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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. 

“The bottom line is what this board is going to be doing is not making recommendations to Congress. They’re really going to be passing law. The statute actually calls it ‘law’ throughout the Patient Protection and Affordable Care Act,” says Diane Cohen, the Goldwater Institute’s lead attorney. “Congress doesn’t have to pass them, the president doesn’t have to sign them. So it’s taking over a historically congressional responsibility and duty—and here comes the legal mumbo-jumbo—without any ‘intelligible principles’ to guide this board.”

Unlike other federal agencies with regulatory powers, IPAB is subject to no external review process—no public notification in advance of proposed rules, no opportunity for public comment, no administrative guidelines, and no judicial review. Cohen sees Congress as “just abdicating” its responsibility “because they can’t withstand political pressure.”  

What’s being proposed in IPAB is so basic a violation of the traditional separation of powers, Cohen says, that we are in virtually uncharted legal territory. To the extent that legislative powers can be exercised outside of Congress, such authority is granted through the “delegation of powers”—a well-defined legal principle. “People will say, ‘We haven’t had a case striking down delegation for years’—but this is really above and beyond what we have seen,” observes Cohen.

One clue as to where the case might be headed comes from a blistering dissent in the 1989 Supreme Court case Mistretta v. United States involving a dispute over the authority of the U.S. Sentencing Commission to enact guidelines that have the force of law. In an impressive feat of soothsaying from over two decades ago, Justice Antonin Scalia wrote: 

By reason of today’s decision, I anticipate that Congress will find delegation of its lawmaking powers much more attractive in the future. If rulemaking can be entirely unrelated to the exercise of judicial or executive powers, I foresee all manner of “expert” bodies, insulated from the political process, to which Congress will delegate various portions of its lawmaking responsibility. How tempting to create an expert Medical Commission (mostly M.D.’s, with perhaps a few Ph.D.’s in moral philosophy) to dispose of such thorny, “no-win” political issues as the withholding of life-support systems in federally funded hospitals, or the use of fetal tissue for research. This is an undemocratic precedent that we set—not because of the scope of the delegated power, but because its recipient is not one of the three Branches of Government. The only governmental power the Commission possesses is the power to make law; and it is not the Congress.

While Scalia’s opinion did not sway the court, the majority supported the sentencing commission only because they felt that it passed the “intelligible principle test”—meaning that the delegation of legislative authority is, in the words of the majority, “constitutionally sufficient if Congress clearly delineates the general policy, the public agency which is to apply it, and the boundaries of this delegated authority.”

Given the fact that IPAB is quite intentionally isolated from democratic oversight or administrative guidelines, it’s easy to imagine the law running afoul of the Court’s definition of constitutionally acceptable delegation of legislative authority. Or at least that’s what the Goldwater Institute is counting on. 

In the meantime, the serious constitutional questions surrounding yet another key provision of the Democrats’ unpopular health care bill are unlikely to help them win the public debate over Medicare. Unlike Ryan, who has defended his plan many times, the president is unwilling to explain IPAB in any detail. A high-profile lawsuit might force Democrats finally to do just that.

In fact, Obama hasn’t even sold his own party on his Medicare plan: Three House Democrats are sponsoring legislation to repeal IPAB, and one of those sponsors, Rep. Allyson Y. Schwartz of Pennsylvania, signed on to oppose the board two days after the speech in which the president doubled down on IPAB. If the president’s Medicare plan is put under a microscope, the result could be politically devastating both in the courts and in the court of public opinion.

Mark Hemingway is online editor at THE WEEKLY STANDARD.

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