Matt Yglesias

The Next Health Reform Debate

The initial aspiration of health reform was to simultaneously tackle the issues of cost and access. As the legislative process has done its work, the access aspirations have been trimmed somewhat but the cost aspirations have taken the really big hits. What we have now counts as a better-than-nothing start, but it leaves the basic structure of American medicine the same and the unsustainability of Medicare still in place. As Austin Frakt says:

That’s why the current debate over health reform is just the beginning–call it Health Reform Debate 1.0 (beta). Debate 2.0 will be about costs, specifically about payment reform. [...] payment reform that compensates providers, at least in part, on the basis of quality and cost control. That’s very vague. One can conjure up some specifics and some have. Few are thoroughly tested and none have been anywhere near the center of political debate. But they will, and soon.

Maybe. Another way of looking at it is that Obamacare could make it more feasible to just enact currently unthinkable right-wing schemes to cut Medicare. After all, the main point of the reform legislation in the congress is to be able to say that we now have an individual health insurance market that works—look at all these regulations and affordability credits and whatnot. But the programs being set up for people under the age of 65 are a good deal less generous than the existing program for the 65-and-over crowd. Under the circumstances, I think that would make raising the Medicare eligibility age politically easier than it is now. Not politically easy but politically easier than it is today and potentially politically easier than the substantively superior path of using Medicare to drive reform of the delivery system.

The Secret History of Medicare

The overwhelming conventional wisdom about health care reform is that if reform is defeated in 2009, it’ll stay defeated for a good long time. Proponents won’t just be able to regroup twelve months later, make their case again, wage another election, and bring it back up in the next congress. I don’t particularly question that wisdom, but it is worth noting that this “get it right the first time” approach to legislative change is at odds with the way past major health reforms got done. Here, via David Leonhardt, is how we got Medicare:

— In 1960, as a Senator and Presidential candidate, John F Kennedy backs a Medicare legislative proposal that falls four votes short in the Senate.

— In 1962, now-President Kennedy backs Medicare in a State of the Union address and a 20,000 mass rally in Madison Square Garden simulcast on three television networks; the bills falls short by two votes.

— The bill is reintroduced in 1963 after the midterms and dies again.

— In 1964, Lyndon Johnson was able to ride the sympathy wave to pass the Civil Rights Act, but Medicare still couldn’t pass.

— In 1965, Medicare finally passes following a landslide election.

This is just totally different from the “win an election, try at reform, and if you fail give up for 20 years” model that Bill Clinton pursued and that people generally seem to feel applies in the Obama era. Instead, the fight went on-and-off for five years across three different elections and a presidential assassination. The idea was that reformers had a proposal that they thought was a good idea and that they thought was a popular idea; when they lost they didn’t blame themselves for having failed to persuade the opposition to stop opposing reform, they blamed the opposition and tried to win the next election.

Of course this doesn’t work if you get crushed in the midterm elections.

Steele Promises Government Will Never Get Between Seniors and Their Medicare

Michael Steele offering some nonsense in rare form. The venue, naturally, is the op-ed pages of the Washington Post whose editors once again display the casual contempt for the truth and for their readers that is the hallmark of their approach to journalism:

Second, we need to prohibit government from getting between seniors and their doctors. The government-run health-care experiment that Obama and the Democrats propose will give seniors less power to control their own medical decisions and create government boards that would decide what treatments would or would not be funded. Republicans oppose any new government entity overruling a doctor’s decision about how to treat his or her patient.

The crux of the matter here is that absent government getting between seniors and their doctors and offering to pay the doctors’ bills most seniors would be unable to afford the level of medical care they need. That’s why liberals created Medicare in 1965. Conservatives opposed this “government-run health-care experiment” at the time and derided it as likely to lead to socialism. Here’s Ronald Reagan laying out the case against Medicare.

