An Important Connection: Improving Health Cost Trends and the Timing of Reform

June 1st, 2013 at 11:29 am

Upon reading this morning’s papers’ take on the Social Security and Medicare financing reports from their trustees, I’m left with this thought:

Suppose someone you really wanted to beat in a race challenged you to a hundred yard dash.  You figure you can take them on a good day, but you just sprained your ankle dancing the Macarena at your cousin’s wedding (and the less said about that, the better).

So your best move is to say: “sure, I’ll race.  But not until my ankle is healed.”  Right??

So it is with Medicare and Social Security.  As I note here (follow the links), there are reasonable changes that could be made to shore up their finances over the long term, ones that meet the critical criterion of protecting economically vulnerable beneficiaries (which defines most recipients of both social insurance programs).  Re Medicare, for example, Van de Water suggests:

Possible measures include ending Medicare’s overpayments to pharmaceutical companies for drugs prescribed to low-income beneficiaries, increasing funding for actions to prevent and detect fraudulent and wasteful Medicare spending, restructuring Medicare’s cost sharing and Medigap supplemental insurance (while protecting low- and moderate-income beneficiaries), and raising premiums for better-off beneficiaries.

(Note the absence of raising the eligibility age, a uniquely bad way to generate Mcare savings.)

The question is, can we trust this Congress to make such changes in a way that protects beneficiaries.  And the answer to that is “no.”

In this regard, the recent good news about slower growth in health care costs should be thought of as a respite, a chance for our ankle to heal before we run the 100.  I’m totally with all the caveats out there in terms of how much we rely on these favorable trends persisting—I’ve been careful to always raise such caveats myself.

But the fact that, for example, Medicare spending per beneficiary is projected to grow at an annual rate of 3.7% over the next decade compared to its average of 7.6% from 2000-10, means we can a) ignore calls for immediate slash and burn, b) implement the ACA, which seems to be helping, and c) build and case for both progressive reforms and a more enlightened politics to implement them.

Think about that as you read a bunch of predictable articles coming out soon saying, “wait a minute—these health cost trends could evaporate, no one really knows their origin, we must act now!”  Better to stay off the dance floor for a while and get ready for the race when the timing is right.

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