Which 2 of 3 Do You Choose?

Illustration: Christoph Niemann

This is about choices. Washington D.C. is ablaze with hysteria about the national debt. On Friday, I sat at table with nine others trying to make sense of the problem and the ideologies shaping the debate, if indeed the current brouhaha rises to the level of actual “debate”. We were frustrated by the complexity of an issue of such great importance to all of us. Saturday night, a friend sent me a link to an article in the current issue of The New Yorker by their Financial Page writer, James Surowiecki, titled “Bitter Pills: Who Is Responsible for Fixing Medicare?”

On Facebook my friend wrote that the article was “far and away the clearest summary of the issue I’ve read.” Clarity is what I need. If Surowiecki is right, the Administration and Congress face the hard choice of choosing only two of three things most voters want, which also means that if you and I have any political leverage and expect to try to influence the outcome we too must choose two of the three things most voters want.

Let’s look at what Surowiecki says are the three things most voters want. “The ideal system, for most voters,

a) Would guarantee all seniors reasonable health care,
b) Stop the debt from getting out of control, and
c) Keep paying health-care providers as before.

“The problem,” he continues, “is that you can only do two of those things at once. The debate between Ryan and Obama is a debate over which of the three we’re willing to give up.” Before I ask you to say which of the three you are willing to give up, let’s look at how Surowiecki concludes that we must make such a choice.

Despite Republican claims of vast overspending, the ratings agency Standard & Poor’s lowering its outlook on U.S. debt because of concerns about the long-term budget, and President Obama’s stating the need to cut two trillion dollars from government spending over the next ten years, Surowiecki says

Yet, strange as it may sound, the federal government does not have a spending problem per se. What it has is a health-care problem. The cost of most budget items typically rises at a reasonable rate, if at all, but the cost of Medicare, Medicaid, and the tax subsidy for employer-provided insurance has been rising much faster than everything else: in the past forty years, Medicare costs increased 8.3 per cent annually. If they’re not controlled, Medicare and Medicaid will eventually be by far our biggest expense. Preventing that is the key to getting our fiscal house in order.

Representative Paul Ryan, a Republican, has proposed a simple solution: give seniors less money. He would replace Medicare as we know it and the government would give vouchers to seniors to buy private insurance.

His plan saves money because the value of the vouchers would rise at a much slower rate than health-care costs themselves; as the years pass, the government’s contribution to seniors’ health-care spending would shrink. As a result, seniors would have to spend more and more of their income on private insurance and out-of-pocket expenses, or go without. Indeed, the Congressional Budget Office estimates that Ryan’s plan would actually increase the amount of money Americans spend on health care, since private insurers aren’t as good at curbing costs as Medicare. But taxpayers would pay less.

The health-care bill that Congress passed last spring represents a different approach.

It trims more than four hundred billion dollars from Medicare spending, and contains a host of initiatives designed to make the health-care system more efficient and effective. In line with that, it creates a body called the Independent Payment Advisory Board, which determines how much Medicare will spend annually. The American health-care system is riddled with waste and unnecessary and ineffective procedures. Relative to every other industrialized nation, we spend more and our health outcomes are no better (and often worse). In American medicine, supply often creates its own demand, and paying doctors on a fee-for-service basis encourages more high-cost procedures. The I.P.A.B., in conjunction with other cost-cutting provisions in the bill, would look to fix the skewed incentives that lead to overtreatment, bargain for better prices, and insure that we’re spending our money more effectively. The Affordable Care Act is far from a perfect law, but the C.B.O. estimates that, if implemented as planned, it could cut the long-term deficit by more than a trillion dollars.

One might have thought, mused Surowiecki that this would have gotten “some love on love on the Hill,” but it didn’t. During the 2010 elections, Republicans used those very cost-cutting provisions as a club to bash Democrats for threatening to trim Medicare spending. And the strategy worked: Republicans won the senior vote by a twenty-one-point margin. Now, some Democrats are joining Republicans in trying to repeal the Independent Payment Advisory Board:

From Congress’s point of view, there are three problems with the I.P.A.B. First, it may take spending decisions out of Congress’s hands. Second, talk of restraining health-care costs sounds like rationing, which Americans hate. (That’s why, as the debate over the Affordable Care Act progressed, Obama said less and less about “bending the cost curve.”) Third, and most important, one person’s “waste” is another person’s “income”—the income of doctors, nurses, hospitals, drug companies, medical-technology makers.

Contrary to the focus on insurance companies in much of the debate on health care in the U.S., Surowiecki says

but, whatever their [the insurance companies] problems, they’re not the main driver of health-care inflation: providers are. Hospital stays, MRI exams, drugs, and doctor’s visits are simply more expensive here than they are elsewhere, and the fee-for-service structure insures that we use more of them, too. It’s really just math: most of our health-care dollars go, in one way or another, to health-care providers, so if we want to restrain the growth of health-care spending, less money will have to go to them.

This makes a lot of people, and not just politicians, uncomfortable: people, on the whole, understandably like and trust doctors and hospitals. They want to be able to choose their own doctors, and don’t want them to drop out of Medicare because the fees are too low. This is the fundamental dilemma: we’re unhappy about the rising cost of health care, but we’re also unhappy about what we would have to do to curb it. [My bold]

So, we are back to the question at the beginning. What is the provision of the “ideal system” you are prepared to live without? That, according to Surowiecki, is what the Administration, Congress, and the U.S. citizenry will have to decide.

Before you answer that question, ask yourself (and then share with the rest of us), is Surowieckie right about the choices we face? And is the fixing of Medicare really the core issue in dealing with our national debt?

My answer? Yes, I believe he is right about the choices we face. The provision I am prepared to live without is “c”, and I believe that the health care legislation passed by Congress with the Independent Payment Advisory Board is a fair way to lower the costs of health care. I also believe that many seniors couldn’t see beyond their fears in the last election. Those of us who are seniors, I believe, have to do everything we can to see that doesn’t happen again.

At our luncheon on Friday, Alice put it well: “Let’s fix the things in Medicare that need fixing. Don’t destroy it!” I believe that if we do that, we will also fix the biggest problem of our national debt.

What say you?

- Milo

Read more http://www.newyorker.com/talk/financial/2011/05/02/110502ta_talk_surowiecki#ixzz1L45ODEdb