Topic: Tax and Budget Policy

Tell Me That’s Not Your Final Answer

The congressionally chartered “Citizens’ Health Care Working Group” today released its final recommendations on how to reform America’s health care sector. (I commented on their interim recommendations here and here.)

As with many GOP-led health care reform efforts, this one began with leftist premises about the role of government. Recommendation #1 is that the federal government should “Establish Public Policy that All Americans Have Affordable Health Care.” Recommendation #2 is that the feds should “Guarantee Financial Protection Against Very High Health Care Costs.” (The group inadvertently neglected to cite any passage from the U.S. Constitution that actually grants Congress the power to do such things.)

Given those premises, there was little doubt that the group would recommend left-wing reforms. For example, the group claims to have developed both a “market–based model” and a “social insurance model” for achieving universal coverage. Yet the former is a mirror image of the statist Massachusetts health plan. What kind of “market-based model” increases taxes and government spending while forcing individuals to purchase government-defined insurance policies? Good grief.

I would give my right eye for a health care reform panel that would make this its charter:

To make health care of ever-increasing quality available to an ever-increasing number of people.

To me, that doesn’t just seem simple and non-controversial, it seems to be what everyone involved in health policy wants.

Moreover, a mission like that would force the panel to consider not just the goodness of its intentions, its knowledge of today’s health care sector, or its ability to do math, but also the incentives that its recommendations would create, and their long-term impact.

Let’s hope some enterprising panel-creator is reading this.

Aside from That, Mrs. Lincoln, How Did You Enjoy the Show?

A website called TheBudgetGraph.com offers a visual representation of federal spending based on President Bush’s proposed budget for fiscal year 2007. (Click here, then click on “View the Graph.”) It is truly a monstrosity.

But look more closely and you’ll notice that it only counts budget items to which Congress must fix a dollar amount every year. It completely ignores those parts of the federal budget where the dollar amount is set automatically by formula. (Those two categories are usually called “discretionary” versus “mandatory” expenditures, but that bifurcation is misleading. Nearly all expenditures are discretionary, with the possible exception of interest payments on the national debt.)

That latter category — which includes Social Security, Medicare, Medicaid, interest payments on the debt, etc. — comprises 63 percent of the federal budget. That makes “The Budget Graph” more like “a visual guide to where one-third of your federal tax dollars go.”

Were the graph to count the entire budget, heck, I’d probably buy the poster.

(HT: Frederic Sautet.)

Medicare Politics Will Sink Quality Efforts

As David Hyman explains in Medicare Meets Mephistopheles (book forum today), Medicare’s already-high tax burden is set to explode when the baby boomers begin to retire in 2011. Yet for all that money, the quality of care that Medicare delivers is downright mediocre.

Some members of Congress, led by Senate Finance Committee chairman Chuck Grassley (R-IA), are using the threat of a cut in Medicare payments to force physicians to accept tying those payments to government-defined quality measures.

Physicians, led by the American Medical Association, are essentially responding, Ditch the planned pay cut – then we’ll talk.”

Who’s right? Whose approach will get seniors and taxpayers the most value for their Medicare dollars? No one really knows, and thus all the political wrangling.

But one thing can be known: the approach that Congress chooses will be determined by raw political power – not by what provides the greatest value. For example, if the physicians get their way, every bit of quality improvement will cost taxpayers more money, because the AMA won’t even support pay cuts for lousy doctors.

As I explain in a recent paper, that is exactly why we don’t want Congress itself in the business of measuring and rewarding health care quality. That task is better left to a competitive market process. Congress should confine “pay-for-performance” to private Medicare plans, and encourage greater enrollment in private plans by giving seniors risk-adjusted vouchers rather than a defined benefit.

Breathtaking

The front-page story on tariff suspensions in today’s Washington Post has to be one of the worst examples of economic policy reporting that I’ve ever seen – and I work in health policy.

(Cato’s trade policy scholars convey that they were particularly suprised that such an article appeared in the Post, whose reporting is normally quite trade-literate.)

