Now that the Republican Plan to Destroy Medicare™ has proven to be so incredibly unpopular with the American public, the GOP and their enablers in the Village Media are trying to shift voters’ focus away from that plan to the Democrats. Increasingly we hear the right-wing claim that Obama, Democrats and the Left don’t have any plan to “save” Medicare, which means that it will soon be driven into bankruptcy and go away on its own. Republicans, they argue, have to destroy Medicare in order to save it.
David Brooks may not be the worst such offender, but given his prime real estate over at The New York Times he could be the most influential. His latest column is classic Brooks, filled with false equivalencies, rhetorical straw men, and dubious comparisons all deployed in an effort to persuade his readers that the Republican Plan to Destroy Medicare™ will result in a consumer-driven, “continual, bottom-up process of [health care] innovation.” His “argument” such as it is, is a muddled mess, an exercise in rhetoric but not logic.
To understand how Brooks does this, one needs to keep in mind that the Medicare program itself is not the problem. Because it is a public program, Medicare is spared a lot of expenses with which private insurance companies have to contend. For example, Medicare doesn’t have to spend money collecting insurance premiums; Medicare is financed with the taxes already being collected by the Treasury Department. Second, Medicare doesn’t have to spend money figuring out how to negotiate and comply with competing state and federal insurance and health care regulation schemes. Third, Medicare doesn’t have to spend money to retain “top talent” by paying multi-million dollar executive salaries. Fourth, and most importantly, Medicare does not have to make a profit at the end of each year in order to please shareholders. This all means that – unlike private insurance companies – Medicare can devote nearly the entirety of its budget to actually paying for its members’ health care costs.
Additionally, Medicare establishes reimbursement rates for health care services and – because of the sheer size of the program – Medicare can establish reimbursement rates lower than those negotiated by the relatively smaller private insurance companies. As I’ve mentioned before, this makes Medicare patients less lucrative for care providers than are patients covered by private health insurance policies but
many – if not most – of the country’s private health care providers cover Medicare patients anyway, simply because there are so many people in the country reliant upon Medicare. In other words, the health care providers make less per Medicare patient than they would treating patients covered by private health insurance, but there are so many Medicare patients out there who need treatment that it doesn’t make financial sense to turn them away: “How can I sell these [health care services] so cheap? Volume!”
No, the only reason Medicare’s sustainability is currently at issue is because health care costs themselves are rapidly rising. The more expensive health care costs are, the more Medicare pays out. The projected shortfalls in Medicare don’t result from “the aging of the baby boomers” or from “government inefficiency,” they result from anticipated increases in these costs.
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Brooks begins his effort to provide cover for the Republican Plan to Destroy Medicare™ by claiming that “[s]ome Democrats simply want to do nothing as Medicare careens toward bankruptcy” and in support of his claim cites Nancy Pelosi’s statement that she will not support any plan that reduces Medicare benefits. Already we see that – for Brooks – “doing something” to save Medicare must mean – can only mean – reducing Medicare benefits. Brooks in effect begins his argument by assuming the outcome he wants to reach.
But this is absurd. The benefit that Medicare provides is the reimbursement of health care charges at a certain rate of reimbursement. That benefit can remain completely intact and Medicare can avoid its scary future bankruptcy if actual health care charges can be reduced.
Say, for example, the charge for a CAT scan is now $7,000 and Medicare reimburses the health care provider 85% of that charge; each scan now costs Medicare $5,950. If the charge to provide a CAT scan is expected to increase to $10,000 in 5 years, then the cost to Medicare (if benefits remain the same) will increase to $8,500. Medicare’s 85% reimbursement benefit has not changed, but the increase in the amount charged for health care has resulted in a 42.85% increase in actual Medicare expenditures. (I know this is a simplistic hypothetical, but it is intended merely to illustrate the point). Again – it is the expected increase in the amount charged for health care that is causing so many people to fret about Medicare’s sustainability.
Now, according to the GOP and Republican apologists like David Brooks, there is absolutely nothing that can be done to constrain rising health care costs. Accordingly, the only way to “save” Medicare is to either reduce the benefits it provides or – in “a radical piece of social engineering" (thanks, Newt!) – destroy it and replace it entirely with vouchers by which seniors can
fail to attempt to purchase private insurance on the open market. In order to sell this plan, Brooks and the GOP are counting on us to buy into their belief that rising health care costs are a force of nature, immutable and inevitable.
But the Democrats don’t accept this premise, and neither should we. Far from doing “nothing,” Brooks actually acknowledges in his column that the Democrats actually do have a plan to fix Medicare – and that plan doesn’t involve reducing Medicare benefits. Instead, it tackles rising health care costs directly in an attempt to rein those costs in. This probably sounds to most people like good common sense and something that should be tried. So Brooks mentions these efforts only to sneer at them in the most insincere way possible.
First, he asserts that “Democrats tend to be skeptical that dispersed consumers can get enough information to make smart decisions” about health care, and therefore intend to concentrate health care reform and “cost-cutting power” in the hands of centralized bureaucrats. But did you notice the switch? The man starts out talking about making health care decisions and seamlessly translates that into decisions about paying for health care. The two are not the same. And how, precisely, would the American people – a group of “dispersed consumers” – even go about making decisions that determine how health care charges will be paid for? This is rhetoric masquerading as argument.
