“The more relevant question is whether the Ryan Plan will promote the more efficient allocation of health care. You can dredge up a theoretical argument that it would. In free market fantasy land, remember, employers and individuals will shop around for the most efficient health care plans, so insurers have an incentive to make their plans more efficient. The crux of the argument is that since insurers face a competitive market, they will work hard to make their plans as efficient as possible, which means they should do a better job than Medicare, which doesn’t face competition. I’m sure this argument has been advanced a hundred times by Heritage, AEI, and so on.
The problem with that argument is that it’s completely false in practice. If that market worked, then we would have a functioning health insurance market for people under 65 (where there is no Medicare);*** but if we had that, then we would not be talking about health care today.”
(Via The Baseline Scenario.)