The folks downstairs at the Committee for a Responsible Federal Budget clued us in last week to an ongoing debate they've been having with the Center on Budget and Policy Priorities. The central piece of the debate is CRFB board member Erskine Bowles's recommendations to the Supercommittee, which included about $600 billion in reduced Medicare and Medicaid spending. The posts are interesting throughout, and as the deadline approaches, we felt it was important to check in on the federal budget side of health policy.
Here's the debate, with a our commentary:
The initial post: Bowles Plan Offers Path to Compromise
The most important aspect of Bowles' plan, from our perspective, is the method proposed by the Fiscal Commission for fixing the Sustainable Growth Rate (the ironically unsustainable Medicare reimbursement cuts that Congress pushes back each year). In order to pay for a long-term "doc fix" (which would bring down spending on physician fees by cutting rates of reimbursement), the commission recommended that Medicare "develop an improved physician payment formula that encourages care coordination across multiple providers and settings, and pays doctors based on quality instead of quantity of services."
This recommendation is critical. Moving away from the current fee-for-service system is among the most important ways to change how doctors make decisions; at a bare minimum, the Supercommittee should recommend changing reimbursements to reflect the value of primary care instead of encouraging the overcapacity of specialists we have right now.
CRFB didn't specifically mention it, but another critical Medicare fix that the Fiscal Commission recommended is removing the hospital exemption from IPAB recommendations. Given that hospitals make up a huge amount of our total medical spending and are the setting for a huge amount of unnecessary treatment, it's crucial that IPAB have the authority to recommend changes that improve hospitals' incentives to treat patients efficiently.
Related to the initial post: Actually, Raising the Medicare Age Is Also A Good Idea
CRFB's discussion of raising the Medicare age from 65 to 67 is the primary inspiration for this post's second title: we just can't find any good reason to support it. (If you're really interested in why, we recommend The Incidental Economist's podcast on the subject.)
The thing is, we agree with CRFB on the facts surrounding the issue. Raising the Medicare age would decrease federal health spending somewhat. (The CBO numbers they mention are higher than the ones cited by Carroll and Frakt in the podcast, but not unreasonably so.) On the other hand, they also acknowledge that the shift would increase costs in the private market beyond the savings to the government (because Medicare pays lower reimbursement rates than private insurance). We at New Health Dialogue are concerned with the high total level of spending on health care, rather than simply the level of federal spending on health care. Unnecessarily increasing total medical spending therefore seems like a high cost to pay for a slight reduction in the federal budget which would probably be shortlived, since many of those 65-67 year olds would need help getting insurance, probably through the exchanges specificed in the ACA.
CBPP's initial response: Bowles “Compromise” Proposal to the Right of Boehner Offer to Obama in July
We have to point out a framing problem in CBPP's analysis: not all Medicare and Medicaid cuts are created equal. Some cuts (like those generated by raising the Medicare age) are simply shifting costs from the federal budget to beneficiaries. Those can be fairly labeled as "cuts," and they do increase the burden of health care spending on the elderly. Some of the $600 billion in lower Medicare/Medicaid spending, though, is intended to come from eliminating overtreatment and waste in the medical system. We're well aware that "eliminating waste, fraud, and abuse" is usually what politicians say they'll do to pay for things that they have no intention of actually paying for. However, the Dartmouth Atlas and other analyses have demonstrated that health care really does have a huge amount of wasteful care. Deciding to give patients only the medical care they need, rather than whatever local practice patterns dictate, deserves to be called what it is: responsible management of taxpayer dollars (and of the health system more generally). Demagoguing against such cuts because they reduce health entitlement spending ignores the possibility of making the health system work better, and stands in the way of real progress.