The Other Medicare Cutters
Obama's plan relies on a politically insulated board of experts.
The debate over Paul Ryan's Medicare reform ideas has largely been healthy, even amid the liberal distortions. But why has there been so little scrutiny of President Obama's new Medicare proposal? Anyone worrying about more individual choice and responsibility in health care might be interested to learn that the alternative is turning every one of these decisions over to a 15-member central committee.
It sounds absurd, but there the President was last week, gravely conceding Mr. Ryan's analysis of Medicare's balance sheet and then claiming that the solution is to give a lot more political power to an unelected board to control health costs. Democrats believe this board will play doctor and actuary and allocate health resources better than markets, so allow us to fill in some of the details of this government-planned future.
The Independent Payment Advisory Board was created in the ObamaCare statute, and the President will appoint its experts in 2012 to six-year terms. From then on, look out. Democrats cut $468 billion in Medicare spending by screwing down its price controls and gutting the private insurance options of Medicare Advantage, while also boosting taxes by about $89 billion. This money could have strung along the status quo for a few more years, but Democrats diverted it instead to their new middle-class entitlement, which is like eating all the food left in the life raft.
Starting in 2014, the board is charged with holding Medicare spending to certain limits, which at first is a measure of inflation. After 2018, the threshold is the nominal per capita growth of the economy plus one percentage point. Last week Mr. Obama said he wants to lower that to GDP plus half a percentage point.
Mr. Ryan has been lambasted for linking his "premium support" Medicare subsidies to inflation, not the rate of health cost growth. But if that's as unrealistic as the liberal wise men claim, then Mr. Obama's goals are even more so. Medicare grew 2.1 percentage points faster between 1985 and 2009 than Mr. Obama's new GDP target. At least Mr. Ryan is proposing a workable model for bringing costs down over time by changing incentives.
Mr. Obama, by contrast, is relying on the so far unidentified technocratic reforms of 15 so far unidentified geniuses who are supposed to give up medical practice or academic research for the privilege of a government salary. Since the board is not allowed by law to restrict treatments, ask seniors to pay more, or raise taxes or the retirement age, it can mean only one thing: arbitrarily paying less for the services seniors receive, via fiat pricing.
Post-ObamaCare, Medicare's administered fee schedule is set eventually to dip below Medicaid payments in many states, which are themselves already far lower than the rates of private insurers that reflect the true costs of health care. Medicare itself says these cuts will cause 15% of U.S. hospitals to become unprofitable in the next decade. Mr. Obama wants Americans to believe that his planners will wring out even more spending through the power of positive technocratic thinking.
Under last year's law, the board submits its recommendations to Congress on an up-or-down vote and they go into effect automatically unless Congress adopts an equivalent plan. Its decisions aren't subject to judicial or administrative review. Now Mr. Obama wants to give the board the additional power of automatic sequester to enforce its dictates, meaning that it would have the legal authority to prevent Congress from appropriating tax dollars. In other words, Congress would be stripped of any real legislative role in favor of an unaccountable body of experts.
The honest-to-Peter Orszag liberal theory here is that, among ObamaCare's well-meaning if speculative pilot programs, someone will find a way to deliver better health care at a lower cost. Then the board will decide "what works" and apply it through regulation to all of American medicine. But small-scale initiatives usually succeed because of local health-care conditions and rarely succeed when mass-scaled. Anyhow, decades of government faith in omniscient miracle workers has left Medicare in its present shambles.
As a practical matter, the more likely outcome is the political rationing of care for the elderly, as now occurs in Britain, or else the board will drive prices so low that many doctors and hospitals drop out of Medicare. Either alternative would create the kind of two-tier system dividing the poor and affluent that Democrats claim is Mr. Ryan's mortal sin.
Messrs. Ryan and Obama agree that Medicare spending must decline, and significantly. The difference is that Mr. Ryan would let seniors decide which private Medicare-financed insurance policies to buy based on their own needs, while Mr. Obama wants Americans to accept the commands of 15 political appointees who will never stand for election.
View online at The Wall Street Journal