The Reality-Based Community

When I started out in public policy, one of my mentors worked in city government. Abandoned properties were a serious local problem. Many became shooting galleries or crack houses. Others simply became overgrown eyesores that dragged down property values in the surrounding community.

The city had a cumbersome condemnation process that resulted in a long waiting list of properties. Aldermen were constantly screaming about it and intervening to move their constituents ahead in the queue. There was always talk of a streamlined process, whereby the Mayor could condemn these properties more quickly and efficiently.

I asked my friend why this never seemed to go anywhere. “Oh,” he said. “The aldermen would never allow that.” The maddening red tape provided too many valuable opportunities to perform constituent services for the aldermen to give it up.

Something like that is occurring in health reform. Last October, Jonathan Chait captured the spirit of this pincer strategy in one of the great thumbnail sketches of the health reform debate:

One could muster ideological extremism to make the case that the government has no business subsidizing health insurance for people who can’t get it. Alternatively, one could make the equally nutty case that Medicare should not lose a single dollar from its budget, however wasteful and inefficient it may be. But no political philosophy on earth could justify both of these fanatical positions at once. Somehow, though, the Republican Party has managed to stake out this absurd territory –Claude Pepper minus the social conscience, Milton Friedman without the small government.

Its total lack of intellectual merit aside, this odd philosophical hybrid offers the GOP maximum demagogic potential.

If anything, this strategy is more politically potent now than it was in autumn 2009. Voted into office by the electorate of 2020, President Obama faces a much older and whiter midterm electorate akin to that Michael Dukakis confronted 22 years ago. Republicans attack Democrats for failing to curb entitlement spending, while simultaneously scoring points attacking Democrats for sensible but unpalatable measures such as curbing Medicare Advantage overpayments. Such fiscally conservative measures enjoy wide support among policy experts across the board. This fact is no more politically relevant than is the fact that Bush administration officials regard Donald Berwick as uniquely qualified to lead Medicare and Medicaid in the era of health reform. Republicans attack Democrats for one-size-fits-all efforts to curb the growth in Medicare spending, while simultaneously attacking Democrats for “micromanaging” things through comparative effectiveness research and related efforts.

(See Ram Krishnamoorthi for more on these points.)

Amid all the noise and self-contradictory rhetoric, it’s worth asking what the alternative, positive vision might be among the most substantantive Republicans. Former HHS Secretary Michael Leavitt provides one answer in a recent Washington Post op-ed. In addition to echoing the above Republican talking points, he says:

What’s needed is a new vision for Medicare. Instead of micromanaging prices, the federal government should provide oversight of a marketplace in which cost-conscious seniors choose among competing insurance and delivery system options. That’s how the new drug benefit works, and costs have come in much lower than expected because genuine price competition drives down costs much more than any payment regulation can.

As I’ve written elsewhere, This is a very poor foundation to either control costs or operate an effective Medicare program. Let’s start with the new drug benefit, Medicare Part D. Amazingly, the program’s estimated long-term unfunded liabilities appear to exceed those of the entire Social Security system. Part D included (until health reform) sloppy features such as the donut hole. It forbad strong government bargaining over drug prices.

In just about every way, Part D is less fiscally responsible and less carefully crafted than this year’s health reform. In hindsight, I’ve also come to believe that it was politically and substantively irresponsible to enact such a poorly-targeted and costly Medicare expansion without a more careful balancing of social needs across different age groups.

As for Leavitt’s vision of consumer empowerment, there is definitely a group of healthy, relatively affluent people who could assume these responsibilities and risks. I’m intrigued to see how these consumers would behave differently–say towards knee replacements and CAT scans under high-deductible plans in which their own money is on the line. We know too much-from the RAND Health Insurance Experiment and from other studies–to trust such arrangements could be safely implemented within less healthy and less affluent patient groups.

It’s especially far-fetched to believe that consumer empowerment can markedly lower costs for Medicare recipients. As Austin Frakt notes, this is the animating and largely-failed vision behind Medicare Advantage, a program that serves the healthiest segment of Medicare recipients. I wish individual patients had the knowledge or the bargaining leverage to discipline the medical marketplace as consumers discipline markets for breakfast cereal or home computers. I see little evidence to support this view.

And let’s be real here. Medicare expenditures are concentrated within a sick group of elderly people who face life-threatening, life-altering, or disabling illnesses such as cancer, stroke, heart disease, and dementia. Is it smart or wise to cast them as “cost-conscious seniors [who] choose among competing insurance and delivery system options?” Is there any evidence that seniors (or their families) want to assume these burdens and risks? Is there any evidence that the American public would stand for that, or that these seniors are equipped to perform these tasks well?

Ironically, Leavitt’s essay made me even more conscious of the advantage of the public option, Medicare buy-in, and other efforts to use government’s great market power to discipline Medicare expenditures. We couldn’t get 60 Senate votes for these proposals. They attracted expected heat from traditional conservatives. Moreover, the entire supply-side of the medical economy was queasy about these measures. That’s too bad. These redacted elements of health reform are much more likely to control Medicare cost growth than anything Republicans offer. These redacted measures are also more likely to win the allegiance of the American people.