What Medicare's Boss Can Learn from Ryan

You have to give the administration and congressional Democrats credit for talking point consistency. They’ve hammered away at one message: “Paul Ryan will kill seniors and the poor with a defined Medicare and Medicaid benefit plan.”

Don Berwick, Administrator for the Centers for Medicare and Medicaid Services jumped into the fray yesterday as well.  As Politico reported:

The man Republicans have derided as the “rationer-in-chief” charges that Republicans’ own budget proposals would end up rationing care to millions of Americans on Medicare and Medicaid.

'It is paradoxical really that with all this talk of rationing, the proposal we hear about how to fix American health care is to take it away from people. That’s from the very people who are crying rationing,' Don Berwick, the administrator of CMS, said in a wide-ranging interview with Politico. 'If you look at the proposed withdrawals of support to Medicare beneficiaries and Medicaid, it’s withholding care from the people who need the care. You tell me what that is?'

But let’s compare the two approaches in a bit more detail. As reported in Politico, “Obama’s budget proposal calls for $480 billion in savings from Medicare and Medicaid through 2023 and an additional $1 trillion in savings in the following decade.” How this occurs is unclear but Dr. Berwick points to eliminating waste, fraud, and abuse to do the job. Right…

Ryan’s plan has been pretty well demagogued, including by Dr. Berwick above, but actually calls for growth in Medicare and Medicaid spending to be capped at average costs in 2012 and then allowed to grow at the rate of the consumer price index. To claim that Ryan calls for withdrawal of support for Medicare and Medicaid is just plain wrong and quite surprising coming from such an eminent individual as Dr. Berwick. I guess this is the face of partisanship.

Medicare is bankrupting the country. It doesn’t matter whether the polls show the public not wanting any changes in Medicare. It doesn’t matter whether Republicans or Democrats win or lose the next election. Medicare’s bankruptcy is coming and the only way to avoid it is to spend less -- a lot less. The demagogues may win this round but in the end, the system will either radically change or completely collapse.

The reason Ryan’s plan calls for the lower percent of GDP spent on healthcare in 2050 is that he proposes slowing the growth of Medicare from a 6-7% increase each year to an increase that tracks CPI while at the same time projecting quicker economic growth.

Moreover, Ryan counts on health insurance companies to manage the system and control utilization. The current government plan calls for a central Independent Payment Advisory Board (IPAB) that will decide payments for healthcare and approve use of various programs. The proof that this approach will work simply doesn’t exist. Moreover, even Democrats in Congress are very uncomfortable with the idea.

Many have been outraged that health insurance companies would even have a role in the new system much less actually administer the whole thing. The typical meme here is that the insurance companies bleed the system, make too much profit, are too inefficient and too intrusive.

You can try to figure out how to reduce costs in a central office in Washington or you can simply give individuals a fixed amount of support, allow them to seek out the best deals for how to spend that money, and shop around for arrangements to maximize the value they receive. Ryan understands that the health insurance companies are actually the best means of implementing this market based approach. Take for example United Healthcare Group’s, recent study: Federal Health Care Cost Containment –How in Practice Can it be Done? Options with a real world track record of success.

This company, the largest health care insurer has actually achieved on a broad scale involving many patients and hundreds of thousands of physicians many of the hoped for reforms Dr. Berwick’s previous project, The Institute for Healthcare Improvement, sought to accomplish on a much smaller scale. United Healthcare makes a convincing case that they could actually accomplish the $540 billion dollars in savings of federal health care expenditures over the next decade if the programs they already have in place could be implemented widely in Medicare.

Dr. Berwick advocates an incremental approach to Medicare reform:

He pointed to health systems that are making improvements in readmission rates or prenatal care, such as Denver Health and Parkland Health and Hospital in Dallas. The challenge for CMS, he said, is to learn from successful programs and expand them nationally.

His approach, to have the federal agency enforce a nationwide approach to care, is a fantasy. Interestingly, he points to industry to model the proper approach to healthcare:

We afford to do it the way every other industry has done it, doing things right in the first place and by removing waste from products and services and reinvesting the harvest of smart waste reduction.

Here he’s correct. Industry can manage this sort of thing. Not the government. Just compare the Postal Service with FedEx.

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