The Path To Prosperity – Where’s The Health Care Cost Containment?

Robert Laszewski

First published 4/5/11 on Health Policy and Marketplace Review

Paul Ryan’s overview of his proposed 2012 Budget Resolution contains an honest and compelling description of America’s debt and deficit spending dilemma.

Every American should read it.

As I read through his discussion of the huge hole we’re in and the imperative to fix it, he had me thinking that we finally have a politician willing and ready to deal with the problem. But when I got to the end of the document, I felt like there was a missing chapter—the one with the controversial and politically problematic but necessary bad news solutions.

In Ryan’s document, his proposed solutions for unsustainable entitlement spending in Medicare, Medicaid, and Social Security each get a few paragraphs with little in the way of detail. The Affordable Care Act gets fixed by simply repealing it.

Beyond his defined contribution market ideas for Medicare, he only mentions tort reform and eliminating the Medicare physician fee cuts (at a cost of $350 billion over ten years) without reforming the Medicare docs payment system.

From what I see, Ryan’s solution to the federal entitlement budget mess is to largely shift the problem to individuals and the states.

Let me be clear, I agree with much of the direction Ryan takes. None of this will be solved without doing things like raising eligibility ages (to 67 for Medicare), means-testing, giving Medicare and Medicaid beneficiaries incentives to spend theirs and taxpayer health care dollars more wisely and giving the states the Medicaid flexibility they need to master the biggest part of their budgets—as well as ending one unfunded federal Medicaid mandate imposed on the states after another.

Ryan deserves a lot of credit for putting these things on the table—where Democrats have already begun to demagogue them.

But the conservative notion that if we just create more robust health care markets and our health care funding challenges will just all painlessly go away, is naive. Just like it is naive for liberals to argue that all we need is a single-payer health care system–or a “public option”–to fix it all. Decades of a single-payer Medicare system have not proven that approach capable of solving the problem on its own any more than decades of a private insurance/managed care system for those under age-65 have proven the market on its own capable of solving the health care cost problem. Nor have private Medicaid insurance plans that have helped the states control costs proven to be, by themselves, the silver bullet.

And, Ryan ignores a huge “elephant in the room” when he argues that giving seniors “premium-support” to subsidize their private Medicare purchases will lead to a more cost effective program. If that were the standalone solution, why after 20-years aren’t private Medicare Advantage plans cheaper than the traditional Medicare program?

When it comes to health care, it looks to me like Ryan has done what the Democrats did last year when they passed the Affordable Care Act—he fell way short on the real issue: Controlling costs.

When Democrats and/or Republicans are willing to face the cost issue and fundamentally begin to change the financing system and the perverse incentives that payers, providers and consumers now deal with every day then we will finally begin to talk about solutions.

You will know it the minute they do. Those finally held responsible for controlling costs will be screaming about the dislocation real reform will cause.

You might also find David Whelan’s Forbes article, on the topic of liberal objections to a voucher system, of interest: Paul Ryan’s Medicare Plan Sounds Just Like Zeke Emanuel’s Voucher System

What might cause Democrats and Republicans to finally face the health care cost issue head-on? Prior post: Will it Be the Bond Market That Finally Forces Serious Health Care Financing Change?

2 thoughts on “The Path To Prosperity – Where’s The Health Care Cost Containment?

  1. AGREED! Politics leaves true reform wanting much more than rhetoric and government cost cutting. The hralth care system must be reformed.

    The reforms needed are those that curb the wasteful spending that is occurring, incentivized and fueled by a national appetite for too much that comes from over-worrying, over-diagnosing, over-treating and over-prescribing. The perverse incentives to do more than is needed must be eliminated, starting with a solid primary care gatekeeper approach to each person’s medical care, avoiding the unnecessary and costly spillage into the vast wasteland.

  2. The idea of giving grants to the states is compelling. Regional solutions to regional problems with limited federal guidance can work well.

    I’d still like to see more global capitation arrangements with the PCP as the one who assumes the risk. PCPs need to be more like resource allocators rather than referring and prescribing machines.

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