Tipping My Cap To Wyden and Ryan
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.
The only way the government saves money in this situation is by cost shifting, not by cost control. Healthcare inflation will still exists, we’d be simply trying to push it off hopefully on providers. But that’s only if this plan is actually adhered to. More then likely though, the government will simply throw that 1 percent thing out the window and take on all the extra inflation. The insurance lobby still exists with this plan. The idea that the government is just going to undercut them and take their business simply on an economic basis without any political fighting happening is naive.
You want to make things politically easier, you eliminate one of the special interests. You don’t add more to the mix.
— Console · Dec 16, 04:58 AM · #
I am all for health care providers as a class making less money. Is this what you are saying will happen? But I do not understand how this will control costs for non-retirees. If medicare (and private insurance for retirees) is capped wouldn’t health care providers start making up profits on the non-retirees? Isn’t this like squeezing a balloon full of pudding?
Obviously, I only partially know what is going on here. I appreciate your understanding that any solution has to be structured in a way to get it through our insane congress, but I wonder if something somewhat more systematic, something less convoluted and compromised isn’t possible. I worry that the more complicated and convoluted a plan gets in order to snake it’s way through congress, the easier it is to corrupt or set of a chain of unintended consequences.
I know it’s most likely impossible, but I would really like the simplicity of nationwide government run, non-profit health insurance program. There would be a huge pool which would lower costs. The government would have a huge club with which to bargin for drugs which would lower costs. THey would be the biggest game in town so they could set marketplace re fees (even more than they do now with medicare) which would lower costs. WIth the huge size they could pressure health care providers to used evidence based practices which would lower costs. People could still have private insurance. The gov has proved with medicare that they can run an insurance program very efficiently. They would be non-profit which would save what, 10-15% a year? There could be death panels so that we wouldn’t waste our precious resources on miscreant and undocumented seniors….
— cw · Dec 17, 07:11 AM · #
PS. I realize that medicare is a form of government run health insurance, but it is only for old people and it is funded through a tax on individual workers that is rather smallish. I think we pay $20 something a month. If you got a large majority of the non-old (and their employers) paying premiums of $400-500 a month (or whatever— surely it would be less that we currently pay now) that would be a large sum of money. And the gov. could use the leverage of that big wad to make real systematic changes in our health care system.
I realize that any libertarians and conservatives reading this are vomiting in their mouths at the idea of the gov using our money to make systematic changes to our health care system. I mean, basically, under my plan they would be in control of our health care system. And I have zero confidence in our congress. So I share libertarian and conservative concerns. But on the other hand, the gov has this huge army and with it could easily exert near total control over our lives. And yet conservatives don’t worry about this. And that is just one example. Our government has all kinds of potential power that it doesn’t (or hasn’t yet) exercise.
And anyway, this is all just me blathering away utopian-style. I think federally run heath insurance for all is very unlikely to happen.
— cw · Dec 17, 07:29 AM · #