The discussion about Obamacare of late has focused almost exclusively, and I would argue foolishly, on the individual mandate. The issue of its unconstitutionality isn’t foolish, but reducing the entire argument about Obamacare to the mandate is shortsighted. The Supreme Court will either strike it down or not, but the other maladies associated with Obamacare will remain.
It is easy to understand how the debate has gotten skewed. With a controversial issue barreling toward the Supreme Court, the unfortunate tendency (by right and left) to make all policy issues into legal ones is heightened. Conservatives, who not coincidentally would like to defeat Mitt Romney, want to talk about the deprivation of liberty associated with the individual mandate. The left would rather not talk about the more fundamental problems with their beloved “historic legislation.”
But Paul Howard and Doug Holtz-Eakin remind us that from a policy standpoint the real target should be the Independent Payment Advisory Board. They explain:
Last week, 24 medical organizations representing 350,000 doctors urged Congress to repeal Medicare’s new Independent Payment Advisory Board (IPAB). That’s the right prescription for improving American health care and protecting access to innovative treatments for seniors. Unless repealed, IPAB will quash medical innovation and make it even harder to adopt Medicare reforms that can improve quality and lower costs. . . .
Over time, policymakers have responded to Medicare’s rising costs by imposing price controls on providers, a strategy that hasn’t solved the program’s underlying problems. Indeed, doctors and hospitals responded to price controls by increasing their volume of services, or providing more heavily reimbursed services.
IPAB is the ultimate in government price controls. It consists of a 15-member board selected by the president and empowered to reduce Medicare outlays automatically if spending rises above a target rate (set by legislation). Beginning in 2018, the target rate is set at GDP plus 1 percent.
Unfortunately, the methodology — slashing reimbursement rates — will effectively ration services and do so in the most inefficient manner imaginable. “IPAB will only increase the distortion, because it exempts hospitals and hospices from cuts until 2019. During the interim, cuts will fall most heavily on physicians, Medicare Advantage plans, medical device makers, and pharmaceutical companies.” The authors explain: “Thus the uneven burden of IPAB’s cost discipline will penalize some of the most innovative and potentially cost-saving technologies – like new (and expensive) drugs for Alzheimer’s, which might save money in the long run by keeping patients out of nursing homes. IPAB’s focus on year-to-year cuts also discourages Medicare from implementing quality and cost-containment programs that might save money over the long term.”
Republicans for a time took a rhetorical meat ax to the IPAB, thanks to Sarah Palin’s “death panels” comments. But the IPAB’s adverse impact on the quality and availability of care is a real issue, deserving of sustained and serious analysis. It’s remarkable, actually, that more attention has not been paid to it.
For Romney, this is a feature of Obamacare that has no counterpart in Romneycare. He should be bashing the president on this aspect of Obamacare, getting mileage out of the Democrats’ embrace of a system that embodies the worst of liberal statism: one-size-fits-all unaccountable bureaucracy for denying care.
Republicans in Congress and elsewhere should not fall into the trap of merely inveighing against the individual mandate. Win or lose in the Supreme Court, the IPAB is likely to remain, and it is critical to contrast that top-down, de facto rationing system with the conservative alternatives. This exchange yesterday in the House Budget Committee hearing was instructive:
HBC CHAIRMAN RYAN: As you may know, I’ve been working across the aisle with a member of the Oregon delegation from the Senate on a premium support plan that uses competitive bidding to help determine the contribution. Competitive bidding we’ve seen has worked well in Medicare Part D and Medicare Advantage. I’d like to get your thoughts on choice and competition as it relates to these previous successful reform plans. Given what we’ve seen in these aspects of Medicare, do you believe that competitive bidding is a process that can be successfully applied Medicare-wide?
[Centers for Medicare and Medicaid Services] CHIEF ACTUARY FOSTER: Yes, I think it can. Obviously, it would represent a large change from the status quo, but I think it could work. We’ve seen the signs of this – you mentioned the Part D prescription drug program, for example, where the different drug plans compete against each other on the quality of their benefit package and the premium level. And we’ve seen – every year since Part D started – a migration of beneficiaries to more efficient plans with lower premiums. So that can help. We’ve also seen for durable medical equipment that competitive bidding, in this particular area of Fee-For-Service Medicare, reduced prices that we had to pay by 40 percent.
RYAN: By forty percent?
FOSTER: Forty percent, that’s right.
RYAN: Those are the kinds of cost savings we’re going to have to achieve if want to make good on the promise of the Medicare guarantee. This should not be a partisan issue. Competitive bidding is something Alice Rivlin has been a champion of, Ron Wyden has been talking about, the Bipartisan Policy Center, and more. There is a lot of data out there that competitive bidding when applied Medicare-wide can achieve the benefit of keeping these benefits going while attacking the root cause of cost growth.
It is important to continue the policy debate on Obamacare and to explain to the American people the pernicious impact of a system that blindly chops reimbursement to health-care providers with no concern for quality of care and the future of medical innovation.