Liberals Believe IPAB Is the “Medicare Fairy”
The Center for American Progress recently released a paper making incoherent claims against conservative proposals for entitlement reform. Take for instance the below paragraphs criticizing the Medicare premium support proposal included in the House-passed budget:
The House Republican premium support plan would also limit growth in Medicare spending to growth in the economy plus 0.5 percentage points. But it’s unclear how this cap would be enforced. As a result, it’s likely that the cap would be enforced by limiting the amount of vouchers provided to beneficiaries. Since the proposed growth rate is much slower than the projected growth in health care costs, the voucher would leave beneficiaries to pay substantially more over time. The CBO estimates that new beneficiaries could pay more than $1,200 more (in 2011 dollars) by 2030 and more than $5,900 more by 2050 under the House Republican budget.
What’s more, the Affordable Care Act already established an Independent Payment Advisory Board that will control the growth in Medicare spending. While the target growth rate for the independent panel is growth in the economy plus 1 percentage point, the president has proposed reducing that growth rate to growth in the economy plus 0.5 percentage points—the same growth rate as the cap under the House premium support plan.
The premium support budget cap, therefore, would produce little or no savings compared to the president’s alternative approach. But the cap under the premium support plan would have serious consequences for Medicare beneficiaries.
The CAP paper admits that under the House budget plan, Medicare would grow at the same rate as under the President’s budget. But to CAP, the House premium support proposal would result in seniors paying thousands of dollars more in costs – while under the President’s budget, Medicare would grow at the exact same rate, but seniors would miraculously avoid paying higher costs, and still have the same access to care. To some, this argument brings to mind the old phrase, “That dog won’t hunt.”
The premise behind these claims lies in CAP’s belief that only government – through Obamacare’s new Independent Payment Advisory Board and its rulings capping Medicare spending – can reduce health costs. This belief can be found elsewhere in the paper, where CAP states that “traditional Medicare cannot provide an integrated benefit package…modify benefit designs, or offer provider network options” – all things that generally reduce health care costs – only to turn around and claim that “increasing the privatization of Medicare does not make sense because traditional Medicare costs less than comparable private coverage.” It’s almost as if CAP believes a “Medicare fairy” can magically erase higher costs in a completely pain-free way that doesn’t affect seniors’ health care.
The problem is, most experts don’t believe CAP’s magical “Medicare fairy” exists. An analysis from CBO released in January found that most Medicare demonstration programs implemented over the years “have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered.” And both CBO and the Medicare actuary have concluded that Obamacare’s IPAB-driven spending reductions won’t work either: CBO concluded that the Medicare reductions will be “difficult to sustain for a long period,” and the Medicare actuary found that provisions in Obamacare “are unlikely to be sustainable on a permanent annual basis.” The actuary went so far as to estimate that the law will cause 40 percent of hospitals and medical providers to become unprofitable in the long term.
While Democrats’ government-centric “Medicare fairy” approach has been weighed over the years and found wanting, the conservative idea that competition can help lower costs has never been truly explored. As we noted last week, even the Obama Administration admits that competition has generated savings for parts of the Medicare program. So instead of waiting around for a “Medicare fairy” that will never show up, why not empower patients instead of bureaucrats, and use competition to reduce costs in health care the same way it has in every other industry?