Evidence vs. Ideology in the Medicare Debate

this from "Economix" by Prof. LAURA D'ANDREA TYSON.  Please follow link to original.
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http://economix.blogs.nytimes.com/2012/08/24/evidence-vs-ideology-in-the-medicare-debate/

Laura D’Andrea Tyson is a professor at the Haas School of Business at the University of California, Berkeley, and served as chairwoman of the Council of Economic Advisers under President Clinton.
When formulating public policy, evidence should be accorded more weight than ideology, and facts should matter more than shibboleths. The Romney-Ryan plan for Medicare reform depends on assertions that are ideologically consistent. But the Republicans plan is not supported by the evidence and does not survive serious scrutiny.
Perhaps that’s why the Romney campaign has been deliberately misrepresenting President Obama’s Medicare record.
Mitt Romney characterizes the $716 billion of Medicare savings over the next 10 years, contained in the Affordable Care Act, as President Obama’s “raid” on the Medicare program to pay for his health care program. This fear-mongering is simply untrue. These savings result from reforms to slow the growth of Medicare spending per enrollee – there are no cuts in Medicare benefits.
The reforms include both voluntary and mandatory changes in how providers deliver health care to promote better care coordination at lower cost, reward the quality and outcomes of services rather than their volume and reduce fraud and abuse.
For example, the law fosters the creation of accountable-care organizations, i.e., groups of providers willing to accept a flat fee for the integrated care provided to their Medicare patients. Accountable-care organizations represent a major step away from the unsustainable fee-for-service model that rewards the number of procedures rather than the quality of care.
Health experts believe that these organizations will significantly improve care and lower costs not just in Medicare but throughout the health care system. This belief is based on evidence, not ideology.
Medicare beneficiaries will also benefit from reforms that penalize hospitals for preventable re-admissions reflecting complications from previous procedures and that require hospitals to post their rates of medical errors, with penalties for those with the highest rates.
Both Governor Romney and Representative Paul D. Ryan have promised to repeal the Affordable Care Act and with it the reforms behind the $716 billion in Medicare savings (although Mr. Ryan duplicitously counts the savings from these reforms in his deficit-reduction plan). Medicare beneficiaries would be the losers. They would lose the benefits of better care at lower cost. They would lose the plan’s expanded Medicare coverage for prevention benefits and prescription drugs, and they would be forced to pay higher premiums and co-pays as a result of faster growth in Medicare costs.
President Obama’s health care plan is not a raid on Medicare; it is an investment in a stronger system. If the Affordable Care Act had not met this standard, the AARP would not have endorsed it.
The plan adds eight years to the solvency of the Medicare Trust Fund while reducing the federal deficit by more than $100 billion over the next 10 years and by about a half of 1 percent of gross domestic product, or about $1 trillion from 2023 through 2032. This is according to the Congressional Budget Office, a trusted nonpartisan arbiter in federal budgetary matters.
In contrast, the last major health legislation, the 2003 Medicare prescription drug bill, added about $400 billion to the 10-year deficit. Mr. Ryan, the self-described deficit firebrand, supported this bill, without a single dollar in savings or additional revenue to offset its costs.
Now Mr. Ryan has espoused – and Governor Romney has embraced — a proposal to transform Medicare into a premium support system. This is part of the Romney-Ryan plan to reduce the federal deficit while cutting taxes, especially for high-income earners, and slashing spending on Medicare and other government programs.
Among commentators, fiscal responsibility is often equated with imposing some of the burden of deficit reduction on Medicare beneficiaries. This is a meretricious gauge of fiscal “seriousness.”
Representative Ryan has won praise from many deficit hawks for his advocacy of premium support, but this praise is unwarranted. There is no evidence that such a system would control Medicare spending more effectively than the current Medicare program strengthened by Affordable Care Act reforms. Indeed, the evidence points decisively in the opposite direction.
In Mr. Ryan’s latest premium-support proposal, the government would provide a subsidy to Medicare beneficiaries to choose among competing insurance plans, including the traditional fee-for-service Medicare plan. Starting for 65-year-olds in 2022, insurance plans would take part in an annual bidding process to compete for Medicare beneficiaries. The bids would reflect the actual growth of health-care costs and would determine the size of the federal subsidy.
Advocates of premium support argue that competition would encourage more cost-sensitive behavior by beneficiaries, providers and insurers. The facts do not support this.
Just consider that despite competition and choice, private insurance premiums per enrollee for comparable coverage have increased more rapidly than Medicare spending per enrollee for more than 30 years. Medicare’s superior performance is all the more remarkable since its elderly beneficiaries include a sizable share of the sickest individuals who are the largest consumers of health care services. And Medicare’s cost advantage is likely to continue into the future.
According to a recent study, with implementation of the Affordable Care Act reforms, Medicare spending per enrollee is likely to grow by 3.1 percent during the next 10 years, about the same as the projected growth rate for G.D.P. per capita, while private insurance per enrollee is likely to grow by 5 percent.
What explains Medicare’s sustained cost advantage over private insurance? Medicare has much lower administrative costs than private insurance. And Medicare has considerable negotiating leverage with providers as a result of its huge enrollment. The new law strengthens this leverage. Private insurance plans have been unwilling or unable to drive reforms to reduce provider costs, preferring instead to pass rising costs on to consumers through higher premiums, relying on Medicare to spearhead efficiency-enhancing reforms.
As I explained in a previous Economix post, this is why the C.B.O. has consistently refused to recognize large potential savings in health care costs from reforms that merely increase competition among private insurance plans.
Indeed, the C.B.O. has concluded that replacing traditional Medicare with competition among such plans would drive up total health-care spending per Medicare beneficiary. Which is why Representative Ryan was compelled to place an arbitrary growth cap on the size of the subsidy in his premium support proposal.
That was the only way he could secure C.B.O.-scored budgetary savings. But imposing such a cap separates the growth of the subsidy from the growth of health care costs and transforms the premium-support system into a voucher system.
A voucher system would do little to control the growth of health care costs, but it would shift their burden onto Medicare beneficiaries in the form of higher premiums and reduced care. Cost-shifting should not be confused with cost containment.
Mr. Ryan asserts that the 1998 bipartisan Medicare Commission proposed premium support as a solution to Medicare’s financing challenges. But he fails to mention that all of the commission members appointed by President Clinton, including me, voted against this idea.
Since then, the evidence has confirmed that competition among private insurance plans would not yield Medicare savings without harming beneficiaries. To achieve this goal, enforceable payment and cost-containment reforms like those in the Affordable Care Act are necessary.
A “serious” deficit hawk committed to saving and strengthening Medicare, not one whose primary goals are repealing health-care reform and cutting taxes for the wealthy, would base his Medicare plan on the evidence. Mr. Ryan and his running mate can’t be serious.