Keeping In the Teeth and Keeping Up the Faith
December 6th, 2009 . by economistmomToday’s Washington Post had this story by Lori Montgomery and Shailagh Murray on the evolving Senate health reform bill. The title of the article was “Deals cut with health groups may be at peril”–subtitled “Top Senate Democrats fight to sustain support in face of amendments.” But it could have emphasized the flip side with a title like “Cost control elements of health reform bill in jeopardy” and a subtitle “Top Senate Democrats stubborn in their pandering.” I give Lori and Shailagh a lot of credit for pointing out the less sexy parts of the debate that are nevertheless the most critical to the issue of whether health reform will actually work to bring health costs down–like the issue of the Medicare commission:
Senior White House officials view the board as a critical component of health reform, the enforcement mechanism to guarantee that all the well-intentioned ideas for making hospitals and doctors more efficient translate into savings for the government. But AARP and other groups have fought to weaken or kill the board, arguing that its narrow focus on Medicare could irreparably damage the program. The House has rejected the idea of relinquishing congressional control over Medicare…
The White House and other lawmakers are pushing in the opposite direction. Sen. John D. Rockefeller IV (D-W.Va.), the board’s original author, wants to strip out exemptions in the first decade for hospitals and other providers who have agreed to reductions in Medicare payments. Rockefeller said he is also considering an amendment to undo changes Reid made that could tie the board’s hands after 2019.
Those changes would allow the board to act only if Medicare spending rose faster than overall health spending. An earlier version, written by Senate Budget Committee Chairman Kent Conrad (D-N.D.), would have let Medicare grow just a bit faster than the national economy, a more frugal standard.
Deficit hawks, skeptical of assertions that the health-care bill would not increase deficits, say the changes would gut the board. Reid’s version leaves it “essentially toothless,” said Robert L. Bixby, executive director of the nonprofit Concord Coalition, which promotes balanced budgets. “It basically means that if health-care costs are growing out of control, so can Medicare.”
We at Concord just want to keep some teeth in that commission. Or maybe it’s already too late for that and it’s more appropriate to say we want to put some good dental “implants” back into the Senate’s version of the commission…
And we at Concord are trying to keep up the faith on fiscal responsibility in the federal budget. One sign that we haven’t given up: the very special event we’re holding Monday and Tuesday on Capitol Hill, to report on the first year of our “fiscal stewardship project” which has been the centerpiece of our grassroots effort lately. As we explain on our website:
The Fiscal Stewardship Project established advisory groups around the country to study the long-term fiscal and economic challenges facing the United States and to recommend possible solutions. They were designed to be models of civic engagement and to demonstrate to policymakers that Americans around the country are serious about fiscal responsibility, greater accountability in Washington, and policies that do not cheat future generations by saddling them with massive government debt. The project involved citizens in Atlanta, Denver, Iowa, Milwaukee, Northern California, Northern Virginia and Philadelphia.
At this event, each council will present its findings and recommendations to cover a broad range of subjects including health care, Social Security, Medicare, federal deficits, tax policies, economic growth, problems with the congressional budget process and proposals for a bi-partisan fiscal stewardship commission.
WHERE: Room 2226 of the Rayburn House Office Building (10 am - 12 noon, Monday 12/7/09)
Individuals representing each of the so-called “fiscal advisory councils” will be meeting with their respective members of Congress on Tuesday, to present their individual reports containing their own perspectives on the nation’s fiscal challenges and their own preferences in terms of policy solutions.
Over the course of the week I’ll be writing (more) about Monday’s public event and the fiscal stewardship reports that will be released, the groups’ meetings with members of Congress, and the groups’ reactions to hearing from Administration and congressional policy leaders in some of the closed-door parts of our two-day conference.
As they advance through Congress, tax bills invariable move farther and farther from any principled origin they may have had. Why should health care bills be any different? The initial proposal is always the high water mark, and for health care that mark did not control costs in any realistic way. Therefore the final product will not control costs either.
Do you have any examples of programs implemented by Congress that work in bringing ANY costs down? This is pure wishful thinking. If the health bill passes it will go the way of every entitlement program, ever deeper into the red.
@murf: The problem, in my view, is that this is not a regular Congressional program. Instead of having a fixed-budget, it resembles an “entitlement” that is supposed to spend *whatever it takes* to fulfill its promises and responsibilities. But we know that we can’t fulfill those bottomless, very generous promises and avoid eventual financial ruin, and so the challenge is, if we don’t want to end up like GM, to promise only what we know we will be able to afford.
Even emergency appropriations - as for war - are technically given fixed budgets within which to work and accomplish their missions. I can tell you from personal experience that commanders are most certainly not given anywhere near every dime, tool, or man that they ask for, and even more importantly, they are rarely given enough time to do everything that is asked of them.
So, one of the explicit and key duties of the job is that they are expected to intelligently economize and achieve the maximum possible positive impact while given a certain limited allocation of scarce resources. They do this the way anybody does, by prioritizing, ranking all potential projects in terms of efficiency, doing everything they can at the top of the list, and reluctantly but necessarily, *cutting off* everything below that line.
It seems to be a view of general acceptance that, whatever plan we might get, that the government both can not and should not spend every dime that will possible be demanded from those for whom it will accept medical responsibility.
