The Health Care Portion Of The Deficit Commission: A ‘Grab Bag’ Of Proposals

Ezra Klein calls out the President’s Deficit Commission — which released its final report earlier this morning — for showing “cowardice” in its proposed recommendations for controlling health care spending — the single biggest driver of the deficit. “The plan’s health-care savings largely consist of hoping the cost controls (IPAB, the excise tax, and various demonstration projects) in the new health-care law work and expanding their power and reach,” Klein writes. “But the commission ‘does not take a position’ on the new law” or “put its weight” behind any single measure to reduce health care spending.

Indeed, the commission’s “grab bag” approach was likely intended to secure the 14 of the 18 votes, but also a reflection of the reality that real cost control would require a patchwork of solutions. No one policy will win bipartisan political support or serve as a silver bullet for slowing the growth of health care spending.

So is the grab-bag any good? The recommendations for expanding the successful payment reforms in the Affordable Care Act, strengthening the Independent Payment Advisory Board (IPAB) — which will advise Congress on how to control health care spending — establishing “a robust public option in the health care exchanges” and “moving toward some type of all-payer system” are probably worth pursuing. Fixing the sustainable-growth formula (the so-called Doc-Fix) is also a good idea.

The commission is also proposing reforming the Medicare cost-sharing rules, which it describes as a “hodge-podge of premiums, deductibles, and copay.” “Because cost-sharing for most medical services is low, the benefit structure encourages over-utilization of health care. In place of the current structure, the Commission recommends establishing a single combined annual deductible of $550 for Part A (hospital) and Part B (medical care), along with 20 percent uniform coinsurance on health spending above the deductible,” the report says. But “it will be difficult if not impossible to ask the majority of beneficiaries to pay more or make do with less.” Seniors are already spending some 16 percent of their income on uncovered services and as the Kaiser Family Foundation’s Drew Altman points out,”nearly half (47%) of all elderly and disabled people on Medicare have incomes below twice the federal poverty level…And two-thirds of the 8 million disabled people on Medicare who are under age 65 have incomes below twice the poverty rate.”

Then there is the commission’s approach to controlling long-term spending by capping total federal health care spending – including Medicare, Medicaid, the Children’s Health Insurance Program, FEHB, TRICARE, the exchange subsidies, and the cost of the tax exclusion for health care – at GDP+1 percent after 2020. If applied globally, leaves no room for the increase in the number of beneficiaries that is expected in future decades, which is projected to rise from 13 percent of the population today to 22 percent in 2050. The commission does note the target “should be measured on a per-beneficiary basis if it is applied only to certain federal health programs,” which is less onerous.

It also flirts with the idea of transitioning Medicare into a “premium support” program, but recognizes that the idea — which would transfer future beneficiaries out of Medicare and give them a voucher that is intended to not keep up with health care costs — “carries serious potential risks” and only recommends running a pilot program of the concept for federal retirees in FEHBP. The commission suggests that if health care costs are projected to increase faster than GDP plus 1 percent, Congress and the President should consider “moving to a premium support system for Medicare” (among other options).

Significantly, here, the committee’s decision to give Congress and the President a list of other options to consider if spending increases faster than the cap is perhaps the strongest demonstration of its ‘leave it to others’ approach and one for which the badge of “cowardice” may be well earned.