Paul: Okay, you guys won the first round. Congratulations on that New York House seat. But “Medicare as we know it” can’t continue. Seniors now have little incentive to control costs, and providers, paid by the procedure, have every reason to ramp them up. Medicare costs were 8.5 percent of the federal budget in 1990 — they’ll be 17.4 percent by 2020.
Barack: The current system can’t go on. I wouldn’t say this publicly, but my party’s wrong to pretend it can. Still, your approach goes way too far. Seniors would get help to buy private insurance but would pay a lot more than they do now.
And over time, because the vouchers rise only with inflation, not with medical costs, beneficiaries would have to pay even more. They’re not going to be able to afford it, not with median incomes of less than $21,000. And why should they? You’re forced to make deep cuts in Medicare because you won’t agree to raise taxes and that’s the only other way to get to balance.
Paul: Look, I could maybe support higher taxes as part of an overall deal. I just can’t admit that. On costs, my plan gives extra subsidies to the poorest, sickest and oldest seniors. If those aren’t big enough, we could talk. But it makes sense for wealthier seniors to pay more. And what about the general concept? Could you accept the idea if the subsidy grew at a rate higher than regular inflation?
Barack: Why are you so insistent on privatizing Medicare?
Paul: Why are you so opposed? Your health-care law set up exchanges for people to buy coverage from private insurers, and you gave people subsidies — vouchers! — to afford it. And maybe you haven’t noticed, but private insurers are already part of Medicare. They run prescription-drug plans, which have cost less than expected. And they offer Medicare Advantage plans as an alternative to traditional Medicare. This isn’t a revolutionary concept.
Barack: Well, it is if you get rid of traditional Medicare as an option, which is what you would do for anyone under 55. If — if — I were convinced that the existing system couldn’t be reformed, then maybe I would think about private plans — plus the choice of traditional Medicare.
But the Congressional Budget Office concluded that health-care costs under your plan would be higher than under traditional Medicare. Not only would seniors pay more out of pocket, overall costs would go up, because the private plans can’t hold costs as low as Medicare can.
Paul: Yes, but the CBO assumes that doctors and other providers are going to continue to take Medicare patients at those prices. And it assumes Congress is going to be able to resist providers lobbying to raise payments.
My theory is that private plans will keep costs down by finding more efficient ways to deliver care, and once seniors have some real skin in the game, they will insist on saving money.
Barack: I’m tired of hearing about skin in the game. Medicare households already spend 15 percent of their budgets on health care, triple that of other households. And a small fraction of Medicare beneficiaries — people with chronic diseases or in their last year of life — account for the vast bulk of spending. You can’t save that much money by persuading other beneficiaries to spend less.
You can’t “fix” Medicare without dealing with the overall health system. We need to do more to rein in costs outside Medicare — such as expanding that tax on Cadillac health plans in the health-care law you want to repeal. Otherwise, costs just get shifted elsewhere.
Plus, the health-care law tries all sorts of cost reduction experiments in Medicare. The IPAB — the Independent Payment Advisory Board — is a fail-safe to impose more changes if those don’t work. And I’ve proposed setting an even slower growth curve. At least give it a chance.
Paul: You think Congress is really going to let all this happen?
Barack: I don’t know. Anyway, this was fun. You make some reasonable points.
Paul: So do you. We should do this again.