GOP Must Call Democrats' Bluff On Medicare Cuts

Eric Cantor’s withdrawal from the debt talks with Joe Biden may be dominating the headlines for now but, in the long run, it may not matter much.

More negotiations, probably between President Barack Obama and Speaker of the House John Boehner, will take place and, unless both parties have a death wish, default on the debt isn’t going to happen. (Both parties may resign themselves to a variety of face-saving short-term extensions until the 2012 elections.)

The bigger news -- which is pretty meaningful -- is that Democrats have apparently floated real short-term cuts in Medicare before talking ended.

If the offer is something more than a political bluff (and that’s what I suspect it is), it’s hugely important.

The cuts the Democrats may have suggested -- cuts to provider reimbursements --  are the right ones. Medicare, as the largest medical payer in the country by a large margin, undergirds a medical system that pays workers, regardless of education, job title, or background, more than their counterparts in any other sector the Bureau of Labor Statistics tracks.

Controlling overall costs is going to require controlling labor costs and that, in turn, is going to require medical providers to be more productive or work for less. And cutting reimbursements to providers, if done correctly, won’t necessarily result in much that patients will notice: as much as doctors may complain about it, few are going to stop taking Medicare patients.

Furthermore, provider cuts could take place right away: For all its merits, the Ryan Plan isn’t nearly as much a small government manifesto as many of its acolytes think.

Nearly all of its meaningful Medicare cuts take place well in the future and, if history is any guide, would probably be repealed before taking effect even if they somehow pass into law. (Medicare cuts almost always have.)

Cuts to Medicare provider reimbursements now will take force now ad cut the deficit now. These types of painful but necessary short-term cuts, furthermore, are exactly the ones Republicans will have to go for if they actually want to reduce the deficit without raising taxes.

Although it may seem like good politics to let Democrats propose these types of cuts first--and then as part of a deal that also includes tax increases -- it does draw GOP political courage into question.

Even though there are plenty of good reasons to think that the offer is insincere, it may give the Democrats an upper hand in trying to show that Republicans are unreasonable. If Republicans are serious, they need to call Democrats’ bluff and propose even deeper cuts in Medicare and probably Social Security too.

Bitter medicine? Yup. But necessary.