The Senate Finance Committee may apparently include a provision
in its health coverage legislation that would allow a little-known
advisory commission known as "MedPAC" to make changes in Medicare
and other parts of the health system that would go into effect
unless Congress explicitly objects. The aim is to achieve
significant savings in the program to help finance coverage
expansions for working families in a way that reduces the
likelihood that future Congresses will renege on promised
entitlement savings.
Given the enormous debt and deficits facing the country, it is
critical that Congress pays for any new programs by reducing
existing spending. Essential to that is a mechanism that makes it
more likely that Congress will actually deliver promised savings--a
rarity in Washington. But lawmakers considering how to respond to
this idea should test any such proposal that emerges from committee
discussions against certain principles. These principles will help
protect this nation's children and grandchildren from an even
bigger debt burden while helping to achieve improved coverage for
working families.
Principle 1: The First Priority for
Savings in Medicare and Medicaid Is to Reduce Long-Term Entitlement
Debt, Not Partly Finance a New Entitlement.
Medicare's long-term finances are in shambles, with a structural
deficit of over $38 trillion (in present-value dollars) burdening
future generations. Budget analysts from across the spectrum,
including former Congressional Budget Office (CBO) directors from
both parties, have been offering proposals to reduce the huge
unfunded obligations of Medicare and other major entitlements.[1] The
bulk of any savings achieved should be earmarked for this purpose,
not for partially financing yet another costly and underfunded new
entitlement.
Principle 2: If Congress Plans to
Finance Part of Any Program Through Savings Elsewhere, Then Those
Savings Must Be "Banked," Up-Front, Before Any New Spending Is
Authorized.
The effort to expand health coverage is shaping up according to
a very familiar pattern in Washington. A health proposal is offered
to achieve some goal. Then, as has been seen in recent days after
CBO has analyzed health proposals, it turns out that the proposal
will likely cost far more than first advertised. Then Congress
piously promises to pay for the proposal with savings and new
taxes. Then the new taxes are enacted but most of the savings
somehow never materialize.
For instance, Congress in 1997 promised that savings would come
from a mechanism to trim physician payments in Medicare, only to
have later Congresses roll back that promise year after year. And
the 2003 Medicare drug legislation required Congress to at least
consider a proposal for savings if Medicare's general revenue
exceeds the stated level. That has been blatantly ignored, and the
current House health bill would remove even that modest savings
mechanism from the statute book.
So if Congress expands coverage mainly "paid for" by promised
savings, responsible lawmakers should insist that an expansion of
coverage proceed in stages and that before each stage can go
forward, real savings must first be achieved and certified by the
CBO and the General Accountability Office. That would provide a
mechanism for lawmakers to require real savings before each
expansion moves forward.
Principle 3: A Reduced Medicare Budget
Should Be in the Form of "Premium Support" That Empowers Seniors,
Rather Than Price Controls That Empower Bureaucrats and Jeopardize
Services.
Congress traditionally tries to reduce Medicare spending by
controlling payments to physicians and hospitals and fixing prices.
This hands-on micromanagement through wage and price controls works
no better in health care than it has in any other area over the
centuries. It leads to distortions, doctors withdrawing from
Medicare, and other problems.
The alternative approach, seriously considered by President
Clinton's National Bipartisan Commission on the Future of Medicare
and favored widely, is instead to taper down the growth of future
spending in Medicare through limiting taxpayer support for the
coverage chosen by seniors (an approach known as "premium
support").
That approach achieves savings through the preferences of
empowered seniors in a competitive market--maximizing their
satisfaction--rather than through the preferences of agency
bureaucrats or fiercely lobbied congressional committees.
Principle 4: While a Commission
Recommending Savings Should Propose Them for Expedited
Consideration by Congress, They Should Not Go into Effect Without
Congressional Approval.
There is significant and wide support for finding novel
procedural ways to deal with Congress's inability to trim
entitlement programs. That has led to the idea of using a
commission or commissions to propose packages of changes that must
be considered by Congress in an expedited way, much as a treaty is
considered or the Base Closing and Realignment Commission made it
at last politically possible to close unneeded military bases.[2]
It appears the Senate Finance Committee may propose that the
Medicare Payment Advisory Commission (MedPAC)--a board of health
analysts drawn from universities, think tanks, and health care
bodies--should have a key role in achieving health savings. MedPAC
currently makes recommendations to Congress on broad aspects of
Medicare, but Congress has no obligation to enact or even consider
its proposals.
But rather than recast MedPAC as an advisory body with clout
(whose recommendations would have to be considered for an expedited
up-or-down vote, perhaps with other competing proposals, and
implemented only if agreed to), it appears that the committee may
enact a procedure whereby MedPAC's recommendations would go into
affect unless both houses of Congress block them.
This powerful default implementation for the decisions by an
appointed board should be unacceptable to lawmakers and Americans.
Like other efforts to insinuate an unelected and largely
independent health board into the health system, these decisions,
in practice, could easily go well beyond mere technical adjustments
in payments and result in board control of medical practice,
contrary to the intent of the original Medicare law. The
relationship between doctor and patient should not be compromised
or undermined by a distant board, council, or panel. If Congress
gives serious consideration to a commission to develop proposals
for savings, the mechanism should be expedited review of its
recommendations, not the implementation of those recommendations by
default.
Caution Ahead
If the above principles are ignored, Congress could end up
creating a large new entitlement, with savings offsets that are
phantom rather than real, and adding to the staggering debt burden
on future generations. And, worse still, it could end up doing this
while also giving excessive power to an unelected and unaccountable
health board.
Stuart M.
Butler, Ph.D., is Vice President for Domestic and Economic
Policy Studies at The Heritage Foundation.