Approximately 200 healthcare economists are urging Congress to reject a premium support model for Medicare and instead “support vigorous implementation” of last year’s health reform law. The economists – who are primarily academics – sent a letter to Congressional leadership saying there are two general strategies to Medicare spending and the “right” approach can be found in the Patient Protection and Affordable Care Act (ACA). “It supports research on identifying those procedures that work best,” according to the letter. “It emphasizes payment reforms and new ways of organizing delivery of care to slow spending growth while improving care,” it said, adding that the Congressional Budget Office (CBO) projects that the Affordable Care Act will decelerate annual growth of per-person Medicare spending over the next 10 years below the rate of overall economic growth.
House Republicans recently released their fiscal year 2012 budget, which seeks to convert Medicare to a premium-support system. Patients would be given a list of health plans from which to choose, and Medicare would subsidize the premiums. In their letter to congressional leaders, the healthcare economists said the term “premium support” mislabels a voucher program, which they say will end up forcing consumers to pay more. Citing CBO statistics, the economists expressed concern that current proposals link voucher payments to growth in the Consumer Price Index adjusted for population growth. “Because medical care costs are rising much more rapidly than the CPI, this guarantees that the value of the proposed Medicare vouchers would erode over time,” according to the CBO.
Some believe that forcing people to pay more out-of-pocket expenses will make them better healthcare consumers. Writing in The New Republic, Jonathan Cohn says that “The solution, as this argument goes, is to redesign insurance so that it forces people to pay more out-of-pocket expenses. And, within reason, it’s not a bad idea. Most economists, even those on the left, would agree that excessive coverage leads to higher health care spending. But redesigning insurance in a way that actually lowers spending and, by the way, promotes good health, is a lot more complicated than merely giving people “more skin in the game,” as conservatives like to put it. A new study by researchers affiliated with the Rand Corporation suggests why.
“The study, published in the American Journal of Managed Care, compares trends in medical spending by two groups of people — one group with traditional insurance and one with newly purchased high-deductible coverage,” Cohn notes. “It appears to be the largest study of its kind, and the three authors did their best to adjust for factors like age, occupation and underlying medical conditions. The result? People with high-deductible plans spent substantially less on their medical care. That’s good news. Or is it? Giving people more skin in the game has distributional consequences. It shifts the burden of medical expenses onto those people with the most serious medical problems, which is, arguably, what insurance is designed to prevent. In addition, discriminating medical consumers are not always intelligent medical consumers. People may decide to skimp on useful medical care rather than the superfluous kind.”
According to White House press secretary Jay Carney, healthcare savings are necessary to control the deficit. Carney said that the president would build on the work of his debt commission, whose recommendations he initially refrained from endorsing. Carney also praised a small group of senators from both parties, known as the “Gang of Six”, which is establishing a framework where a sharply divided Congress can compromise on deficits. “The president understands very well that healthcare spending is a major driver of our deficit and debt problem,” Carney said. “He believes we can achieve those savings in ways that protect the people that these programs are supposed to, and were designed to, support and help.”