ACA’s austerity risk

I’ll make this brief because the blog is full today and you’re busy (plus, I have to catch a train).

A key to Medicare’s acceptance among providers was that it was implemented in 1966 with no serious mechanism to control spending. As providers enjoyed the influx of cash, they recognized that Medicare was a pretty sweet deal. Result: no backlash that led to any repeal.

Fast forward to 2003/2006. The Medicare drug benefit, along with generous increases in payments to other private, comprehensive Medicare plans was passed and implemented without budget offsets. The money flowed and insurers and providers were, by and large, delighted.

Consider the ACA. It passed and is being implemented in a time of austerity. Coverage expansion is being funded, in part, by cuts to providers. Medicare is targeted for additional cuts to reduce the deficit. In this dimension, the analogy with Medicare and Medicare Part D fails. Some providers, principally hospitals, are being paid less. They may become fed up with their role as piggy bank and act accordingly. The ACA faces an austerity risk.

What will happen? Is this austerity risk serious? Who knows. Ask me in two to five years. Point is, we’re in a different world. What other major expansion of government subsidized health care occurred in a period of fiscal belt tightening?

(222 words. Not too shabby.)

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