But obviously once the government says it will pay for medical care the question arises of how much it should pay and for what. Currently that decision is in the hands of congress, which is not well-suited to making technical judgments about appropriate reimbursement rates for medical procedures. The Obama administration has proposed outsourcing the bulk of the decision-making to an expert body, known as IMAC, that would naturally still be subject to being overruled by congress. The idea is to prevent lobbyist-driven overpayments, not to deny care to seniors. And it would save the government some money over the long run. Which, you would think, conservatives would be happy about. Especially when you consider that conservatives don’t think Medicare should exist in the first place! But instead of being happy, we’ve got this campaign of deception, fearmongering, and opportunism.

So congratulations to Fred Hiatt for landing such a buzzworthy piece of nonsense for his publication and I hope the right-wing enjoys the giant tax hikes we’ll be enacting down the road once they show the political world that any attempt to trim Medicare spending, no matter how modest, will be savaged by opportunists on the other side.

Paying for Value in Medicare

David Ignatius wants Barack Obama to forget about the uninsured and focus on changing the health care delivery system:

If liberals really want to show they are serious, they should begin with our existing single-payer behemoths, Medicare and Medicaid. Cortese argues that the White House should mandate that, within three years, these programs will shift from the current fee-for-service approach to a system that pays for value — that is, for delivering low-cost, high-quality care. If doctors performed unnecessary tests that ballooned costs, their compensation would be reduced. And doctors would be compensated by regional formulas, to encourage them to work cooperatively in local networks where they could all make more money by practicing better medicine. [...]

This “pay for value” approach would amount to a cultural revolution in American health care. It would take our bloated system and make it cheaper and better. The adjustments wouldn’t be easy, and the medical profession would balk unless respected doctors such as Cortese led the way.

I think there’s a lot of logic to this point of view. At the same time, the implication that the reason Barack Obama isn’t doing this is because “liberals” aren’t “serious” could really stand for some more scrutiny. Similarly, the idea that the medical profession might under any circumstances not balk at this is a bit nuts. No professional guild ever embraces the idea that they should be forced to completely change the way they do business. Anyone who proposed doing this would be savaged by medical professionals who would convince seniors that it amounted to a drastic reduction in their standard of care.

Indeed, Ignatius might have noticed that the health reform bills pending before congress already do take small-but-important steps in this direction and it’s already freaking seniors out. Nevertheless, allegedly unserious liberals are happy to vote for such bills. It’s moderate and conservative legislators who are balking.

Lindsey Graham: Public Provision of Health Insurance is Terrible, Except When It’s Popular

Lindsey Graham talks to Ezra Klein about his opposition to the creation of a “public option” for people currently languishing on the individual health insurance market:

My belief is that no private-sector entity can survive over a long period of time competing against the government. The public option will be written by politicians. It will be generous. Nobody in my business worries about the bottom line. Eventually, the public option will dominate the marketplace because the political forces in the public sector are different than the economic forces in the private sector. Eventually, the private sector will give way.

Ezra asks the natural followup question: If government provision of health insurance is so terrible, why not scrap Medicare?

If you could start from scratch, would you scrap Medicare?

No! Medicare was a safety net for those seniors who couldn’t afford coverage. I buy into the idea of everyone having health coverage. You can have the public-private partnership in retirement. You can have a government-run system for those who are needy. But above that it’s best for the private sector to cover people. There’s still a government role. Look at the Wyden-Bennett bill. The government helps people buy their health care in the private sector. To me, that’s proper. I don’t mind helping people be covered in retirement. We’re not going to get rid of Medicare and there’s no reason to get rid of it. We just need to be sure it’s a well-run program and we can afford it.

This is nonsense. Medicare is not a means-tested program. It covers all senior citizens. It’s not a program of narrowly targeted subsidies to the very poor. It’s a public sector health insurance program. And Graham’s ideology clearly commits him to condemning it. But he doesn’t want to because it’s too popular.

