Medicare’s Fiscal Ailment
With Medicare facing unfunded liabilities that top $30 trillion, Washington is scrambling for ways to hold down the program’s soaring costs. And in the usual fashion, the proposals on the table ignore the fact that it is the government that created this problem in the first place.
One of the main ways ObamaCare attempts to address Medicare’s spending spree is by creating the Independent Payment Advisory Board (IPAB), a fifteen-member board empowered to reduce payments to health care providers.
But critics of IPAB have voiced concern that cutting fees for doctors and hospitals will make them less willing to accept Medicare patients and as a result, retirees will find it difficult to find doctors. For the same treatment, doctors today are already paid 20% less by Medicare than they are by private insurers. More than 13% of family physicians don’t accept Medicare patients, and a quarter of doctors limit the number they treat. Under ObamaCare, Medicare’s chief actuary predicts that the program’s payment rates will fall below even Medicaid’s, which infamously underpays doctors by more than 40%, in which case many more doctors will likely stop treating Medicare patients.
Taking a step back, it’s important to recognize that we’ve been debating what to do about skyrocketing Medicare spending since the program was first brought into existence four decades ago. One side argues that Medicare costs are out of control and we need to cut back on spending, and the other side retorts that cutting spending will lead to lower quality care. The usual compromise has been to try to root out “fraud, waste, abuse” through “smart” cuts. But these have proved elusive—Medicare costs continue to rise.
In reality, there are only two basic ways the government can curb its costs—rationing services by shrinking who and what Medicare covers or capping the amount it pays for services, i.e., price controls. Both approaches amount to reducing the amount of care Medicare provides. IPAB is not a novel concept—it is just another price control that will lead to a further shortage of doctors and hospitals, thereby subjecting Medicare patients to longer wait times.
Are we forced then to choose between spending ourselves into bankruptcy and limiting the quality of the elderly population’s medical care? No. This conflict is inherent only in a system where people are forced to subsidize each others’ health care, as we are today.
In a system where you are responsible for your own health care, what your retired neighbor spends on medical services is no one’s business but his own. If he wants to see an expensive specialist or try a costly drug, he is free to do so because the expense will come out of his own pocket (or whatever arrangement he has with a private insurance company). People in such a system pay for the quality of health care they want and can afford.
But in the system we have today, the quality of health care a retiree gets is everybody’s business because it is paid for by our tax dollars. And when taxpayers and their representatives decide that the price of a treatment is more than they are willing to shell out, they cut back by reducing coverage or capping prices. Individual retirees who may have benefited from the treatment then have no choice but to accept poorer quality care. In today’s system, the quality of health care a retiree can get depends not on the kind of care he wants and how much he has saved but on what government bureaucrats have decided they can “afford” to give him.
The solution to Medicare’s problems is not to allow government bureaucrats to dictate how much providers get paid and what level of care is “reasonable.” The solution is to challenge the fundamental idea of the program, which forces all of us to foot the bill for seniors’ health care needs.