How much complexity? Under the Bush plan, a typical retiree pays a monthly premium for prescription drugs averaging $32 a month. After he or she satisfies a $250 deductible, the insurer must cover 75 percent of the next $2,000 in drug costs. The assistance then vanishes through the so-called “doughnut hole,” until total expenditures exceed $5,100, at which point insurance kicks in again to cover 95 percent of additional drug costs. A retiree who judges this proposition a good deal must choose between an integrated, Medicare managed-care plan that includes drugs, and a free-standing drugs-only plan. In the latter category, there are more than 40 choices available in most locales, including multiple options from competing insurers, each covering different brand-name drugs and offering different inducements. The only way to navigate the decision-making process is via the Internet, which I am sorry to say that some elderly people still have not learned how to use.
The failure of Bush’s reform effort illustrates an important point about psychology and economics—what writer Barry Schwartz* calls the “paradox of choice.” Given too many options, rational actors are more likely to be paralyzed than to pick wisely. To take another example, consumers now have the right to choose from a long list of electricity suppliers via their local utilities. If you are a frustrated energy trader, this is a fabulous new benefit. If you just want the electricity to stay on in your house, you’re likely to ignore the menu and accept the default setting. The potential savings from choosing a new supplier—which come with a risk of increased costs as well—don’t justify the investment of time, even for the small minority of people capable of figuring out the new system.
Beyond that, the Medicare D fiasco offers a lesson about policymaking in an age of market consensus—one that we would do well to bear in mind as we contemplate further expansion of public health-care benefits and the eternal possibility of Social Security reform. Market-based schemes for distributing public goods may begin as clear and sturdy concepts, but they tend to become increasingly convoluted as the political and legislative processes work their magic. Whatever simplicity may have been present at the outset tends to get lost. And if the plan isn’t simple enough for average people to understand, it just won’t work. ~Jacob Weisberg, Slate
This will probably always be the problem for any public-private arrangement that tries to incorporate the complexity of the market by means of the complexity of bureaucracy and leaves it to the consumer to decipher how it all works. Another practical problem with enshrining Choice as the new idol of Republican politics is that it assumes that most people want the hassle and responsibility that come with having to make these choices. Decades of voting patterns suggest otherwise. Americans have become quite accustomed to someone else making all sorts of decisions for them, and to have the government ask them to start making decisions in order to benefit from what ‘should’ be a simple redistributionist giveaway program is probably as shocking as it is annoying. Of course, there should be no drug entitlement at all, or Medicare either for that matter, but that’s a post for another day.