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Thursday, January 10, 2013

The real budget battle: voucherize Medicare, or IPABize it?

Noting that the emerging Republican budget strategy seems to be stalemate -- refuse to approve any new taxes, consequently give up on entitlement reform, and blame Obama, Jonathan Chait notes that this strategy makes a kind of sense. That is, it locates the long-term budget battle where it belongs, on the means of controlling healthcare costs:
This may sound like a cynical strategy. And it is. But it’s not a purely cynical strategy. It reflects an important intellectual development on the right. Capretta is advocating not just the classic no-taxes-ever approach that has defined the party for years, but also its newer (or newly fervent) belief in privatizing health-care services.

The main driver here is Paul Ryan, whom Capretta advises. (Yuval Levin, another Ryan favorite, makes a similar, though less openly cynical, no-deal argument for the Weekly Standard.) Ryan has accepted the argument, traditionally pushed by Democrats, that the main driver of long-term budget deficits is not the aging population but skyrocketing health-care costs. Ryan has decided that the only possible answer to the problem is to turn Medicare into a system of subsidized private insurance, and that the wonders of competition between insurance firms will dramatically suppress cost inflation (“the way it always works when the consumer is in charge,” he says).
What's truly cynical is not Ryan's ideological faith in the competition fairy, but his demonization, in the illustrious McCaughey-Bachmann-Palin tradition that is now general GOP dogma, of other more proven means of controlling healthcare costs. Chait continues:

As a corollary to this position, Ryan utterly and fervently rejects the reforms put in place by Obama in the Affordable Care Act, which amounted to a comprehensive overhaul of Medicare designed to incentivize doctors, hospitals, and insurers to pay for better outcomes and not just more expensive procedures. Ryan has insisted that these reforms must fail because they involve bureaucracy and only markets can work. This is despite the fact that every other advanced economy on Earth has both a more regulated health-care system and dramatically lower per capita health-care costs. It is also despite the fact that health-care costs have dramatically slowed their growth in recent years, a trend suggesting at least the possibility that the pay-for-value revolution can work and that the budget projections assuming endlessly, skyrocketing health-care-cost inflation (and thus skyrocketing deficits) will prove far too pessimistic.
The chief target of GOP hostility to "bureaucrat-controlled" or "government-controlled" healthcare is the Independent Payment Review Board (IPAB) established by the Affordable Care Act. IPAB is a panel of healthcare experts appointed by the president and confirmed by the Senate, empowered to find ways to keep federal Medicare outlays below a yearly growth cap of GDP + 1% . In years when costs are projected to exceed the cap, IPAB is charged with developing a package of proposals to hold costs below it, to be presented to Congress, which must give the package and up-or-down vote unless a supermajority agrees to waive that requirement. In the Medicare reform section of his 2013 budget, a highly ideological document that repeatedly decries "government-controlled healthcare," Ryan makes this flatly false charge:
IPAB's unelected and unaccountable bureaucrats have the power to determine what "rationing health care" means, allowing them to cut Medicare in ways that harm seniors' access to providers and lead to the denial of critical care.
In fact, the ACA stipulates that IPAB proposals "shall not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums under section 1818, 1818A, or 1839, increase Medicare beneficiary cost sharing (including deductibles, coinsurance, and co-payments), or otherwise restrict benefits or modify eligibility criteria" (ACA consolidated bill Sec. 3403\1899A SSA page 409). 

While "IPAB vs. premium support" may look now like a clean ideological battle, of course it's not. Republicans, Ryan chief among them, were for IPAB-style "government-controlled" healthcare before they were against it. Don Taylor has pointed this out repeatedly, most recently, in this modest proposal:
I have an idea. [House Republicans] could pass a simple bill to replace IPAB (a board of 15 experts) with the two board of experts (one of 5 members, the other of 15) that Rep. Paul Ryan proposed as part of his 2009 (111th Congress) health reform bill the Patients’ Choice Act (title VIII to be exact). I have long said I understand Republican savagery of IPAB to be quite hypocritical given such leaders of the Republican party proposed a bill with boards about 1 month prior to the Commerce Committee reporting the first version of the HR3200 back in June, 2009 (me prattling away in July 2011 about this here, here and Rep Ryan’s spox responded here). But, no one seems to care....

IPAB actually has a much narrow brief than do the PCA boards since it can only focus on Medicare, and then can only propose changes in Medicare reimbursement rates. By comparison, the PCA boards would likely be far more consequential....
Taylor goes on to highlight the sweeping enforcement authority these boards would wield over the entire healthcare system, not just Medicare:
(b) ENFORCEMENT AUTHORITY.—The Commissioners, in consultation with the Secretary of Health and Human Services, have the authority to make recommendations to the Secretary to enforce compliance of health care providers with the guidelines, standards, performance measures, and review criteria adopted under subsection(a). Such recommendations may include the following, with respect to a health care provider who is not in compliance with such guidelines, standards, measures, and criteria: (1) Exclusion from participation in Federal health care programs (as defined in section 1128B(f) of the Social Security Act (42 U.S.C.1320a–7b(f))).(2) Imposition of a civil money penalty on such provider. [Taylor's emphasis].
In short, as Chait suggests, Ryan and the Republican leadership are fully aware that healthcare reform is entitlement reform -- and that effective healthcare cost control depends on increasing government pricing power (though Ryan circa 2009 would couple this bulked-up "government control" with premium support). That is, the nation's future fiscal health depends on a) paying for less unnecessary care and b) paying less per covered procedure, since such prices are vastly higher in the U.S. than in any other wealthy country. The cost control measures in the ACA, IPAB prominent among them, are designed to advance these goals. Absent Republican death panel hysteria, pursuing more effective deficit reduction would would entail further strengthening government control over pricing and coverage rules.

The only cost-cutting alternative is to shift costs to seniors any other recipients of government-controlled or -subsidized health insurance. That is what Ryan proposes to do -- the hard reality behind his competition fairy.  Republicans lack the power, and probably to some extent the will, to voucherize Medicare or gut Medicaid by block-granting it.  But they will do everything in their power to block effective means of healthcare cost control.

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