• Take Medicare, subtract politics, mix

    In a NY Times blog post, Peter Orszag picks up where David Leonhardt left off (see also, this) in illustrating how Medicare can purchase care more efficiently.

    The question is how ideas like the three-year test-out period can be evaluated and then implemented. The legislative prospects for enacting this type of change in Medicare, given the dominance of inertia in the face of increasing polarization in the Congress and the role of lobbying, would be dim. The health bill, however, includes a set of institutions designed for precisely this type of situation.

    In particular, the newly created Independent Payment Advisory Board could propose this type of payment change in order to help reduce costs and improve quality in Medicare. The change would then take effect by default — if Congress ignored the board’s proposals, if one house voted them down, or even if both houses voted them down and then the president vetoed that legislation.

    Inertia would work in favor of implementing this type of change rather than, as under the current system, against it. And that could make all the difference.

    The IPAB is not some pie-in-the-sky gimmick to get a good CBO score. It can actually do some real work to cut costs. Moreover, it is relatively insulated from the political forces that would normally make such cuts impossible. I expect the IPAB will be attacked for this very reason. But it shouldn’t be, or at least not unless the attacker has got another very good idea for how to credibly reduce the federal government’s health care cost burden.

    Put this another way: take your pick of (1) massive debt, (2) massive taxation, or (3) lower health care cost inflation. To argue against mechanisms to promote (3) without any viable alternatives is, implicitly, to adopt (1) or (2). What politician could win an election arguing for either of those? Not a single one. Exactly!

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