Medicare, the federal health care program for America’s seniors, represents $30.8 trillion in long-term unfunded obligations. If Medicare’s runaway costs are not reined in, the program could cease to exist for future generations.
The issue is not whether Medicare costs should be controlled but how. Congress can pursue one of two routes: (1) It can change the structure and culture of Medicare to empower patients to make health care decisions in order to achieve the best value, forcing plans and providers to compete for their dollars, or (2) it can further empower bureaucracy to impose top-down controls on the costs of services. This can indeed reduce spending, but it guarantees a simultaneous reduction in the quality of health care Americans enjoy today.
The first is the path taken by Budget Committee Chairman Paul Ryan (R–WI) in his fiscal year 2012 budget proposal. Heritage’s Robert Moffit and James Capretta write that [1] a premium support [2] system like the one proposed by Ryan would:
…give Medicare patients control over the flow of dollars and freedom to make decisions about how they access medical services. This will stimulate
intense market competition among plans and providers, control costs, and promote rapid innovation and higher productivity through the efficient delivery of quality care, thus guaranteeing value in return for retiree premiums and taxpayer dollars.
Last week, President Obama embraced the alternative: toughen up the bureaucracy and ratchet down Medicare payment to doctors and hospitals. The President described strengthening the Independent Payment Advisory Board [3] (IPAB), a 15-member board of unelected officials created under Obamacare to rein in the cost of Medicare.
Under Obamacare, the board can tweak Medicare to hold growth in spending beneath its target, mainly by making cuts to provider reimbursement rates. Reducing provider payments means reduced senior access to physicians, another form of rationing of health care that already occurs to some extent in Medicare today.
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