Honestly, Medicare Reform Just Isn’t That Necessary Right Now

William Galston is worried that if they go overboard in criticizing Paul Ryan, Obama and the Democrats may hamstring their own ability to sell future reforms to the American public.

In 2008, John McCain wanted to treat employer-provided health insurance as taxable income, a policy that many economists in both parties favor as helping to slow the pell-mell increase in health care costs. The Obama campaign went on the attack, to great effect. But in the process, they made it impossible to include any robust version of that policy in the architecture of the Affordable Care Act. […]

A number of Democrats once believed—and some still do—that a well-crafted version of premium support is part of a balanced and sustainable long-term fix for Medicare. If the effect of the Ryan choice is to take not only the Ryan budget’s version of premium support off the table, but also the kinds of approaches that Alice Rivlin and Ron Wyden have proposed, then we’ll be left with far less appealing options for stabilizing Medicare… If Obama wins the election by playing on the fear of change, which is very real, then the election will settle nothing, and our already dysfunctional political system will be mired in gridlock indefinitely.

This isn’t a crazy concern. I’m one of those Democrats who thinks premium support might (might!) be a necessary part of Medicare’s future, and the employer-provided insurance kerfuluffle was, in terms of policy substance, one of Obama’s lowest points. The Affordable Care Act may still be able to unwind the employer-provided market, but the process will take far longer and be much messier than if we had just gone at the tax treatment question directly.

So I get the worry that by taking advantage of immediate political expediency, Obama could kill needed policy down the line. But it doesn’t really concern me in this instance, for several reasons.

One, political expediency can flip pretty quickly. Just take Obama’s one-eighty on the individual mandate. In fact, I’d argue the ACA’s failure to go after employer-provided coverage had a lot more to do with the GOP’s lock-step opposition than with Obama’s previous promises. If the Democratic leadership thought equalizing tax treatment could peel off enough Republican Senators to afford losing a few Democratic ones, I think they would’ve done it. They were certainly happy to compromise on a raft of other points.

More fundamentally, Obama’s promises will only bind the Democrats for another four years — assuming he wins in November — and moving Medicare to premium support just isn’t going to become a terribly pressing concern in that window. I realize this goes completely against centrist conventional wisdom, much less conservative conventional wisdom, but it’s true. The key thing to remember is that Medicare is not becoming more expensive because there’s anything particularly wrong with Medicare. It’s becoming more expensive because it happens to buy health care, and health care is becoming more expensive. And the primary engine driving that rise in costs is far and away the private markets.

The growth rate in Medicare has been well below that of the private markets, and it only covers 16 percent of Americans versus around 65 percent covered by private ensurers. Medicare rides the costs of health care, and is able to bargain them down somewhat below trend. But it isn’t driving them. You cannot treat these things as conceptually separate — if you want to fix Medicare, you need to fix everything outside of Medicare. (And Medicaid.)

This is precisely what the Affordable Care Act does. It uses Medicare’s bargaining position to inject a whole raft of delivery reforms into the market that will hopefully be taken up by private insurers. There’s evidence this is already having an effect. It also created a mechanism for forming multi-state compacts out of the exchanges, which could break down the state-by-state fracturing of the health coverage market. And it set up long-term forces that could unwind the employer-based system over time. As I said earlier, if Republicans were willing to play ball, and accept the ACA as the framework for health care reform going forward, they could probably improve the law in ways that would greatly speed up these processes.

Now, maybe you think this is all bullshit. Maybe you think the ACA is the worst thing ever, and should be repealed wholesale, and then we should nuke the employer-based system, give everyone health savings accounts, and turn the health insurance regulatory environment into a nationwide wild west. But even if this approach did work, it would bring down health care costs across the board. That would go most of the way towards fixing Medicare right there — whether you fiddle with the program itself is gravy.

This gets us to the real perversity of Paul Ryan’s position. He’s out there proposing that we torpedo the biggest overhaul to the health care market we’ve passed in decades, and instead wants to upend Medicare’s structure in ways that don’t meaningfully change its spending course from Obama’s proposal. Of course, he’d like to kill the employer-based system, do HSAs, and do cross-state competition too. But that stuff isn’t in his budgets, for the very simple reason they’d be an even more politically difficult and poisonous lift than the ACA itself was.

We barely got the ACA through thanks to a highly unusual political moment. It’s a profoundly valuable foothold. The idea that we could kill it, and then impose an even more disruptive reform on the private markets — minus all that making-sure-poor-and-sick-people-can-get-coverage hippy nonsense, of course — is just insane. But that’s just what Ryan and his cohorts are proposing.

UPDATE: Sen. Ron Wyden of Oregon is more positive on premium support for Medicare than I am. But Paul Ryan and Mitt Romney’s attempts to use the Ryan-Wyden plan as bipartisan cover are extremely disingenuous, and this interview Wyden gave to Ezra Klein sums up my own frustrations with the Medicare debate we’re having:

In the broader conversation over Medicare, the reforms in the Affordable Care Act and premium support are seen as sharply divergent paths. The ACA relies on delivery-system reform and the IPAB, while premium support relies on vouchers and competition. But you’re saying they’re not opposed at all. In fact, they’re best done together.

I’ll make a substantive point and then a political point. I feel strongly that to tee premium support up for a decade from now — which is what the white paper called for — you need the kind of delivery system reforms envisioned in the Affordable Care Act to accelerate the trend toward more coordinated care and paying for quality and bundled payments. If you don’t accept those, and Gov. Romney says just rip the Affordable Care Act up and go to our form of coupon care, you’ll never had have any of these reforms.

Number two, I’ve found that more and more Americans are coming around to this head-scratching exercise where they ask, shouldn’t we do the same things for people over 65 that we’re doing for people under 65? Can’t we start the march to an integrated system?

One frustration for me in this debate has been that Republicans have essentially lifted the insurance market structure from the Affordable Care Act, which they say will save no money, and moved it to Medicare, where they say it will save tons of money. But it’s the same idea! The Affordable Care Act’s exchanges use an almost identical competitive-bidding process to the Medicare exchanges in Ryan’s budget. I don’t see how you can say one will save money but the other won’t.

People have described it almost as ideological bedlam. You have Republicans saying that what they’re so strongly opposed to in the Affordable Care Act is exactly what they’d like to see done in Medicare. And then if you give traditional Medicare, which I think has to keep its purchasing power and we have some ideas for that, but if it did that, it would end up essentially being the public option that Democrats have been for.



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