Fix Health Care Policy

Medicare Reform Debate: What Really Works in Health Care Competition

Recently, economist Paul Krugman derided the premium support plan to reform Medicare:

Still, wouldn’t private insurers reduce costs through the magic of the marketplace? No. All, and I mean all, the evidence says that public systems like Medicare and Medicaid, which have less bureaucracy than private insurers (if you can’t believe this, you’ve never had to deal with an insurance company) and greater bargaining power, are better than the private sector at controlling costs.

Of course, Medicare has been shown to be “efficient” enough to lose more money to fraud than private insurance. Peter Suderman of Reason magazine recently pointed out a number of studies suggesting that the private sector can effectively control costs in health care. One notable study recognizes that private plans do have the potential to control costs better than the government, as illustrated by Medicare Advantage’s success in constraining costs compared to traditional Medicare.

Read the rest on The Foundry…

Tags: controlling costs, defined contribution, guaranteed benefits, Medicare, Medicare Advantage, more competition, premium support, private plans

Obamacare in the Senate: Cutting Medicare

Last week’s consideration of amendments to Obamacare, focused on Medicare, which Majority Leader Harry Reid’s (D-NV) bill uses as one of the main sources of funding for funding the expansion of Medicaid and the establishment of a new health care entitlement.

The McCain Amendment. Senator John McCain (R-AZ) offered an amendment to recommit and require the Senate Finance Committee to revise Sen. Reid’s health care bill to exclude all spending cuts to Medicare. Senate Democrats include nearly $500 billion in Medicare cuts to pay for the legislation. Sen. McCain said that simply cutting the funding of one entitlement program to create another federal entitlement program would not constitute reform. Instead, hundreds of billions of dollars in new spending will be added to the federal deficit.

With an estimated $60 billion lost each year to fraud, waste, and abuse, Medicare needs reform. But the Congressional Budget Office’s score of the Patient Protection and Affordable Care Act shows minuscule savings from eliminating or reducing fraud, waste, or abuse in the bill. Noted Senator Tom Coburn (R-OK): “We could cover everybody in the country or extend the life of Medicare 20 years by eliminating the fraud that’s in Medicare today. What are we going to do? We’re not. We’re going to create more government programs and more agencies that are going to be designed to be defrauded.” Sen. McCain’s Medicare amendment was defeated by a vote of 42-58.

The Bennett Amendment. Meanwhile, Senator Michael Bennett (D-CO) offered an amendment that would prohibit any reduction in the guaranteed benefits of Medicare enrollees, and would require that savings in Medicare that result from the legislation would increase Medicare solvency, lower premiums, expand benefits, and improve access to providers.

But Senator Chuck Grassley (R-IA) and others pointed out that the Bennett amendment is less than meets the eye: “the concern on our side…is that it does not require that the savings from Medicare would only — with emphasis upon the word only — be used for that purpose.” In other words, savings in Medicare would still be used to fund a new federal health entitlement.

In any case, promised cuts to Medicare rarely materialize, because they are often restored after they are enacted in the next legislative cycle. In the case of the Senate bill, the cuts would come from reductions in payments to Medicare Advantage and health care providers such as hospitals, hospices, and nursing homes. While the benefits may be formally guaranteed – thus remain on the books- by the Bennett Amendment, it is the effective reduction in Medicare reimbursement that results in reduced access to those benefits. Cuts to medical professionals who deliver services result in less access to those services, regardless of the paper formality of their provision in the Medicare program. In that respect, Senator Bennett’s amendment is either one that would result in real reductions in services for seniors or one that would not result in real savings and thus be effectively meaningless. Nonetheless, the Bennett Amendment was unanimously agreed to by the Senate.

Kathryn Nix currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm

Tags: fraud and waste, guaranteed benefits, Medicaid, Medicare, ObamaCare, reimbursement