empty vessel
Member
Chichikov, I'm not trying to make much of a claim about Medicare. Like I said, I didn't want to get into whether or not Medicare paying some factor times a prevailing rate for some things is a good idea, and I wasn't asserting that Medicare was actually big enough to be problematic in the way I was describing.
What are you talking about when you say that Medicare pays "some factor times a prevailing rate for some things." You say you don't want to get into whether or not that is a good idea, but can we get into whether it is true? As I understand it, Medicare pays some factor less the prevailing rate. That's because Medicare pays based upon its own assessment of actual costs by the care provider, i.e., it effectively leverages monopsony power to dictate the price to the seller. This is why some doctors try to avoid taking Medicare patients, claiming that Medicare's payments are too small. (They really aren't; it's just that prices they can get in the private "market" are inflated.)
I'm just saying that, if you want to do things that way, you want to make sure that your program is never accounting for nearly all of the market, or else you'll be overpaying.
This may be true for something like voucher programs where beneficiaries are given coupons to spend as they like, but it is not true for programs where the government is the direct purchaser, and thus effectively a monopsony. Sellers have no leverage in that situation. Of course, there may not be many areas where we want to have the government as the sole purchaser of goods or services, but nevertheless it is an important exception.