“Medicare is a government-run health care plan that people are very happy with.”
— President Barack Obama
“The Republican Party’s contract with seniors includes tenets that Americans, regardless of political party, should support. First, we need to protect Medicare and not cut it in the name of ‘health-insurance reform.’ “
— Michael Steele, chairman,
Republican National Committee
The exploitation of Medicare by both Democrats and Republicans this summer is predictably shameless, but still discouraging. When it comes to federal spending on seniors, the political reflex is always the same: see, hear and speak no evil.
And so President Obama extols a federal program whose unfunded liability has soared to tens of trillions of dollars, whose shoddy oversight is richly documented and whose regulations interfere with good medical outcomes probably no less often than any private insurer’s.
Just last month, a USA Today report explained how kidney dialysis in America tends to be both more expensive and less effective than it could be, thanks to Medicare payment rules.
To be sure, the president is correct that Medicare is popular — although naturally he fails to explain why.
“The reason for Medicare’s attractiveness to seniors is not hard to find,” writes Professor Mark Pauly of the Wharton School at the University of Pennsylvania in his book “Markets Without Magic: How Competition Might Save Medicare” (AEI Press, April 2008). “Their premiums amounted to only 10 percent of the cost of the benefit before the advent of Part D and only about 12 percent afterward. This represents an enormous subsidy to seniors, and virtually any product, no matter how imperfect, would be attractive at this kind of discount.”
Under most circumstances, Republicans might be counted upon to view with concern a program that floats atop a colossal subsidy and whose financial prospects will only worsen with the retirement of baby boomers and the deteriorating ratio of active workers to retirees. But in the summer of 2009, the speak-no-evil edict reigns as Republicans draw a line in the sand to “protect” Medicare at all costs. It’s a tactic worthy of . . . well, Democrats when George W. Bush and Ronald Reagan were presidents.
Now, back to economic reality — the one in which Medicare will rapidly become the biggest driver of deficit spending in the entire federal budget. As a result, “there is no magic that can preserve Medicare as we know it today,” Pauly writes.
But can’t we just streamline Medicare by, say, bundling payments, focusing on outcomes and only paying for treatments that have proved their merit? “The ideas sound good,” Pauly told me this week, “but we don’t want to bet the farm on their likely success. I’m pretty skeptical that anyone knows how to improve efficiency.”
Traditionally, he added, the way Medicare constrains expenditures is by cutting payments. And that’s mainly what Congress will probably do in any health care reform.
What we actually need, Pauly said, is to change the bargain with Americans not yet retired. “We’ve got to say, ‘Look, we can’t deliver on the same promises we made to your parents.’ ” That could mean basing Medicare premiums on retirees’ wealth or perhaps means-testing benefits. But Pauly believes a far more promising approach, as he explains in his book, is to move toward a Medicare voucher “with a limited growth rate, and then allow beneficiaries to use their vouchers among a variety of plans with fairly light restrictions on minimum levels of coverage.”
The vouchers would increase annually at slightly less than the expected rate of growth in Medicare, forcing health plans to figure out ways to constrain costs.
Sound far-fetched? Unfortunately, Pauly writes, “the solutions that sound relatively painless are also relatively useless . . . whereas the solutions that may work may seem nearly unthinkable.”
E-mail Vincent Carroll at vcarroll@denverpost.com.