Robust MedPAC and Robust Public Option Are Too Great Tastes That Go Great Together

An excellent point from Igor Volsky who observes that the idea of cutting health care costs through a beefed-up MedPAC is highly complementary with the idea for a robust public option for non-seniors:

This makes the public plan all the more important. If MedPAC is identifying payment reforms that would lower health care spending, then the public health option could transfer those methods into the private insurance market by itself adopting these efficiencies and (through the miracle of competition) coax private insurers to do the same.

One might add, conversely, that public-private competition among non-seniors could also act as a check against the (in my mind, remote) threat of MedPAC decision-making run amok. But the broader point is simpler. Clearly, everyone working on health reform sees that senior citizens should have a publicly run insurance option—it’s called Medicare. Equally clearly, everyone is hoping on reforms implemented through the Medicare process to pay systematic dividends in terms of ensuring the availability of affordable coverage for everyone. The logic of those two points is firmly in the direction of a serious public option for the under-65 crowd. The transmission of Medicare-based reforms throughout the system could happen without such an option, but it would be much easier to make it happen with a public option in place. Politics is politics, of course, but if Medicare is the right option for senior citizens and if Medicare is an important mechanism for influencing provider behavior, it continues to be hard to see the case on the merits for denying a Medicare-esque option to the rest of us.

Growth, Taxes, and Retirement Programs

There are a number of different ways to characterize the findings of the latest “trustees report” for Social Security and Medicare, but the bottom line is that at some point in the future taxes are going to have to be higher.

Right now we’re set to be buried under a torrent of health care cost inflation, which highlights the need for health care reform. Tweaking Medicare in isolation is unlikely to be the most effective approach since Medicare costs track private sector health care cost shifts:

That said, controlling health care cost growth through systematic reform is necessary but not sufficient. We’re not realistically going to get health care cost inflation down to zero. And even if we did, demographic shifts imply higher expenditures for Social Security, Medicare, and Medicaid. In other words, unless we radically scale back our commitment to providing a secure and dignified retirement for senior citizens, some of this will have to be done on the tax side.

Meanwhile, note that the trustee’s report suddenly looks a lot worse because of the recession. That’s because even though these trends are driven by health care economics and demographic changes, they’re also quite sensitive to questions about economic growth. A relatively small boost in the growth rate, if sustained over time, makes our existing commitments much more affordable. One lesson of this is that even revenue-neutral tax reforms—efforts to curb deductions and loopholes in exchange for lower rates—can help a lot with this program. Another lesson is that when the time does come to talk about tax increases, it’s important to focus on tax increases that are economically efficient. Evidence suggests that the administration’s proposals to limit deductions for high-income taxpayers fit this bill as do some of the ideas about taxing public health hazards that have been vaguely leaking out around the Hill. But a broader, deeper, more fundamental reform would be highly desirable during these next few years before we shift into a higher tax equilibrium.

Ben Smith Says the Left Won’t Object to Entitlement Cuts

Politico’s Ben Smith claims that Barack Obama can get a free pass from the left if he moves to gut Social Security and Medicare:

President Barack Obama plans a busy February. The new administration hopes to have a stimulus package passed by Congress, a new plan in place to shore up ailing banks and, by month’s end, to hold a “fiscal responsibility” summit.

If the stimulus and banking bailout weren’t controversial enough, the summit fills some entitlement reform critics with dread, as they fear it could speed calls for cuts to Social Security and Medicare.

Strikingly, however, Obama appears to be getting unusual room to maneuver on entitlements by most of his liberal allies. On the subject of entitlement reform, in fact, Obama’s honeymoon continues — at least in the unlikely precincts of the Democratic left, a counterintuitive development that has buoyed the spirits of reformers who would like to see drastic changes in the way Social Security works.

