Tim Pawlenty’s Partial Privatization Of Medicare Will Lead To Eventual Destruction Of Medicare

Tim Pawlenty has thus far declined to endorse the Medicare privatization plan backed by House Republicans earlier this year. But today he offered the first hints of his alternative strategy, one that attempts to put a softer face on the same basic concepts. One important thing to note is that even though he won’t come out and say so, his new ideas are fully consistent with the conservative movement’s longstanding desire for Medicare to “wither on the vine” and die. Here’s the key point as reported by Ben Smith:

Pawlenty also suggested he’d offer “premium support” — Paul Ryan-style vouchers — to people who aren’t yet enrolled in the program [i.e., Medicare]. He suggested, though, that he’d make the Ryan-style plan an option for individuals, not an immediate replacement for the entire program.

This is supposed to make privatization sound non-threatening. If you like Medicare, you can stay in Medicare. But here’s the problem. Medicare takes advantage of its large scale to save money by paying doctors and hospitals less than they would charge on the private market. Consequently, if Pawlenty structures a partial privatization scheme such that it’s a good deal for 20 percent of seniors and a bad deal for 80 percent of seniors, then about 20 percent of seniors will drop out of Medicare. That reduces the size of the Medicare purchasing pool, and creates incentives for doctors to drop out of treating Medicare patients in order to focus on higher-paying private ones. But when doctors drop out of Medicare, that makes the program less attractive to the remaining 80 percent. So more patients will drop out leading to more doctors dropping out leading to more patients dropping out. Lather, rinse, and repeat. In the end, seniors will face all the same problems as they’d face under the House GOP privatization plan—much higher per unit treatment costs and less available care.