Interview: Zeke Emanuel’s plan to fix health-care spending

December 18, 2012

President Obama and House Speaker John Boehner are getting closer to striking a "fiscal cliff" deal. One of the unresolved areas looks to be health care: Both sides have reportedly agreed to cuts, although without nailing down a crucial detail: Where should those cuts come from?

Zeke Emanuel has a few ideas. He's a former Obama health policy adviser and a current fellow at the Center for American Progress, where he recently co-authored a white paper looking at how best to reduce Medicare spending. We spoke recently about the deficit negotiations, how he would reduce health-care spending and his recent proposal that his brother, former White House chief of staff Rahm Emanuel, dubbed his "best idea."

Sarah Kliff: Let's say you're in charge of reducing Medicare spending during this deficit debate. What are the key changes you make to the program?

Zeke Emanuel: We’ve got to do two things. One is the scorable savings, the things CBO will score. Then you need to focus on the things that will transform Medicare and Medicaid into a more efficient system. Those two overlap to some degree, but by and large CBO doesn't give you as much scoring for efficiencies. For good institutional reasons, they’re uncertain, always skeptical of these things.

There are a number of ways that you can save money, in ways CBO will score, like changing the drug rebates and going after Medicare Advantage plans. 

The ones I’m really interested in though are the ones to bend the cost curve. One would be more competitive bidding in Medicare. The Affordable Care Act does a good job of expanding that program to prosthetics, but does it slowly, in 2017. There are many other things that can be competitively bid, that are in the 2009 budget that President [George W.] Bush submitted. Lots of radiological scans are pretty much standard, you could competitively bid those.  

SK: Tell me more about what you would do to reform Medicare Advantage.

EZ: I’m actually for them competitively bidding their premiums without a baseline. There’s probably a lot more that can be had there. Importantly, we're going to need more data. Right now it's a black box. You need utilization and outcomes data about the patients who are on Medicare advantage. There's long been suspicions about those plans doing a bunch of upcoding or cherry picking members. We've got to solve that problem. 

SK: How would you set the amount of support that seniors would receive in that kind of system?

EZ: What we ought to end up with is giving them a percentage of the premium that increases with the increase in costs. One of the way Part D premium support works is it increases with costs. It’s surprising the Republicans use that in Part D, but didn't want to adopt that in premium support for the rest of the program.

SK: What you're describing sounds relatively similar to the Romney-Ryan budget that was proposed during the campaign season. 

EZ: Except that you don’t convert the whole thing. You don’t convert everyone to it. I would have the support grow much faster. 

SK: I'm curious whether you think more competition in Medicare Advantage would drive down premiums and about the relationship between premiums and competition in general.

EZ: There's no one who claims to know exactly what it would do. There are a lot of health economists who think we substantially overpay Medicare Advantage plans. I'm not sure we're convinced that more competition would save money, but I wouldn't think we're going to lose money.

SK: You have a proposal to raise the Medicare eligibility age gradually, tethering eligibility to one's lifetime's earnings. How did you come up on that?

EZ: I got thinking about it when the President put it out there as an idea [in 2011]. It does seem to be that there is some support for the idea, that as we've increased the longevity of people, to raise the retirement age.

But as I've pointed out, that’s not uniform across all seniors. The more lifetime earnings you have, you’re going to live longer and afford it more. That’s not to say we’re going to cut you out, you’ve paid out into the system. One of the things about the Medicare program is it gives more years of coverage to the wealthier, because they live longer. By changing it, you make it equal across the system.

It also means people will have to plan on their savings differently. If you're in the top 30 percent, you're going to have to plan on saving a bit more for your health care. That would have its own advantages, in encouraging more savings.

SK: What happens, under your plan, to the seniors who don't save, the ones who have high lifetime earnings but don't have the money to cover their health-care costs?

EZ: We want people to be individually responsible. You've got to save, and if you're a spendthrift who wants to have big meals, and then doesn't have the money later on, that's not the behavior we want to encourage. 

These people would also be able to buy coverage on the exchange if they needed to. The exchange subsidies are annual earnings, not lifetime, so they could probably qualify there.

SK: Do you have any sense of whether an idea like this could gain political traction here in D.C.?

EZ: I have no idea. I’m not the political brother. I’m not good at counting noses. When I published this, my political brother [former White House chief of staff and current Chicago mayor Rahm Emanuel] said, that's pretty much your best idea. We ought to think about how to do that.

I think it's got bipartisan appeal. I understand though that I work at an organization that doesn't agree with me on this issue.

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Ezra Klein · December 18, 2012