seems, private plans can provide care cheaper than Medicare. But after that, there’s no evidence that what it costs Medicare to pay for care for beneficiaries is affected. In other words, there is no evidence that vouchers slow the growth rate for Medicare spending, which is driven more by doctors’ and hospitals’ bills than by the insurers who pay them. When it comes to curbing the growth of Medicare spending, Singer-Katz reports, “Feldman makes no promises.” He told her, “I don’t build that in because I don’t think the evidence is strong enough.”

She then went to the voucher wellspring—the Heritage Foundation—the conservative policy think tank, which has been pushing Medicare vouchers since the mid-1990s. A Heritage blueprint for reform claims vouchers could reduce Medicare spending by $702 billion over 10 years, but, says Sanger-Katz, Heritage estimates no savings from competition’s effect on the health sector. “It’s kind of like trying to find the Higgs particle in healthcare,” says Rea Hederman Jr., a Heritage research fellow. “We know it’s out there, but we don’t have the tools to find it.”

It’s reasonable to think that the evidence might have surfaced—one way or another—in the 17 years since Heritage begin promoting vouchers and competition to the media through a series of “Dear Journalist” letters and executive memoranda, which heavily influenced press coverage in the 1990s. In launching its quest for vouchers in the summer of 1995, Heritage noted, “A Medicare system based on consumer choice and market competition would mean choice and security for today’s elderly and a strong and solvent retirement health-care system for future generations.” But apparently, the evidence is hard to come by.

Sanger-Katz also consulted the Congressional Budget Office (CBO) for evidence backing up the voucher theory. None there either! She reported that the CBO has looked “repeatedly” at this question over the years and “has found no conclusive proof that insurance competition lowers health costs.” CBO director Douglas Elmendorf, in House testimony earlier this year, told members of Congress he could not “score,” or measure the dollar savings, resulting from competition because “we don’t have the tools.”

Should the public, especially those who will be coming in to Medicare in the next decade and after, take a chance that the Higgs particle of healthcare will emerge, or is it too much of a gamble, as Sanger-Katz seems to suggest? She notes that, in theory, the market would reward insurers that find innovative ways to delivery care by limiting coverage for costly, unproven treatments or by paying doctors for quality, rather than for the number of services they perform. But, “There are basically no examples of this in the US healthcare system,” she reports, and suggests that the opposite might happen when a few powerful insurers and a few powerful hospital systems run the show, as she has noted in her earlier reporting.

Voucher advocates say they’re worth a try, arguing that any valid cost-saving theory should be tested. The public seems less inclined to gamble, however. In our highly unscientific CJR Town Halls in the swing states of Missouri and Pennsylvania, we found that retirees and those nearing retirement did not like the idea of vouchers at all. Jackie Calmes of The New York Times reported over the weekend that a Times/CBS poll found that three-quarters of voters want to keep Medicare the way it is. “I don’t trust anybody who says ‘voucher,’” said Gary Fieldsend, a 62-year-old New Hampshire voter.

Sanger-Katz has advanced the voucher discussion by exposing that the foundation and driving force for Medicare vouchers rests more on ideology than on hard evidence. The National Journal piece is a refreshing must-read, and we hope it comes up in the October 3 presidential debate on domestic policy.

Trudy Lieberman’s Medicare primer is here, and an archive of her critiques of the coverage of Medicare is here.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman. Tags: , , , ,