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The Real Mediscare

Obama’s rationing is the thing to worry about.

May 9, 2011, Vol. 16, No. 32 • By MARK HEMINGWAY
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Since the introduction of Rep. Paul Ryan’s budget, backed by the House GOP, Democrats have been heavily engaged in “Mediscare” tactics. “Put simply, it ends Medicare as we know it,” said President Obama, attacking Ryan’s plan. 

The Real Mediscare

Any honest assessment of our fiscal health, however, would conclude that “Medicare as we know it” is unsustainable. The program faces a whopping $30.8 trillion long-term shortfall. Ryan’s plan does indeed amount to a serious overhaul, introducing premium supports—similar to vouchers—that would help seniors purchase private health insurance, harnessing market forces to bring down costs. 

Ryan’s Medicare proposal shares some of the market-based aspects of Medicare Part D prescription drug coverage and the popular Medicare Advantage program, which allows Americans to get Medicare coverage through private insurance. That might be one reason why, according to the latest Gallup poll, Ryan’s budget is polling better than the president’s among seniors. 

But for all the Democrats’ fear mongering about Ryan’s proposals, they’ve said little about their own plan for reining in Medicare spending. That’s likely because the Democratic proposal, as outlined in their much-disliked health care law, is far more radical than what Ryan is proposing. In fact, a new lawsuit contends that it’s unconstitutional.

Unlike Ryan, who made public a detailed budget plan, the president outlined only a budget “framework.”  Here is the sum total of his comments on Medicare cost containment in his speech of April 13: 

Now, we believe the reforms we’ve proposed to strengthen Medicare and Medicaid will enable us to keep these commitments to our citizens while saving us $500 billion by 2023, and an additional one trillion dollars in the decade after that. And if we’re wrong, and Medicare costs rise faster than we expect, then this approach will give the independent commission the authority to make additional savings by further improving Medicare.

The “independent commission” the president refers to here is the Independent Payment Advisory Board (IPAB) created by the Patient Protection and Affordable Care Act, the health reform bill signed into law last year. 

Here’s how IPAB works: It’s a panel of 15 presidential appointees who are tasked with reducing Medicare spending. The panel is given certain spending targets, beginning in 2014. At first those targets are on a sliding scale, but by 2018 spending growth is limited to the rate of growth of GDP with an additional percentage point tacked on. 

Any decisions IPAB makes about Medicare spending automatically become law. To override IPAB requires a three-fifths majority vote in the Senate, a high legislative hurdle. Alternatively, Congress can pass its own Medicare plan that meets the same spending target. There’s no administrative process allowing doctors or citizens to challenge the board’s decisions. Since Medicare comprises about 13 percent of the federal budget, that’s an awesome amount of power to be placing in the hands of unelected bureaucrats.

In order to assuage fears that the board would go on a rationing tear, the commission was supposedly given a narrow mandate. IPAB can’t adjust premiums or Medicare’s cost-sharing mechanisms, such as copayments and deductibles. 

It can, however, adjust the rates at which doctors are reimbursed. But Medicare reimbursement rates are already well below market rates, and consequently doctors are treating fewer and fewer Medicare patients as they lose money on them. Doctor access is already a huge problem for Medicaid for this same reason: Over half of all specialists in many major metropolitan areas are refusing to take on new Medicaid patients, according to a 2009 survey by Merritt Hawkins and Associates on physician wait times. As it is, Medicare reimbursement rates are set to drop below Medicaid’s in the coming decade—and that’s without IPAB.

To date, almost all of the constitutional challenges to the new health care law have centered on its requirement that every American purchase health insurance. But in Coons v. Geithner, the Goldwater Institute, a right-of-center think tank in Arizona, is challenging the bill’s constitutionality on the basis of IPAB. 

Whether Congress can simply offload its legislative responsibility for Medicare to a commission in the executive branch is a serious question regarding the separation of powers. 

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