On Entitlements and Containing Costs
Before President Obama gives his speech on the budget deficit and entitlements tomorrow, it’s worth examining some of the philosophical and practical questions surrounding entitlement reform in health care. These issues were exemplified by a letter organized by the Center for American Progress in opposition to the House Republican budget plan. The letter talks about how the health care law “is mobilizing Medicare’s buying power to encourage delivery system reform,” because “a large buyer [i.e., the federal government] can promote innovation in payment methods…in ways unavailable to small buyers. That strategy is recommended by physicians’ organizations, hospital organizations, and experts across the spectrum.”
It’s not surprising that the liberal economists who signed that letter would take a broad view of federal power. Similarly, an appellate brief in the multi-state health suit filed this week by several state legislators argued that the individual mandate is constitutional because “Congress has the power to regulate the nearly 20 percent of the U.S. economy that is the health care industry.” Such an expansive statement about unfettered federal power may give those who contemplate a limited role for government significant pause.
Perhaps unsurprisingly, the Obama Administration is attempting to do just that – impose new government control on decisions about what procedures and treatments may be covered. Inside Health Policy reported last week that the director of NIH is engaging with discussions with Medicare Administrator Don Berwick about the “potential to examine the intersection between NIH research and Medicare coverage policy” through the Center for Medicare and Medicaid Innovation. Using comparative effectiveness research, or even cost-effectiveness research, to determine coverage options may synch with the views of Administrator Berwick, who famously stated that “The decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open.” But it may not hold the support of the American people.
Yet over and above legitimate concerns about government-imposed rationing, the idea of using the federal government’s spending to “leverage” (some would argue “micro-manage”) private health plans is fraught with practical implications that have yet to be answered:
- If Medicare is large enough to “leverage” changes that will fix health care nationally, doesn’t that also mean Medicare’s payment model helped break the national health care system in the first place?
- If Medicare is so efficient, then why did the Congressional Budget Office in June 2010 conclude that over more than thirty years (1975-2008), excess cost growth was higher within the Medicare program than in all other categories of health spending?
- Why should anyone place faith in the federal government to fix a problem of skyrocketing health care costs that even liberals (implicitly) acknowledge the federal government helped create?
- What happens if and when most or all of the delivery system reforms don’t work? In that case, the federal government will be on the hook for covering approximately 30 million new individuals – with more individuals covered on the taxpayer dime driving costs even higher. (Also of note: The Medicare actuary admitted that the coverage expansions could induce demand-driven price rises, exacerbating cost pressures.)
The old axiom holds that “If you’re in a hole, stop digging.” Some would argue that would apply to creating a new $2.6 trillion entitlement at a time when Medicare and Medicaid face significant unfunded liabilities. Some would similarly argue that axiom could also apply to the theory that the federal government can reduce health care costs by (over-)regulating the health sector.