'Do no harm' in healthcare costs

Obama's healthcare legislation must lead to reform of Medicare.

On this much, President Obama and Congress agree: A healthcare-reform package must not add to the federal deficit.

That's a necessary condition, and a tough one to fulfill. The last time Congress expanded coverage (a Medicare prescription drug benefit in 2003), it added substantially to America's healthcare tab. Last week, the nonpartisan Congressional Budget Office estimated that the House version of healthcare reform would actually increase federal budget deficits by $239 billion over 10 years.

But let's say lawmakers manage to "do no fiscal harm" and somehow pass a deficit-neutral package. Even that is not enough in an era of trillion-dollar deficits. Annual deficits add up to long-term debt. The US has dug a hole of debt all the way to China – the lar­gest holder of US bonds, and a worrywart about Uncle Sam's ability to pay.

By far the largest contributor to the country's ballooning debt is Medicare, the federal program for seniors. New healthcare legislation is the perfect place for lawmakers to commit to sopping up red ink from unmet Medicare obligations of nearly $40 trillion. [Editor’s note: An earlier version incorrectly compared unmet Medicare obligations with US economic output.]

The operative word in that paragraph is commit. Lawmakers may nip and tuck at Medicare in the final legislation, but actual overhaul is an unreasonable expectation. Simply getting to universal coverage – a historic change – will be hard enough without adding top-to-bottom reform of Medicare, which would be a complex and politically charged undertaking.

But lawmakers can, and should, lock themselves into Medicare reform. They can do this by including in their legislation the establishment of an independent commission to recommend comprehensive changes to Medicare payments and services.

This idea – in various incarnations – is starting to gain ground. The House version includes a blue-ribbon panel that would recommend changes in Medicare reimbursement rates. The White House is pushing expansion of an existing Medicare commission (called MedPac) or the creation of a new one to control health costs. Democratic Sen. Jay Rockefeller, from West Virginia, is pushing the commission idea in the Senate.

But some lawmakers strongly resist ceding even an inch of their control over Medicare payments to an outside body. They see the setting of reimbursements to local hospitals, doctors, and other providers as a indispensable service to their constituents. These constituents, of course, lobby intensely for increases, and lawmakers oblige. Therein lies the problem of leaving Medicare reform completely up to lawmakers.

A way to get past this would be to fashion a Medicare reform commission after one used to successfully decide the difficult issue of closing military bases that the Pentagon no longer wants. Under this scenario, a Medicare commission would make the politically courageous recommendations, and Congress would vote either up or down on the entire package. Congress still has a say, but the commission gives it political cover for difficult choices.

Committing to such a Medicare commission would send a signal that Congress intends to do more than stop digging a hole of debt in healthcare spending; it will begin to fill it.

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