Policy Markets Could Clarify the Medicare MSA Debate

by Robin Hanson

I just read through CATO Briefing paper #26 (found somewhere at http://www.cato.org), and decided it would be a great idea futures "policy market".

The main criticism of allowing Medicare folks the option to use Medical Savings Accounts (MSA), it seems, is that only very healthy people would choose them over the existing Medicare system. If this happened, this could raise total Medicare costs, instead of lowering costs as MSA advocates claim.

This CATO paper cites two studies critical of Medicare MSA, which predict 1-2 and 3 percent would pick MSA. It also cites one study in favor of MSA which predicts at least 40 percent choosing it within 8 years, and the paper emphasizes that private corporate MSA get about 90 percent participation.

The percent of people who pick MSA within 10 years after a bill is passed to allow Medicare folks to pick it should be easy to verify after the fact. The policy debate seems to center on this number, and the estimates are widely separated.

Thus this would be a great "policy market" - a market estimate of the fraction picking MSA conditional on a bill passing should be directly relevant policy information regarding whether to pass a Medicare MSA bill.

Now if only it were legal ...

Robin Hanson July 9, 1996
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