Some Honesty in the Medicare Debate, Finally

In the Washington Post, Ezra Klein has an interview of Rep. Chris van Hollen, who sits with Rep. Paul Ryan on the House Budget Committee.  The interview is here.  Klein does an admirable job of keeping the discussion on an even rational basis.

As one example, many opponents of the Ryan "premium support plan" claim that it cuts Medicare benefits, while the Affordable Care Act did not cut benefits.  See for instance Eugene Robinson in the WaPo who says this:

"The Affordable Care Act, otherwise known as Obamacare, slows the rate of growth of payments to Medicare service providers by more than $700 billion over a decade. But no impact is felt by seniors themselves, whose benefits and costs remain the same."

Sarah Kliff, in an otherwise very informative post, makes a statement that is very similar:  

"It’s worth noting that there’s one area these cuts don’t touch: Medicare benefits. The Affordable Care Act rolls back payment rates for hospitals and insurers. It does not, however, change the basket of benefits that patients have access to."


Now current Medicare does not pay anything directly to beneficiaries; the beneficiaries visit hospitals and doctors, who are paid directly by Medicare.  ACA does cut payments to doctors, hospitals, and some private insurers, and Kliff's otherwise fine post details quite well what those cuts are (they are very complex).  To say that ACA's cuts to doctors, hospitals, and private insurance companies (who provide supplemental Medicare insurance) are not cuts to benefits is really semantics.   Taken to an extreme, ACA could have cut doctors' reimbursement rates to Medicaid rates (extremely low, that is) and the ACA sympathizers would still be saying "but we didn't cut any benefits."  

Getting back to the Klein interview of Rep. van Hollen, there is this exchange.   I like Klein's question more than van Hollen's answer, which doesn't really address the question  (though he does have a valid point on what ACA attempts to do).

EK: Until now, I think that insofar as folks knew anything about the Medicare debate, they probably thought that Republicans had a plan to cut Medicare spending, but it was a bit cruel, and Democrats were completely unwilling to touch Medicare spending at all. I think we’re starting to get closer to the truth here, which is that both parties have very different visions for how to cut Medicare spending. But one thing the Democrats like to say is that they’re just cutting providers, not beneficiaries. But providers often pass their costs along to beneficiaries, either by making them pay more or giving them worse service. So how real is that distinction?

CVH: Obviously, if you were just to do across-the-board, arbitrary cuts, that would be the case, but the whole idea behind Obamacare is to change the incentive structure behind Medicare so the payments to providers focus on the value of care rather than the volume of care.

So, for example, before the Affordable Care Act was passed, hospitals would get reimbursed every time a patient was readmitted to a hospital even if they were readmitted continuously for the same underlying condition. Hospitals had no financial incentive to coordinate the care of the condition once the beneficiary left the hospital. We’re now changing the model so hospitals don’t get reimbursed every time the patient gets readmitted. Now they’ll get readmitted for managing that underlying condition. There’s also a major initiative underway to better coordinate care for dual-eligibles, people both on Medicare and Medicaid, who are a small portion of the population but a very high percentage of the costs. There are lots of misaligned incentives between the Medicare and the Medicaid program, and we’re working on them.