McConnell Gambles on Real Medicare Cuts

After months of proposing symbolic actions (cuts in domestic discretionary spending), decent if politically risky ideas (the Ryan Medicare reform) and one truly terrible one (we’ll default on the debt but, by paying foreign bondholders ahead of Social Security beneficiaries, we’ll somehow avoid “real” default), the Republican Party is, at last, talking about serious entitlement reform.

Senator Mitch McConnell’s decision to put Medicare—the single biggest entitlement program—in the spotlight makes a lot of sense. Nearly everything McConnell has said about the program  (its out of control costs and the need for reform) is right. If he actually wants to achieve reform and is willing to take big political risks to do it, the best place would be to start in the obvious one: current Medicare benefits. Although difficult, such changes can be made in a way that doesn’t seriously harm current beneficiaries. It could get past the White House and Senate, and would make real budgetary progress.

Here’s the logic. Short-term cost savings changes—which, as a practical matter, would need to involve a return of the “capitation” (basically provider fee caps) that was key to the 1990s Medicare reforms—offer the key to saving money right away without raising taxes. Other plans, including Paul Ryan’s, would let costs continue to grow until an entirely different system kicks in a decade or so hence.  Plans to cut in the future (which both parties have made a lot of) can be changed before they take effect. Cuts now, obviously, take place now.

Capping and even cutting provider fee reimbursements is the least bad option for containing costs. Wages in the medical sector, for all job types and skill levels, are already higher than those in any other of the 11 major private employment sectors the Bureau of Labor Statistics monitors.  Since nearly all medical jobs are skilled, prestigious, and higher paid than similar ones elsewhere in the world, furthermore, providers have no place to go. Although they’ll complain mightily, cutting government payments now won’t cause an exodus from the medical field. Yes, some specialist waiting lists will probably grow and creature comforts may disappear from a few hospitals but medical care itself probably would not suffer. (I’m not sure that Medicare should be paying for the lattes, hardwood-floor private rooms, and hotel-like dinner menu the hospital closest to me offers inpatients.)

Although Democrats will surely complain and blame Republicans for any ills that result, short-term cuts to Medicare that include real deficit reductions will be hard for the Senate to ignore or the President to veto.  So long as no benefits are actually removed—pretty easy—both parties can take credit for  “protecting” the program and “preserving” its future. Anyone who would oppose such cuts, once they pass the house, can be seen as the enemy of deficit reduction.

The effects of cutting payments right away, furthermore, would happen now. Since the savings from payments would accrue every year starting immediately, future cuts and reforms could be a lot less painful and controversial. Sure, immediate cuts to Medicare aren’t the most politically popular option and would almost certainly cost Republicans a handful of House seats and perhaps a Senate seat or two. But they’re the right thing for the nation’s future.

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