Emergency Care Providers Decline “Free” Money

A couple of years ago, Congress created a $1 billion fund to reimburse providers for emergency medical care delivered to illegal immigrants who don’t pay their bills, but providers aren’t signing up for the free money.

According to the Chicago Tribune, “In Illinois, one of six states slated to receive the bulk of the money, just 6 percent of the $12.1 million available to hospitals, doctors and ambulances has been spent.”  Why so little?

The biggest deterrent to applying for the money, [hospital officials] explain, is concern about time-consuming paperwork that can offset any money gained…

Another problem for some is more of a moral issue, a concern by hospital officials that questions about immigration status will scare off already worried immigrants. These hospitals are uneasy with the requirement that they document whether their patients are eligible for the federal money.

If winning congressional approval of this handout required loading it down with so much red tape that even its intended beneficiaries don’t want the money, then might this be a government program that Republicans could eliminate?  Maybe? 

Don’t hold your breath.  One of the program’s biggest supporters is conservative Republican Jon Kyl of Arizona, a member of the Senate leadership.  Back in 2004, Kyl boasted that he had secured $42 million for Arizona through this program.  (Only $5 million of that has so far been spent.)

Help Wanted: New Medicare Administrator

Dr. Mark McClellan recently announced his intention to resign from the position of administrator of the Center for Medicare and Medicaid Services (CMS). 

Finding a replacement shouldn’t be hard.  The job description is simple.  The next Medicare administrator must run a sprawling program that buys health care for approximately 42 million Americans in every state of the union, and he must simultaneously:

  1. Spend less money on health care (to keep Congress and the Administration from calling for your head);
  2. Spend more money on health care (for example by averting the 5 percent cut in physician payments scheduled to take effect next year) to keep providers from calling from your head - and seniors from doing so once they can’t find a doctor to treat them;
  3. Using modest carrots and no sticks, dramatically improve the mediocre quality of care currently being delivered to Medicare beneficiaries - but don’t interfere with the way in which providers deliver health care, particularly if a low-quality provider has the ear of a congressman or employs lots of people in a swing district;
  4. Buy lots of pharmaceuticals for seniors - but don’t pay too much (because Congress and the Administration will have your head) or too little (or the pharmaceutical companies will stop developing innovative products);
  5. Using inadequate and outdated information, set the price that Medicare will pay for every single good and service that beneficiaries need in every county in the United States;
  6. Assure Congress that you are protecting the program from fraud and abuse, even though your own fraud control personnel have doubts about whether they have the tools to do so, and the program is routinely labeled as being at “high risk” for fraud;    
  7. Prepare Medicare for the impending tidal wave of baby boomers, who will stop paying into the system and will start expecting benefits in 2011; 
  8. Keep a straight face while you explain that Medicare will be there for future generations, even though your trustees have determined that putting just one part of the program in actuarial balance for the next 75 years will require an “immediate 121% increase in the tax rate or an immediate 51%reduction in expenditures;”
  9. Surrender your every waking hour to the thankless task of bailing out a sinking ship while being forced to cheer on the efforts of your bosses (in the Administration and Congress) to drill more and bigger holes in the bottom; and finally 
  10. Walk on water in your (non-existent) free time. 

The last item on the list is obviously a stretch, but the next administrator of CMS will face all of the other challenges. 

How did the Medicare program – born of such high hopes and good intentions – end up in this mess?  What can we do to address these problems? 

For some answers to these questions, along with a satirical perspective on the Medicare program, attend the book forum for Medicare Meets Mephistopheles at the Cato Institute on September 21, 2006.  Sign up here.

Beggar Thy Neighbor

This item is a month old, but worth taking the time to read – especially if you work on health policy in the states. Paul Gessing is the president of New Mexico’s Rio Grande Foundation. That state’s governor, Bill Richardson, is planning a run for the presidency and recently proposed expanding New Mexico’s Medicaid program. In an article for National Review Online, Gessing does a superb job of explaining why that is the wrong approach. Other state think tanks should take note.