There will be, unfortunately but somehow, a cutoff of the unaffordable, just like there is of every thing in every household. The challenge is to do this as objectively, intelligently, and in as politically palatable a way as possible. That is what this medical commission is being asked to achieve, and is, indeed, what similar bodies are asked to do in almost every developed country that has to face the same budgetary limitations. But it is not being asked to achieve it in the same way - that is - with a view towards economizing within some explicit budgetary limitation which the democratic society has, begrudgingly but stoically, agreed upon in advance as being the appropriate level of spending.
Think back to that concept of “affordability”. What does it mean for any proposed reform of the national health insurance and medical care delivery system to be affordable? It can’t mean much less that that expenditures and income are required to remain both balanced and stable (limited to a certain reasonable but narrow range of total revenue or GDP).
Economists can debate what the right number is to optimize social welfare but if we are going to be responsible and prudent then our commitments cannot be entirely open-ended. We should try and give any health care plan something like a fixed budget, and the proper role of the experts in the commission would be to take that number and then tell us what no politician will ever say because we don’t want to hear it: what we can and cannot afford.
Mickey Kaus, a supporter of the reform, gives one opinion…
Some thoughts on the word “cut” with respect to future Medicare spending.
During the fight in the mid-1990s over Medicare “cuts”, the word itself became a significant part of the rhetorical battle. The argument from the right was that the word was inaccurate and misleading, because the proposed changed consisted of increases in Medicare spending over time, just not increases as great as were projected. They mocked the use of the word in that debate as absurd, as a sign of just how supposedly warped Washington – and particularly those LLLLLLiberalllssss – were, since they were describing significant increases in spending as “cuts”.
Technically those on the right were correct, but conceptually their semantic argument was more misleading than the left’s use of the term “cuts”. Projected growth in Medicare spending was based on (1) projected increases in the number of beneficiaries (based on actuarial projections of eligible people) and (2) the projected increase in spending per beneficiary, which (to the best of my knowledge) was not presuming some increase in benefits (the stated health insurance coverage) or general policies regarding utilization (i.e., general approach to approval of requested treatments, etc.), but rather the increase in costs to provide the same stated benefits with the same general policies regarding utilization, based on general inflation and the excess of healthcare inflation over general inflation. Given that the projected number of beneficiaries was unalterable (barring adoption of some “modest proposal”), reducing projected Medicare spending would mean reducing projected spending per beneficiary, essentially by either reducing stated benefits and/or more denial of authorizations for treatments (in either case, reducing “benefits” in the more general sense), assuming that the amount of truly pure waste that could be eliminated, particularly without any cutting any healthcare of value in the process, would not amount to the proposed “cuts”.
Therefore, despite the technical accuracy, it was grossly misleading for the right to characterize any proposal that included increases in total Medicare spending as providing “increases” in spending rather than “cuts”. To illustrate, suppose I employed 100 people and paid them each $50,000/year, so my payroll is $5 million. Now suppose inflation is 10% and I plan to hire another 20 people (and pay them the same amount the other employees will earn). Keeping compensation per employee constant in real terms would mean a payroll of ($50,000) X (1.1) X (1.2) = $6.6 million. If instead I planned to increase my payroll to only $5.6 million, would it be misleading for me to tell all my employees that I’m going to increase employee compensation next year on the basis of that total figure? It sure would be misleading. To each of them it would mean a reduction of compensation from $50k to $46,667 in nominal terms and to $42,424 in real terms.
Now on to a different aspect of this semantic and conceptual matter of the word “cuts”.
The components of projected Medicare spending (and of the projected growth) are, of course, still the same. But what is really in that projected Medicare healthcare inflation rate? Part of it, at least looking out a few decades is the eventual shift in the age distribution of Medicare beneficiaries toward higher ages (although the Medicare age distribution actually shifts younger as the baby boomers initially join the beneficiaries), but I assume this projected Medicare healthcare inflation rate doesn’t really represent solely the increase in cost to provide the same level and quality of healthcare to each beneficiary, but rather to provide ever improving healthcare made available by continuous medical innovation (equipment, procedures, drugs, etc.). Put differently, I assume that this projected Medicare healthcare inflation rate would be significantly lower if the assumption were just to maintain the current total level and quality of healthcare to Medicare beneficiaries. If my assumption is correct, then maintaining the same stated benefits and general policies toward utilization really represents an increase in coverage, in effect (not an increase in stated coverage in black & white, but increasing level and quality of healthcare, with superior health outcomes). Therefore, if and insofar as a “cut” in projected Medicare spending represents some increased limitation (increased denial) of utilization of “the latest and greatest” medical innovations – i.e., a type of “rationing” (which of course is silly for anyone to characterize as a four-letter word) — it may be reasonable to reject the characterization of that reduction in projected spending as a “cut”.
The point of the preceding paragraph is that at least part of the projected increases in Medicare spending is based on the assumption that Medicare beneficiaries will not be limited to the best care available today, but rather that they will be able to take full advantage of ever improving healthcare (by “full” I mean to the extent that they can get the best care available today, and I assume Medicare is very liberal – in the sense of looseness and abundance, not ideology – with authorization of requested care). We should bear that in mind whenever the nation finally gets around to considering, debating and making those “tough choices” that everyone with a clue knows are inevitable, and when terms like “cuts” and “rationing” are thrown around in that context. It may be that we would prefer to sacrifice in other ways so that we can provide to seniors healthcare that is ever improving and equally unrestricted (vis a vis whatever is available over time), but we should view it as providing each beneficiary more than beneficiaries have today, not as providing the same.