Medicare spending: Do Obama and Romney see eye-to-eye?

Matthew Yglesias has a flawed but useful argument

Several days ago, Matthew Yglesias dug deeply into the Medicare weeds, arguing in Slate that Obama and Ryan basically agree on what needs to be done to Medicare costs. “They have essentially the same plan to control Medicare spending. And it’s a pretty good one,” Yglesias told his readers. Hmmm.

I don’t agree with Yglesias, or at least with the implications of the headline Slate stuck on his piece: “Obama and Romney Agree on Medicare; if you ignore the fiery campaign rhetoric, you’ll see an astonishing level of consensus.”Just because Ryan and Obama agree on the same spending targets does not mean their approaches are anywhere near equivalent. Medicare now is social insurance that guarantees a set of benefits to everyone 65 and older, and to disabled people. Americans have an obligation to pay into the system when they are working and have a guaranteed right to receive benefits when they are eligible. The GOP approach would convert Medicare to a private insurance scheme. The government would give people a voucher with which to buy insurance from commercial carriers. That’s a huge difference. Under a voucher plan, insurance companies may or may not have to provide a minimum set of benefits, and people would essentially get what they are able to pay for.

But Yglesias does raise an important issue about not only controlling the cost of Medicare, but controlling medical costs period, the elephant in the healthcare room.

He described current Medicare spending this way: “It’s almost as if the government had a program that just gave senior citizens free shoes in unlimited quantities,” adding that the program offers an open-ended commitment, which expands as new healthcare technologies are invented and existing services get more expensive. He’s right; it is open ended, and has been since the program began. And while we’re talking history, it’s worth noting that healthcare providers have pushed back, often successfully, whenever Medicare tried to control its costs.

What to do about this now? Yglesias reports that both camps agree that spending must be trimmed, and both believe Medicare should grow at a fixed rate—one half of one percentage point higher than GDP growth. They just disagree on how to implement the cuts.

Yglesias notes that in the GOP plan, the growth target would limit the size of the voucher. If it’s not enough for seniors to buy what they consider a decent policy, they’d have to pay the rest of the premium out-of pocket. And the CBO, in scoring Ryan’s first version of a voucher plan, found that the plan would cost seniors several thousand dollars more than Medicare. (The CBO has not scored his second version).

As for Obama, Yglesias reports, the president’s reform would instead “hit the growth target the way foreign single-payer systems limit their costs, with more aggressive bureaucratic management of what Medicare is willing to pay for and how much it’s willing to pay.” That is how most national health insurance systems, whether single payer or multi-payer, spend a lower proportion of GDP on medical care (while, by the way, often achieving better patient outcomes).

Who would bear the burden of Medicare cuts under each approach? Yglesias doesn’t explicitly say, but the point is a critical one. Although neither party would agree to this somewhat reductive language, in short, Ryan wants to reduce the government’s check to Medicare beneficiaries. Obama, meanwhile, wants to reduce government checks to doctors, hospitals, and others who provide the care.

Under Obama’s vision for Medicare, presumably, the program’s fee schedule would still exist, although provider fees would grow at a lower rate. In the absence of any plan details from Ryan, or an actual bill, we are left to wonder what the cost control mechanism for Medicare providers will be in the GOP’s vision. Under a voucher plan, there may be no control or oversight on what doctors can charge seniors. Will their fees reflect what the market will bear?

Yglesias goes further. He argues that, in the end, the effect of both plans on seniors will be the same. Essentially: With a voucher a la Ryan, the poor will be stuck with “bare bones” insurance because the voucher will be too small to allow them to buy something better. The affluent, meanwhile, can pay out of pocket for uncovered services. Realistically, though, only the very wealthiest can afford the thousands and thousands of dollars a serious illness can cost. Medicare beneficiaries know that, which explains why they are scared by the talk of changing the program.

Under Obama’s design for Medicare, Yglesias argues, the poor will also get “bare bones” coverage from Medicare, and richer seniors will buy supplemental policies to beef up their coverage. Iglesias doesn’t quite say why. Does he mean capping what the government spends will cause doctors to stop treating Medicare patients? Or is he arguing today’s benefits will be cut for tomorrow’s seniors?

Yglesias labels Ryan’s plan “outsourcing” to the private sector and Obama’s “central rationing.” At its core, his argument is about rationing—that thing most people believe America doesn’t do, but is the elephant in the room whenever public discussion turns to controlling medical costs. Yglesias argues:

Under either version, seniors will face the novel situation of potentially being denied useful medical treatment on the grounds that Medicare can’t afford to pay for it. Over the long term, something along those lines is likely inevitable.

That takes us into dangerous territory. As Don Berwick, the former Medicare administrator has argued for years, America needs to rationalize—not ration—the great quantities of healthcare services it consumes. We should pay only for what’s clinically effective at a reasonable price, Berwick preaches. In theory, that’s a simple idea; in practice it’s hard to implement without cries of rationing from politicians, technology sellers, and healthcare providers whose incomes are at stake.

At the end of his post Yglesias laments that we are “getting no real debate” over whether GDP+ 0.5 percent cap is the right number to curtail Medicare spending. He seems to be opening the door for a full throated discussion about this fundamental issue: Do we as a country want to want to continue unlimited spending on ineffective and expensive treatments? Or do we want to be more careful with the healthcare budget even if it means a senior may not get a treatment a doctor suggests might work or a seller of new, whiz-bang technology makes less profit?

That is his most important point. He needs to go further and lay out explicitly what’s at stake. So should other journalists.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman. Tags: , , , ,