On Thursday, the House did something truly surprising: it passed legislation fixing the way Medicare pays doctors. Or, if fixing is too strong a term, at least making Medicare's payments to doctors predictable. (For much more on the crazy way Medicare manages payments, see Sarah Kliff's explainer.)
At the National Review, Yuval Levin has a thoughtful assessment of the House legislation, and why he opposes it. It's worth quoting at length, in part because it illuminates an important tension right now in Republican health-care policy thinking. The GOP's campaign to eliminate or overhaul Obamacare, Medicaid, and Medicare are in tension with any effort to effectively govern the programs. This didn't much matter when Republicans were in the minority, but now that they control Congress, it's becoming a bigger issue.
For the next five years, physician payment rates in fee-for-service Medicare would increase by 0.5 percent per year. After that, physician payments in Medicare are supposed to be determined by a new payment system that’s meant to move away from paying for volume toward paying for quality and outcomes. This is basically a replacement of a blunt technocratic instrument with a fine technocratic instrument—and fine technocratic instruments are very often even worse, indeed much worse, than blunt ones.
The portion of the bill laying out how this is supposed to work adds up to a 120-page demonstration of why the government should not be acting as a health insurer. It draws precisely the wrong lesson from the SGR experience, concluding in essence that, because the Medicare bureaucracy could not manage a crude price-control mechanism without rewarding volume over quality in counterproductive ways, that same bureaucracy should now be assigned to define quality, measure it, and reward it.
The bill text brims with confidence in the capacity of central planning and public-interested management ("In order to involve the physician, practitioner, and other stakeholder communities in enhancing the infrastructure for resource use measurement, including for purposes of the Merit-based Incentive Payment System under subsection 1833(z), the Secretary shall…), in the clarifying power of federal information management ("In order to classify similar patients into care episode groups and patient condition groups, the Secretary shall…") and in the potential of the bureaucracy to stand above American health economics and render objective assessments of the relative performance of its parts ("Not later than January 1, 2017, the Comptroller General of the United States shall submit to Congress a report examining whether entities that pool financial risk for physician practices, such as independent risk managers, can play a role in supporting physician practices, particularly small physician practices, in assuming financial risk for the treatment of patients.")
The core insight underlying the conservative approach to Medicare reform in recent years points in precisely the opposite direction from this proposed payment system. It suggests that the way to contend with the unavoidable complexity of health economics in a free society is not to internalize that complexity in a bureaucracy that seeks to manage the whole but to externalize it in individual consumer decisions that never seek to manage more than small, individual parts.
There's wisdom in Levin's post. Blunt, simple approaches often are superior to finely tuned technocratic plans. There are real difficulties with the government's efforts to measure the quality of health-care services — a much more subjective concept than the quantity of health-care services.
But the idea that the private market manages to effectively price American health care is ... bizarre. Medicare has its problems, but this is the current state of pricing in the market that Levin wants to replace it with:
Hsia and her colleagues compiled reams of data about how much more than 100 hospitals charged for basic blood work. The prices these facilities charged consumers were all over the map.
The charge for a lipid panel ranged from $10 to $10,169. Hospital prices for a basic metabolic panel (which doctors use to measure the body's metabolism) were $35 at one facility — and $7,303 at another ... Hsia's previous research looked at the cost of an appendectomy in California and found similarly gigantic variation. For an appendectomy with no complications, she found that hospitals in the state would charge anywhere between $1,529 and $186,955.
Americans pay vastly higher prices than residents of any other country, they know almost nothing about the prices they pay, and the cost of particular treatments vary wildly for no discernible reason depending on who's paying and where the service is being delivered. American health-care pricing is an insane mess — and Medicare, for the most part, pays much less than private insurers for the same services. I'm open to certain forms of premium support, but I think pricing is a particularly terrible argument to turn more of health care over to private insurers. (Here are 15 charts showing how nuts American health-care prices are as compared to those in other nations.)
What's important to understand about Levin's post is that it really isn't an argument for fixing Medicare pricing. It's an argument for not fixing Medicare pricing — because the more problems Medicare has, the more politically vulnerable it will become.
Levin is a supporter of moving Medicare to a voucherized, premium support system, and a big part of his beef with the House doc fix is it doesn't do that. Indeed, by making Medicare work a little more smoothly, it does the opposite of that. As he writes, "The most relevant question is about whether the bill as a whole makes a larger reform toward a premium-support system more or less likely." In this case, he concludes, "Indulging liberals in this technocratic fantasy is not a step toward the Medicare reforms we need."
There is a deep tension in conservatism right now between those who want to use Republican control of Congress to heighten the contradictions in America's social programs, hoping the resulting mess will create opportunities for conservative reform, and those who want to try to improve those programs.
You can see it particularly clearly in Obamacare, where Republicans are working toward strategies, like the King v. Burwell case, that would sabotage the law in the hopes that the resulting policy mess clears the way for some version of repeal-and-replace (though the "replace" part remains vague, to say the least).
But this approach is present, in gentler form, in Levin's article, too. Republicans want to devolve Medicare to private insurers. That's a tremendous political lift, and the fewer problems there are in Medicare, the harder that lift becomes. One reason conservatives are frustrated with Boehner right now is that in his effort to make Medicare work a bit better in the short term he's potentially making it harder for Republicans to change Medicare completely in the long term.