Bye-Bye, Medicare! (As You Know It)

The hot Washington Medicare debate centers on whether congressional Republicans will, in the language of the left, “End Medicare As We Know It.” But the dirty little secret on Capitol Hill is that Obamacare already ended the program as we know it.

They don’t tell you that in those clever “Mediscare” ads.

Here’s what Obamacare has already done:
Replaced Medicare’s traditional financing. Obamacare replaces Medicare’s fee-for-service structure—the very heart of traditional Medicare financing—with capitated payments and salaried physicians. Whether this is a good or bad idea, it’s not your grandpa’s Medicare.
Capped future Medicare spending. While slashing roughly a half-trillion dollars in Medicare provider payments over the next 10 years, congressional liberals imposed a hard cap on future Medicare spending. Once again, good or bad idea, it’s the law right now: No open-ended Medicare entitlement.
Put an unelected board in charge. Then congressional liberals went even further: They created the Independent Payment Advisory Board (IPAB), a group of 15 unelected bureaucrats, to cut payments to Medicare providers. In fact, unless Congress enacts an alternative plan to cut Medicare spending by the pre-ordained amount, the Secretary of Health and Human Services is authorized to enforce the board’s recommended cuts without congressional approval.

Republicans and Democrats alike want to behead the IPAB piece of the Obamacare Hydra. (Check out Greek mythology on that Hydra thing.) There’s a reason you don’t see the Congressmen who voted for the IPAB out there on the hustings beating their chests and shouting themselves hoarse in a full-throated defense of their handiwork.

But this week, some high-powered policy wonks came to IPAB’s rescue. A group of health policy experts and economists penned a letter to congressional leaders to express their support for IPAB as a solution to Medicare’s looming insolvency, which the Medicare Trustees’ gloomy annual report highlighted last week. (That was followed by an even gloomier assessment from the Medicare Actuary.)

The problem is that IPAB cannot achieve its goals any more than the goofy Medicare payment formula is going to guarantee a 30 percent cut in doctors’ pay next year.

Except for a bloody toolbox of axes, cleavers, knives, and scalpels, IPAB doesn’t have any tools that would change the conditions of supply and demand for medicine. And when the bureaucratic slicing and dicing starts, ordinary Americans are going to find the board a pretty objectionable citadel of contemporary liberalism.

Politico’s Sarah Kliff writes that “health industry groups are concerned the board will have to reduce spending by slashing payment rates—mainly to certain providers and the Medicare prescription drug program.” No kidding.

To repeat, current law stipulates that IPAB cannot reduce the cost of Medicare by rationing care, raising taxes or premiums, or reducing benefits or eligibility. (It’s important to note that the law also assumes if the government cuts payments for medical services, this is not considered “rationing.”) As Heritage expert Robert Moffit explains, the law leaves little room for anything but provider payment cuts, a method that has been tried and failed time and again. Moffit writes:

Physicians’ services under Medicare Part B could be subject to more payment reductions, even though Medicare physicians are already struggling under a flawed and volatile payment update system that routinely threatens them with draconian reductions. Hospital payments under Medicare Part A are exempt, even though they are the largest single category of Medicare spending. Though hospital payment updates would be reduced under other provisions of PPACA, their exclusion from the board’s range of action over the next 10 years is still a serious limitation on the board’s ability to control Medicare spending. Medicare providers that are exempt from the range of the board’s recommendations accounted for 37 percent of all Medicare benefit payments in 2009.

Dr. Alice Rivlin, former director of the Congressional Budget Office, signed the letter supporting IPAB. She said, “There are a lot of unreasonable fears about the IPAB. It’s been associated with death panels and stuff like that…I view it as a much more benign device to improve the efficiency of delivery systems in a lot of different ways.” But the problem for Rivlin and others is simply this: The Board does not have a lot of different ways to do what it is supposed to do. If all you have is a hammer (provider payment cuts), as the saying goes, everything starts to look like a nail. President Obama now wants the hammer to be even bigger. Seniors’ benefits and medical treatments are going to look like a large bunch of nails.

This is not the kind of Medicare “reform” most Americans had in mind.

There’s a better way to achieve higher value for the dollars spent on Medicare. The key issue is who is going to make health care judgment calls. In Heritage’s “Saving the American Dream Proposal,” rather than empower IPAB, we leave the crucial judgment calls to doctors and patients—where they belong. To learn more, visit www.savingthedream.org.