One of the many dilemmas surrounding federal health care policies is that the government only partially insures most people when it subsidizes health care, but we want to pretend that once “insured” we are all entitled to the maximum health care available. This puts a lot of weight on the definition of “insurance” and creates misunderstandings about what the government does and does not do.
This issue came up in a column by Bruce Bartlett, who notes that Republicans may now oppose an individual mandate, but they do support (directly or indirectly) a mandate on hospitals to provide emergency care. Moreover, while ignoring their effective support of this mandate, and the effective taxes necessary to pay for it, Republicans maintain that the emergency-care mandate means that everyone has some amount of insurance coverage, however partial it may be.
This debate raises the question of what it means to be “insured.” No government plan covers everything. For those soon to have access to the exchange subsidy available through Obamacare, the “silver” and “bronze” plans that could be subsidized still cover only some costs. Medicaid, in turn, generally pays providers less than do other insurance plans; as one result, the more highly paid (and, often, more highly skilled) providers are less available. Similarly, Medicare does not cover all health services, including long-term care, and some doctors now refuse new Medicare patients, though that system’s payment rate is still higher than Medicaid’s.
You may argue that you want equal coverage—if some people get Cadillac coverage, everyone should. However, no elected official from either party seems willing to raise the taxes necessary to pay for such an expensive system. The reason is obvious: such health care would absorb all the revenue currently raised by the federal government and then some, leaving nothing for other government functions.
Even then, some people would step outside the system and buy a Mercedes policy, so inequality in health care would remain. Thus, the notion that everyone gets the same health insurance coverage, even in the most nationalized health system, is pure myth. But if people are not going to receive the Cadillac or Mercedes coverage from government that others obtain privately, how should Congress design policy with those multiple gaps in mind?
I don’t think there is any easy answer, but I do think that researchers and analysts should be more precise when reporting on “insurance” coverage. For example, the Congressional Budget Office produces counts of how many people would be insured under various options, but such estimates by themselves are misleading. Insured and not insured for what? For instance, if everyone received a simple (say, $5,000) voucher, with few restrictions other than that it must cover health care, almost everyone would buy at least a $5,000 insurance policy. On the other hand, if government dictated that the voucher had to be used to buy an expensive plan that many people couldn’t afford, then supplying a voucher would not produce fairly universal (yet partial) coverage.
Alternatively, one can’t assume that a highly regulated system will automatically provide whatever care is specified, since what it pays affects which providers participate in the system. The implicit assumption—and I am not judging it here—may be that many providers are so overpaid that cutbacks would have only limited effect on the care provided or the quality of the doctors and nurses who would accept a lower-paying career.
The ideal but difficult approach for researchers and budget offices, I think, is to note as best as possible what coverage is provided by regulation or subsidization of emergency rooms, Medicaid, Medicare, exchanges—indeed, of each government engagement in the health care economy. Note the expected gaps, whether in preventive care, higher-priced doctors, drugs, or other services. Finally, compare the extent to taxpayers and insured individuals avoid coverage gaps by paying higher taxes or more for their insurance.
In any case, a dichotomous count of who is “insured” or “not insured” is too simplistic. Almost any government health insurance policy is partial in care and cost. If Republicans want to claim that emergency room care is a type of insurance, then they should also acknowledge what is not insured through that mechanism and the implicit taxes on those who end up covering the emergency room cost. If Democrats want to claim that vouchers provide less insurance than a more regulated system, then they, too, should specify just what additional insurance they claim will be covered, at what cost to whom. Both parties should also make coverage comparisons for systems that are equally cost constrained.
Democrats and Republicans Favor Medicare Cuts and Then Deny It
Medicare is taking on a primary role in the presidential race. The discussion often turns to whether the program should continue in its current form, with more direct government controls over costs, or shift its emphasis to vouchers or premium support plans. Let’s try to set the record straight.
Lowering Medicare spending growth over the next 10 years from, say, an additional $500 billion to an additional $400 billion means spending $100 billion less on covered services. It doesn’t matter for budget purposes the source of the saving. It is a benefit reduction.
Both presidential candidates claim to save money on Medicare without cutting benefits. President Obama says his reforms “will save Medicare money by getting rid of wasteful spending…that won’t touch your guaranteed Medicare benefits. Not by a single dime.” Meanwhile, Governor Romney promises that his “premium support” plan will save money while still providing “coverage and service at least as good as what today’s seniors receive.”
But politicians aren’t the only ones dispensing that free-lunch rhetoric. Even highly respected journalists and researchers get pulled into it.
Consider two New York Times stories. After the first presidential debate, Michael Cooper, Jackie Calmes, Annie Lowrey, Robert Pear and John M. Broder said that President Obama “DID NOT CUT BENEFITS by $716 billion over 10 years as part of his 2010 health care law; rather, he reduced Medicare reimbursements to health care providers.” A few days later, David Brooks cited an AMA study of a premium support plan put forward by vice presidential candidate Paul Ryan and Democratic Senator Ron Wyden, saying that “costs might have come down by around 9 percent with NO REDUCTION IN BENEFITS” [cap emphases mine].
Can you see what is going on? Politicians, reporters, and experts all recognize that cost growth must be brought under control. But they also want to suggest that benefits won’t be reduced—if only we go with a particular approach.
It’s one thing to say that we can spend $100 billion less on health care so we can use the money better for education or tax cuts or paying off our debt. But it’s another thing to pretend that we can get $100 billion more in educational benefits or money in our pockets and absolutely the same quality of health care.
We know from personal experience that certain medical procedures, at the end of the day, are worthless or worse. But there’s no budget line called “worthless health care” that our elected officials can bravely vote to reduce.
Instead, we are left with blunt instruments to control costs. A Medicare board may recommend or members of Congress may elect to cut payments to providers, as they have done many times in the past. One can argue such cutting may not produce a great loss in services, depending upon how providers and consumers react. But no loss whatsoever? Come on! Try lowering government payments for anything—rental vouchers, school lunches, highways—and see if the same services are provided.
Similarly, suppose that Congress puts more Medicare recipients into a premium support system, like Medicare Advantage–type plans run by health maintenance and similar organizations. The system then limits the growth rate of payments to those groups. Again, there’s less money to go around.
Both the regulatory and voucher approaches have a precise accounting correspondence. If the government spends $100 billion less, then it purchases $100 billion less in services and makes $100 billion fewer payments to providers.
Back to the presidential and vice presidential debates. Directly trying to control prices for individual services may not have the same effect as trying to control the total amount paid for all services under a premium, and vice versa. But no candidate can deny that he favors benefit cuts relative to today’s unsustainable promises.
To add to the confusion, each side talks as if some idealized system of cost control or premium support exists. Almost inevitably, we will be taking ideas from both approaches. We’ll cut back on high reimbursement rates when we believe the effect on actual services would be moderate and, at the same time, use limited budgets to encourage providers to operate more efficiently. For instance, we might lower the payment rates for many operations faster and simultaneously induce more Medicare recipients to opt into groups like Kaiser-Permanente that make many allocation decisions within a fixed budget.
Ferreting out the truth in this Medicare debate also requires looking beyond health care. Benefit losses in health care must be contrasted with benefit gains elsewhere. Yet even health care will likely be much worse if we continue to borrow hundreds of billions of dollars more from unfriendly nations and let excessive debt inhibit economic growth.
Bottom line: both parties favor cutting Medicare benefits, or, more accurately, slowing down the rate of benefit growth. The issue isn’t whether but how this can best be done.