Jeffrey Miron: To save Medicare, seniors ought to pay more

President Obama's approach to fixing Medicare has little hope of achieving these gains because it does nothing to put more consumer skin in the game. His approach, which consists mainly of regulating prices and quantities via the Independent Payment Advisory Board, can in theory slow expenditure but it would generate rationing, creative accounting and myriad distortions in the healthcare system. No government panel can effectively set the prices and quantities in a large, complicated and ever-evolving industry.

The Romney-Ryan proposal, which allows seniors to opt out of Medicare and get what is essentially a voucher to purchase health insurance, has some chance of improving Medicare, but the devil is in the details. In theory, consumers with vouchers would become price sensitive about their insurance policies, often choosing ones with high deductibles and thereby restoring consumer stake in the system.

But that will happen only if the health insurance market becomes truly competitive, which depends crucially on how the government defines the vouchers and whom it allows to accept them. Generating a competitive marketplace will not be easy.

Regardless, any approach that makes Medicare better requires seniors to pay more of their own costs.

Jeffrey Miron is a senior lecturer and director of undergraduate studies at Harvard University and a senior fellow at the Cato Institute. He is the author of "Libertarianism, from A to Z." He wrote this for the Los Angeles Times.