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It's fairly widely understood (though I guess not by Professor Krugman) that Medicare offloads some of its own costs onto the private sector by the below-market rates it pays providers.This is fairly widely claimed, but it's a pretty weak claim. Doctors are not required to accept Medicare. They choose to do so. They choose to accept the rates Medicare offers. When one party offers an amount for a second party's services, and the second party accepts, they have just established the market rate for that transaction.
This claim also conveniently ignores the fact that insurance companies do the same thing. Check over a medical statement from your insurance company some time. You'll see where the doctor billed $300 for "nasal deconfrabulation", your copay was $25, and the insurance paid $125. Total due: $0.
> He's also neglecting to make a real comparison of the services that private health care provides vs. Medicare. Sure, private insurance premiums may have risen faster than Medicare spending during the '90s, but Medicare wasn't even paying for prescription drugs (a huge cost driver) until Part D was implemented in 2006.
The status of Medicare in 2006 seems to have little relevance to Medicare today. The first question is how much Medicare spends today per client vs how much private insurance spends per client, on average. The second question is how coverage differs in these scenarios. How does Medicare compare to the average insurance policy? I don't know the real answer to these questions, but I know Medicare's coverage or lack of coverage for prescription drugs in 2006 isn't relevant.