Ron Wyden and Paul Ryan have teamed up to propose a Medicare reform that, in broad strokes, looks a lot like what I’ve been cheering for as the next step in healthcare reform.
Under the plan, in ten years Medicare would be “voucherized” within the framework of the ACA. However, traditional Medicare would be retained as a public option. And the entire structure would be subject to a budget cap of GDP growth + 1%.
It’s important to recognize that this budget cap is basically doing all the work of controlling costs – and also that such a cap is precisely what American Medicare doesn’t have but that foreign countries’ health care systems do, a point I’ve made repeatedly before. In the absence of such a cap, Medicare costs would continue to be a function of the coverage and reimbursement formulae of Medicare – and the incentives of private insurers would be to game the system so that Medicare costs rose as fast as possible so that they would have the lowest competitive bar to clear. How exactly the system would be gamed would depend on what the rules turn out to be – but that’s where the incentives are. If Medicare is genuinely kept on a budget, the incentives change, and private insurers would have a reason to keep the costs of their plans competitive with the public option (or they’d lose all their customers) while competing on quality. But we should all be clear that it’s the budget that keeps costs down.
That being the case, the real question is whether this plan makes it politically easier to enact and enforce such a budget than past efforts – in other words, would we be treated, in a Wyden-Ryan world, to the annual ritual of raising the Medicare ceiling instead of the annual ritual of enacting the doc fix. The optimistic case here is that interposing an unsympathetic private entity – the private insurer – makes it easier for the government to impose budget rules which, in turn, force that private entity to put the squeeze on providers, rather than having the fight be between evil government bureaucrats and noble health-care professionals. I’m not convinced I should be optimistic, but I think that’s the case.
But I’m pretty convinced that Matt Yglesias’s preference is wrong:
I wish Congress would actually separate this budget issue out from the question of Medicare structure. How large a share of America’s output do we want to allocate to health care services for the elderly is a very important question. What that spending should look like is also a very important question, but it’s a fundamentally separate one.
Yes, but the first question is a zero-sum battle that pits a whole suite of powerful, entrenched interest groups against what Yglesias (and I) see as the national interest. The second question is – at least potentially – a win-win debate that scrambles the interest group alignment. Tying the two together might – might – be a good way to get the first one done. It might not. But separating them strikes me as a sure way to avoid dealing with the first question at all.
In any event, from the right the big win here is that the door is open to “privatizing” Medicare. There’s likely some benefit to innovation from such a move; I also think it’s a small way to hedge possible bureaucratic missteps by the Medicare bureaucracy, since private health insurance bureaucracies might not make identical errors (though, in practice, there’s a huge amount of convergence here). From the left, the wins are that this reform basically can’t work without the ACA, and, moreover, post-reform it’s much easier to argue for expanding the Medicare public option to include people besides the elderly. But the real question, in my mind, is: are these wins big enough to induce left and right to agree on a serious cap in health-care costs? Because that’s the big win for the country.