How ObamaCare Cuts Medicare


Don't worry, my super-technocrats will fix everything.

Over the weekend, The Washington Post published a Q&A-style explainer on the Independent Payment Advisory Board—the panel of federal health care technocrats charged with keeping down spending growth on Medicare.

The details are complicated, but the gist is simple: If spending on Medicare is projected to grow beyond certain yearly targets, then it's IPAB to the rescue: The 15-member panel appointed by the president has to come up with a package of cuts that will hold Medicare's growth in check. If Congress want to override that package, it only has two options: Vote to pass a different but equally large package of cuts or kill the package entirely with a three-fifths supermajority in the Senate.

The Post lays out the basic framework above. But what it doesn't explain in any detail is exactly how those cuts will be achieved. And that, of course, is where the difficulty begins: Here's how The Wall Street Journal's editorial board explained it last month: "Since the board is not allowed by law to restrict treatments, ask seniors to pay more, or raise taxes or the retirement age, it can mean only one thing: arbitrarily paying less for the services seniors receive, via fiat pricing." Medicare already centrally sets the prices it pays for the services of doctors and hospitals. Given the board's limitations, the most likely cuts we'll see from IPAB, then, will be arbitrary, quality-blind reductions in these payments (though hospitals will be exempt from cuts for the first couple years).

We know what happens next: Providers stop taking on new Medicare patients, or drop out of the system entirely. In Medicaid, which pays far lower rates than Medicare (which pays somewhat lower rates than private insurance), this is already common: As one emergency physician recently told The New York Times, "Having a Medicaid card in no way assures access to care." If IPAB cuts Medicare provider payments down to the bone, it could end up transforming Medicare into a seniors'-version of Medicaid.

A movie about Medicare?

Will seniors have an out, a way to get out of the system? Perhaps. But perhaps not, or not always. We've already seen one recent case in which several seniors were told by a federal judge that if they want to take the benefits they paid into from Social Security, they must also enroll in Medicare. It's an entitlement. Is it also an obligation? 

The more likely out is that seniors will complain loudly to Congress, which will then rewrite IPAB's rules to further limit the sort of cuts the panel can implement. As The Post notes, IPAB is intended by its backers to give Medicare-cutting power to technocrats rather than politicians in the hopes that the technocrats will be less swayed by political pressure from both seniors and the health care industry. 

In response to complaints from the health care industry, Sen. John D. Rockefeller IV (D-W.Va.), who was one of IPAB's architects, said that the board was specifically designed to reduce the influence of "special interests" on the Medicare payment policy. Those interests, he and others say, have kept Congress from making the tough decisions needed to hold down spending and reduce the deficit.

But Congress will still have the power to change IPAB's rules, or get rid of it entirely. Indeed, there's already movement to do so, with supporters in both parties.

The big picture is plain: This is what happens when you yoke a huge portion of a major industry (the health sector) to a single, government payer. But the best solution is not to continually inflate centrally-set rates on the taxpayer dime, or to attempt to control spending through a commission of independent experts, however well intentioned. It's to allow market-driven price signals (starting by restoring balancing billing) into a quasi-government-run health care system that, for decades, has been lashed to one federally determined price setting scheme or another, nearly all of which were intended to restrain out-of-control spending somehow—and, as the current entitlement predicament shows, nearly all of which failed.

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  1. If Congress want to override that package, it only has two options: Vote to pass a different but equally large package of cuts or kill the package entirely with a three-fifths supermajority in the Senate.

    Congress always has a third option: repeal those provisions of ObamaCare which seek to tie its hands.

    And history shows that Congress won’t have its hands tied when it comes to implementing Medicare cuts that were “previously agreed to.” Those automatic cuts to physician rates have never, not once, been implemented, after all.

  2. Remember when Sean Young used to be hot?

    1. Time is cruel.

    2. you can always fantasize about Kevin Costner

    3. vividly

    4. Sean Young could have been one of the great stars in American Cinema, but according to insiders, she was literally too fucking crazy to work with. I believe Howard Stern asked her about some of her crazy after her fall from grace. She confirmed most of it without batting an eye.

  3. Nothing of substance to add, but:

    Hooray for alt-text!

    1. is not a reason not to comment on Reason

      Enjoy your drink

  4. Many Americans have structured their lives around government dependency. It’s part of their latter years end game.

    Considering the above, a far better system than ObamaCare as well as the current system of Medicare and Medicaid would be thus:

    [1] immediate end to Medicare and Medicaid

    [2] For all Americans with household incomes below an arbitrary amount, say $30,000, taxpayers pay medical insurance premiums

    [3] All such welfare-dependent Americans get assigned randomly to any of those firms operating as medical insurers

    [4] All firms required to carry welfare-dependent Americans until such Americans voluntarily withdraw or die

    [5] Elimination of deduction of premiums paid by employers as such acts as a subsidy for firms to attract workers uncompetitively

  5. Pretty said aint it. America, Run by the Rich, FOR the rich. No one else matters.


    1. Jeeves! A tophat and monocle to ZegWee, stat!

  6. It’s rare that you see such complicated problems solved by even more complicated solutions. I agree we need to go free-market.


  7. Original, documented investigation on Kaiser Permanente’s rigged end of life counseling, “Birth of a Real Life Death Panel,” is posted on http://www.hmohardball.com at http://www.hmohardball.com/Death Panel Birth & Attachments 1st in Series 2-14-2011.pdf
    Twenty years ago, Dr. Ezekiel Emanuel, ObamaCare’s ethics engineer, published that he had invented a scheme that induced 70% of patients to reject treatment and life support in a 15 minute end of life counseling session. He would deny Rep. Giffords’ care, because she may not be able to “meaningfully participate” in the American “polity.”
    Robert Finney, Ph.D.

  8. Your argument seems to be:

    1. This independent board can make some (but not many) Medicare cuts. This is bad, because it should be able to make more cuts. Therefore, let’s get rid of it and pretend that Congress will make cuts.
    2. Members of Congress want to theoretically take away this independent board’s power. This change would be vetoed, but it still proves that the board is not independent.
    3. Politicians are better at determining treatments than healthcare experts.
    4. Democrats who cut spending didn’t really do it because Congress will just put the money back. Republicans who cut spending are really cutting spending because their cuts are permanent. Also, Nixon never actually went to China.
    5. Healthcare is a public good. Giving Seniors more choice will reduce prices because…uhhh…markets. Seniors are incredibly adept at shopping for modern things and other activities like determining whether to give their bank account number to a stranger over the phone or remembering to eat.

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