So close, but yet so far

We all agree that the cost of Medicare is increasing too quickly, and that it is adding to the deficit. In order to reduce the deficit, we must either (1) increase revenue or (2) reduce spending. So far, I imagine that everyone agrees with me.

Most people seem to oppose raising Medicare taxes, so it’s difficult to do (1). This leaves us with (2). I still assume that I’ve not lost anyone.

When you try and do (2), however, you appear to lose most of the country. When asked, “In order to reduce the national debt, would you support or oppose cutting spending on Medicare, which is the government health insurance program for the elderly?” only 21% supported it.

I’ve seen a number of posts already this morning blaming the American people, but I’m not entirely sure it’s their fault. Many of them are busy, and don’t have the time to follow the intracasies of health care system reform. Therefore, they appoint people whose job it is to make those decisions for them in an accountable and public manner. It’s how a republic works, and most of the time, we like it just fine.

I think it’s failing a bit here, though, because instead of leading, our elected officials seem to be all over the map.

There are two schools of thought on how to reduce the amount that the federal government pays for Medicare. The first was put forward by Rep. Ryan a few weeks ago. Starting ten years from now, instead of giving people Medicare as it exists today, we give the elderly vouchers, or subsidies, or checks, or whatever you want to call it. They can then use those vouchers to go and buy private insurance. If it sounds like exchanges in the PPACA, that’s cause it is. The problem with his plan is that there’s no assurance that the private insurance sector has any interest in insuring this massively expensive population. More importantly, the rate at which the value of the vouchers rises is set way below the projected increases in the cost of health care. Therefore, over time, the vouchers will buy less and less insurance, and seniors will have to buy more and more of it themselves.

This is a feature, not a bug, as it means that the federal government will be spending significantly less over time. That’s (2) from my first paragraph. It will reduce the deficit caused by Medicare. But it likely won’t reduce how much health care costs, or how fast it grows; it will likely just reduce how much of it the government is paying for. The rest will come from the pockets of those over the age of 65, which could lead to a bad risk pool, and many, many seniors unable to purchase adequate insurance.

But, at its core, this represents a belief in the power of the consumer. If enough seniors mass together and demand cheaper prices, then they can drive the market towards reduced spending. It’s consumer directed health care, and it sounds fine in theory. In practice, I haven’t seen a lot of evidence for its success.

The second school of thought is the one put forth by President Obama. It relies more on a panel of experts to determine from within what should and should not be covered. It’s the Independent Payment Advisory Board:

[S]pending cuts recommended by the presidentially appointed panel would take effect automatically unless Congress voted to block or change them. In general, federal courts could not review actions to carry out the board’s recommendations. The impact of the board’s decisions could be magnified because private insurers often use Medicare rates as a guide or a benchmark in paying doctors, hospitals and other providers.

This is meant to be scary, I suppose, but once again, it’s a feature – not a bug. This is how spending would be reduced. At its core, this represents a belief in the knowledge of experts. If a group of people can use explicit criteria to determine what works and what does not, then they can make decisions to reduce spending. People will have to pay more out of pocket for things they want that the government spends less on. It also sounds fine, in theory, and a number of countries use groups like this.

I understand that the idea of this sounds scary to many Americans. They fear rationing and DEATH PANELS! and such. That’s understandable. That’s why the law specifically says that “the board cannot make recommendations to “ration health care,” raise revenues or increase beneficiaries’ premiums, deductibles or co-payments.” Moreover, this is how the board is appointed:

Board members will be subject to Senate confirmation — no easy feat in the current political climate. Terms are six years. Members can serve no more than two full consecutive terms.

That sounds a lot like appointing people whose job it is to make those decisions for us in an accountable and public manner. As I said before, most of the time, we like that just fine.

It should come as no surprise to readers of this blog that I think considerable evidence exists to support the latter methodology of spending reduction as superior to the former, with respect to health care. As always, I’m open to new evidence, but so far that’s my read. However, I love good debate and, in a rational world, I would look forward to the two competing schools of thought duking it out.

That’s not what we get, however. Instead, we have a public that opposes the former and leaders that oppose the latter.

If you explain to people that the value of the vouchers is set to rise more slowly than the cost of health care (that’s a feature!), then 84% oppose the plan. Regardless of the merits, that makes it almost impossible that it could be implemented politically. Let’s also not forget that nearly every elected Democratic official (and a few Republican ones) don’t like it either.

And, when it comes to a powerful IPAB, you have leaders saying things like this:

Representative Allyson Y. Schwartz, a Pennsylvania Democrat prominent on health care issues, said: “It’s our constitutional duty, as members of Congress, to take responsibility for Medicare and not turn decisions over to a board. Abdicating this responsibility, whether to insurance companies or to an unelected commission, undermines our ability to represent our constituents, including seniors and the disabled.”…

Representative Pete Stark of California, the senior Democrat on the Ways and Means Subcommittee on Health… [said] “But, in its effort to limit the growth of Medicare spending, the board is likely to set inadequate payment rates for health care providers, which could endanger patient care.”…

“Relying on arbitrary spending targets is not a good way to make health policy, especially when decisions may be left to the unelected and unaccountable,” said A. Barry Rand, chief executive of AARP, the lobby for older Americans.

Those are Democratic elected officials and an AARP CEO. Also noted opposing the IPAB were prominent Republican officials Rep. Ryan and Sen. Cornyn.

Back to the beginning of this post. (1) is out. Now, it appears, any effort at (2) is out. Yet, we are told, again and again, that our elected officials are serious about all of this. I can’t tell you how frustrating it is for someone who works in health policy.

“Why have legislators?” asked Representative Pete Stark of California

Was that question rhetorical?



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