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More scrutiny for Obama's proposal to curb Medicare costs

April 20, 2011 | 10:58 am

Ryan As this blog predicted last week, President Obama's proposal for more aggressive Medicare cost controls is drawing heat, with flak coming from both sides of the ideological spectrum. At least some of the criticism seems easy to refute, although there are aspects of the plan that do appear risky.

Obama's proposal centers on one of the cost-control techniques created by last year's Patient Protection and Affordable Care Act: the Independent Payments Advisory Board, a panel of 15 presidential appointees that will recommend ways to rein in Medicare costs if they grow faster than the law's targets. The president proposes to tighten the targets, which would trigger recommendations from the IPAB sooner, and to give the IPAB the latitude to recommend "value-based benefit designs" to promote the use of treatment and wellness strategies that have been shown to yield better results.

The New York Times quoted House Budget Committee Chairman Paul D. Ryan (R-Wis.) calling the IPAB a "rationing board," and ordinarily I'd respect his judgment on that. He is, after all, an expert on rationing, having built his own Medicare reform plan around it. But the IPAB isn't designed to ration care, it's designed to find more efficient ways to use the dollars being spent.

That's the intention, at least. The risk ...

... is that it could end up doing the same thing Washington has done for years to control Medicare costs: It could recommend that the program pay doctors less for the services they perform. (The law bars IPAB from touching hospital reimbursements until 2020.) Changes in benefit design, payment methods and delivery systems could yield significant savings, but they may not help IPAB fulfill its mission of hitting short-term spending targets, Timothy Jost of the Washington and Lee University law school noted in the New England Journal of Medicine.

If Medicare's reimbursement rates are set far enough below what the rest of the market pays, many more doctors may refuse to see Medicare patients unless they pay out of pocket or switch to private insurance. That could leave many limited-income Medicare beneficiaries unable to obtain care. Of course, Ryan's plan is intended to force seniors to pay far more for care out of pocket than they do today. By the Congressional Budget Office's estimate, Ryan's plan would cost the average new Medicare enrollee an extra $12,500 as soon as it goes into effect in 2022, with expenses rising from there.

(The Wall Street Journal editorial cited above calls Ryan's approach "a workable model for bringing costs down over time by changing incentives." That would be true only if the market for individual insurance policies -- which is what Medicare would look like under Ryan's reform, albeit with a new exchange for seniors to shop for coverage -- was effectively holding down costs by changing incentives. To the contrary, costs are skyrocketing in that market because individuals under the age of 65 have no leverage over insurers or providers. So why would individuals over the age of 65 fare better?)

Another common criticism of the board is that it would usurp powers that should be left to Congress. As Rep. Allyson Y. Schwartz (D-Pa.) told the New York Times: “It’s our constitutional duty, as members of Congress, to take responsibility for Medicare and not turn decisions over to a board."

That's ... how do I put this politely ... ridiculous.

For starters, the idea of having Congress involved in the minutiae of Medicare is as silly as having lawmakers dictate how thick the concrete should be on interstate highways. In addition, do we really want to turn the administration of healthcare programs into a political exercise? The right role for Congress is the one laid out in the Affordable Care Act: to review the IPAB's recommendations before they go into effect, and if they're not acceptable, to come up with an alternative way to meet the cost targets.

Lawmakers' track record on controlling Medicare costs has been dismal. Congress adopted the "sustainable growth rate" formula in 1997 to try to tie the increase in reimbursement rates to the rate at which the economy was expanding. But physicians' costs grew far faster than the formula allowed, leading Congress to adopt a series of "fixes" that set reimbursements much higher than the SGR called for. The experience with the SGR shouldn't give the public any confidence in lawmakers' ability to perform their "constitutional duty" to "take responsibility for Medicare."

Nor, for that matter, should the experience with the Medicare prescription drug benefit, which Congress enacted without attempting to pay for it. The most meaningful effort at controlling Medicare costs came in the Affordable Care Act, which reduced the subsidies for Medicare Advantage -- a version of Medicare offered by private insurers that costs taxpayers significantly more than conventional Medicare does. GOP critics railed against the law's Medicare provisions, but House Republicans voted unanimously for Ryan's budget plan, which would leave the Medicare Advantage cuts in place.

One potential problem with the IPAB process is that there's no real enforcement mechanism if the board can't come up with a plan to hit the targets, or if Congress vetoes the board's recommendations but doesn't offer a realistic alternative. In response, the White House issued a vague proposal last week to give IPAB "additional enforcement mechanisms such as an automatic sequester." Such a mechanism presumably would force reductions in spending to meet the targets in the event neither the board nor Congress acted as required by law. The Wall Street Journal's editorial page picked up on this, warning that "Congress would be stripped of any real legislative role in favor of an unaccountable body of experts." That would be a bad result. For a sequester mechanism to be acceptable, the automatic cuts or premium increases would have to be laid out in advance by lawmakers, not by IPAB.


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-- Jon Healey

Photo: Rep. Paul D. Ryan. Credit: J. Scott Applewhite / Associated Press Photo

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