And who are those bureaucrats that Brooks so clearly disdains? Well, there are those centralized officials who “decide how to set national reimbursement rates.” Uhhmmm, David? Medicare already does that. And how do you propose this should be changed? Should Nana and Papa take their chances with the hospital and negotiate Medicare reimbursement rates on their own?
There is also the Center for Medicare and Medicaid Innovation, which Brooks falsely claims is supposed to “organize medical innovation” apparently for the entire industry, like some kind of Soviet-style central-planning approach to innovation. Uhhmmm, David? No, it’s not. It is designed to keep tabs on different ways health care and payment models work, and make sure more efficient ways of doing the same thing are communicated to everyone else in the system. It is also intended to promote preventative medicine (keeping costs down by avoiding later, more serious health crises), improve record-keeping, and improve coordination between health care providers. The truth is nothing close to your thumb-nail description.
And there is the team of officials created to engage in cost-benefit analyses of medical care to avoid incurring costs for medical treatments that do not provide any actual medical benefit. This seems like a common sense, old school Republican kind of rational approach to cost-cutting that would appeal to Brooks, but he sneeringly dismisses this idea: “[I]f 15 Washington-based experts really can save a system as vast as Medicare through a process of top-down control, then this will be the only realm of human endeavor where that sort of engineering actually works.”
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So, what is David Brooks’s preferred solution? Why, “bottom-up engineering,” of course. And this is where the disingenuousness of Brooks’s column is made apparent. Brooks describes the Republican Plan to Destroy Medicare™ as providing “[s]eniors the opportunity to select from a menu of [private] insurance plans,” the cost of which would be partially offset by government vouchers. According to Brooks, allowing seniors to choose between private insurance companies would unleash the magic of the free market on the health care system, and drive costs down. In support of this idea, Brooks points to a number of examples in which competition-based insurance models have successfully driven down insurance costs elsewhere.
But, again . . . did you catch the switch there, did you see him palm that card? In the examples cited by Brooks what is driven down is the cost of insurance – not the cost of health care.
Now, it isn’t surprising that introducing competition into the insurance industry can drive down insurance costs. One of the biggest problems the country faces today with its insurance industry is that, owing to some vagaries in the way antimonopoly laws were enacted and interpreted years ago, insurance companies are able to set themselves up as effective monopolies in any given geographic area. In North Carolina, for example, if you do not belong to an employer’s health insurance plan then pretty much the only entity that provides health care insurance is Blue Cross/Blue Shield. In fact, for most of the United States any particular area will have only one or maybe two health insurance companies servicing that region. And they behave just as monopolists behave everywhere – in order to maximize their profits they charge as much as state regulators will permit them to charge. (Coincidentally, they also make some pretty heavy campaign contributions.)
Where competition has been introduced (as in the examples cited by Brooks) it isn’t surprising that health insurance costs have gone down. The same thing happens whenever you introduce competition into a market formerly dominated by a monopolist. For these reasons, I am a big fan of enacting laws that can inject competition back into the private insurance industry.
But don’t be fooled. The competitive, “bottom-up” solution that Brooks proposes is no solution at all. Allowing consumers to pick and choose between insurance companies might mean that we get more efficient, slightly cheaper insurance companies but it will have absolutely no effect on actual health care costs – and that is the fundamental problem that needs to be addressed.
No matter how efficient private insurance companies become (and it is highly unlikely they could ever match the efficiency of Medicare, with its built-in natural advantages), those companies will be forced to continue raising their rates to keep up with the unrestrained rising costs of health care. Moreover, health care costs are expected to continue to rise at a rate significantly greater than that of inflation. Because the vouchers that seniors will receive under the Republican Plan to Destroy Medicare™ are only allowed to grow at the rate of inflation, this will render those vouchers increasingly worthless and will ensure that over time more and more American elderly are left without any access to health care at all.
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Look, when it comes to creatively coming up with solutions to complicated and ever-shifting situations I’m generally as dubious about central planning as one can be. One of the things that I really enjoy about blogs and blogging is that it can create a kind of decentralized “hive-mind” where readers and commenters chime in and exchange ideas and points of view that together work toward a greater and better refined understanding of complicated problems. On the Web I have followed some lively discussions between writers in which, at the end of the day, one or both have acknowledged that their original thoughts on a subject were wrong or, at least, incomplete.
But I just don’t see how any kind of “bottom-up” solution presents itself when the fundamental problem that needs to be addressed is not the cost of health insurance, not the cost of Medicare, but the cost of health care itself. How are insurance companies supposed to compete with each other to demand that health care providers charge less for their services?
Although . . . . Wait a minute. I suppose that if sufficient competition and “bottom-up” pressure were placed on the insurance industry such that one company’s system eventually became so efficient it could capture a large part of the market for itself alone, then that company would be able to exert the kind of power necessary to force reductions in health care charges from providers. Oh, wait! I know of one such program already.
It’s called Medicare. And as Nancy Pelosi says: “Medicare is the Democrats’ plan.”