I’m not sure what the administration’s thinking is, but certainly I wouldn’t be silent if he were to propose draconian cutbacks in Social Security and Medicare. On the other hand, if Obama wants to get the long-term public fiscal situation in check by tackling its main root cause—runaway cost inflation in the health care sector—I would applaud that:

I have some reason for confidence that Obama will, in fact, do the right thing. That’s because the liberal perspective on this is espoused by, among other, Office of Management and Budget Director Peter Orszag. The chart above comes from his Congressional Budget Office days when he produced a masterful slide series entitled “Health Care: Capturing the Opportunity in the Nation’s Core Fiscal Challenge” which defines the “fiscal challenge” correctly as less an “entitlement” problem than an “health care” problem. You could solve the entitlement problem fairly easily, if brutally, without tackling the health care problem—just pair back benefits. And then instead of a bankrupt state you’ll have bankrupt families and you won’t have achieved anything. But if you can solve the health care problem, you’ll have done most of what needs to be done and set the stage for tackling other issues.

Obama, Entitlements, and Health Care

Barack Obama did an interview at The Washington Post yesterday where he apparently said a bunch of stuff, including something that inspired the Post to run a big article about his plans for entitlement reform. But for a long article about how Obama told the Post something about his plans for entitlement reform, it contains shockingly little information about what Obama actually said about his plans for entitlement reform. Instead, you see a bunch of political speculation. Josh Marshall has a post up with a message from a reader about how “The current owners (particularly the Sam Zell’s and private equity firms of the world) don’t give a hoot for the public trust aspect of the major metros that they own – unlike the families that started and ran these papers for generations.” That’s true, but by the same token it seems to me that a great many of the reporters working at these places don’t give a hoot about public trust issues either.

Thus an article where we have to wait until graf twenty before a substantive remark from Barack Obama about entitlement policy emerges. And he says—ellipsis in the original—the following:

“Social Security, we can solve,” he said, waving his left hand. “The big problem is Medicare, which is unsustainable. . . . We can’t solve Medicare in isolation from the broader problems of the health-care system.”

Since the article is poorly written, it’s hard to know what to make of this. But that sounds like Obama saying that entitlement reform should be made subordinate to comprehensive reform of the health care system. Or, rather, that Obama seems health care reform as the centerpiece of his approach to long-term budgetary strategy. It wouldn’t surprise me to learn that’s what Obama thinks, since that’s definitely what Peter Orszag thinks, and Orszag is Obama’s choice to be his top budget guy. And if that’s right, that’s a kind of different story than one with this lede: “President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare ‘bargain’ with the American people, saying that the nation’s long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.”

McCain and Entitlements

Marc Ambinder points to some Sarah Palin remarks in which she says “John McCain and I will protect the entitlement programs that Americans depend on – and above all, Social Security.” But it was just a few days ago that the McCain campaign decided that rather than raise taxes on health care, they wanted to More »« Less on Medicare and Medicaid. In other words, the very entitlements that Palin just promised to protect.

Meanwhile, it’s still the case that McCain has long favored privatizing Social Security — not protecting it.

McCain: Cut Medicare

Paul Krugman doesn’t like John McCain’s health care plans very much:

Conservative Republicans still hate Medicare, and would kill it if they could — in fact, they tried to gut it during the Clinton years (that’s what the 1995 shutdown of the government was all about). But so far they haven’t been able to pull that off.

So John McCain wants to destroy the health insurance of nonelderly Americans instead.

It seems his deadline must have been too early to catch the latest twist from the McCain campaign. Faced with the accusation that swapping the tax deductible status of employer-provided health care for a $2,500 per person ($5,000 per family) CPI-indexed tax credit would constitute a net tax increase on the middle class, McCain’s people proclaimed that employer-provided plans would be subject to income tax, but not to payroll tax. No more net tax increase. But where’s the money going to come from? Well, it looks like $1.3 trillion over ten years in Medicare cuts is the answer. Igor Volsky observes that this is hardly the first time McCain has taken a stand against Medicare beneficiaries. One might have thought, as Krugman evidently did, that McCain would be too averse to the political risks to take up the mantle of Medicare slasher amidst a presidential campaign, but evidently he was just hoping that amidst his campaign’s oft-shifting story about the details of his health care plans nobody would notice.