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In the Nation's Interest

News on Health Care

By Joseph Minarik

In something of a “scoop,” Meghan McCarthy of National Journal reported this week that two of the most significant outside advisers to President Obama have expressed general approval of “premium support” for health care.  That is positive news substantively, though it underlines the complexity of the political environment in Washington during the election campaign.

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The story relates that David Cutler of Harvard and Jonathan Gruber of MIT were consulted by the Simpson-Bowles commission during its deliberations two years ago.  Members of the commission’s staff asked the two advisers’ opinions of the concept of giving Medicare beneficiaries cash to choose among alternative health-insurance plans, including private plans.  In the usual clipped and short-hand language of e-mail communication, the two both mentioned some preconditions that would need to be met, including favorable and useful experience under the insurance exchanges in the Patient Protection and Affordable Care Act (PPACA) of 2010, and special work to protect the elderly from “cherry-picking” and confusing marketing by insurance companies.  But with those conditions met, Cutler and Gruber expressed generally positive views of this approach, known as “premium support” among the cognoscenti of health care.

This is good news on policy grounds.  In its policy statement of 2007, Quality, Affordable Health Care for All, CED argued for such an approach as a replacement for the current employer-based insurance system.   We believe that individuals choosing in a cost-responsible way among competing private plans would force both those plans and individual providers to find ways to deliver higher-quality care at the lowest possible price.  The PPACA took a limited step in that direction by creating health-insurance exchanges for non-elderly persons who are not covered by their employers.  CED has gone further by offering a roadmap toward such premium support under Medicare in our 2011 statement, To Reform Medicare, Reform Incentives and Organization.

We believe that cost-responsible choice is the only way to “bend the cost curve” and make health care fiscally sustainable.  We have seen no serious alternative — the Independent Payment Advisory Board (IPAB) does not come close — and continue to speak up for this approach.  It still receives attention.  The Domenici-Rivlin proposal (to which CED contributed) of the Bipartisan Policy Center follows closely along these lines.

The Simpson-Bowles commission frankly took a pass on this issue, merely expressing good intentions for “bending the cost curve” without saying how.  However, Representative Paul Ryan (R-WI) picked up on the idea during the Simpson-Bowles deliberations from his fellow commission member Alice Rivlin.  Rep. Ryan was unfortunately partisan in his original rollout of the idea (see August 14th’s blog post:  “Paul Ryan, the Campaign, and the Budget,”), and somewhat poisoned the well.  His harsh original formulation gave Democrats a clear route to the political jugular, and they continue to speak to that version of the Ryan plan even though Ryan himself has moderated his approach in a subsequent revision, in collaboration with Senator Ron Wyden (D-Or).

And therein lies the problem.  The Democratic base has taken the hardest line on Medicare reform, stating starkly that any change in policy that increases beneficiary costs in any way and in any degree is unacceptable.  The President himself invoked that rallying cry, saying in his convention acceptance speech, “I will never turn Medicare into a voucher.  No American should ever have to spend their golden years at the mercy of insurance companies.”

Now, the President hedged his bets on that apparently categorical language by saying that he would reform Medicare, and he would hold costs down, though not by “asking seniors to pay thousands of dollars more.”  But his base supporters heard the strict version, and surely took it to the bank.  This takes us down a blind alley.  Medicare costs are growing unsustainably.  We must achieve a large measure of savings.  Simply reducing provider reimbursements will not suffice, and in fact could drive providers from Medicare and decrease both quality and beneficiary access.  If significant cost deceleration is not forthcoming, the taxpayer at large could not possibly pay taxes fast enough to keep the debt (and Medicare itself) from exploding.

A categorical commitment never to raise the costs of any beneficiary, no matter how affluent, would render totally non-viable the essential Medicare guarantee of access to insurance coverage for all seniors, no matter how old or how sick.  It is in no one’s interest to expose that guarantee to crisis.  Denying reality does not create Wonderland.  We all have to get real.  That means expanding the playing field to include the creative alternative of premium support — absolutely with protections for those among the elderly who are less than affluent, and for those who already are in close relationships with doctors to undertake treatment for serious conditions.  And that is why this story is important.

Not everyone reads National Journal.  The reasoned ambiguity — actually more uncertainty — of Professors Cutler and Gruber may not become headline news.  But if we create just a little negotiating room around the policy center — and if all of the pledges at the Gamma Nu (read Grover Norquist) fraternity expand that room just a little more by acknowledging the need for additional revenue — then perhaps we can cut a balanced deal and head off a potentially catastrophic fiscal and financial crisis.