Controlling health care costs: The Democrats have a plan and Paul Ryan, GOP Budget Czar, doesn't

Ezra Klein at WaPo's "Wonkbook," on controlling health care costs:

(T)he reality is that Democrats have a plan and Ryan doesn’t. But the perception, at this point, is just the opposite.

At the heart of Ryan’s budget are policies tying the federal government’s contribution to Medicare and Medicaid to the rate of inflation — which is far, far slower than costs in the health-care sector typically grow. He achieves those caps through cost shifting. For Medicaid, the states have to figure out how to save the money, and for Medicare, seniors will now be purchasing their own insurance plans and, in their new role as consumers, have to figure out how to save the money. It won’t work, and because it won’t work, Ryan’s savings will not materialize.

Even Ryan’s fans agree you can’t hold health-care costs down to inflation. But even if you grant that Ryan’s target is too low, his vision for reforming Medicare would like miss a more reasonabke target, too. Consider the program Ryan names as a model. He said his budget converts Medicare into “the same kind of health-care program that members of Congress enjoy.” The system he’s referring to is the Federal Employee’s Health Benefits Program, and cost growth there has not only massively outpaced inflation in recent years, but actually outpaced Medicare, too. Ryan’s numbers are so fantastic that Alice Rivlin, who originally had her name on this proposal, now opposes it.

Democrats don’t just have a proposal that offers a more plausible vision of cost control than Ryan does. They have an honest-to-goodness law. The Affordable Care Act sets more achievable targets, and offers a host of more plausible ways to reach them, than anything in Ryan’s budget. “If this is a competition betweenRyan and the Affordable Care Act on realistic approaches to curbing the growth of spending,” says Robert Reischauer, who ran the Congressional Budget Office from 1989 to 1995 and now directs the Urban Institute, “the Affordable Care Act gets five points and Ryan gets zero.”
The Affordable Care Act holds Medicare’s cost growth to GDP plus one percentage point, which makes a lot more sense. It’s the target Ryan’s Medicare plan originally used, back when it was called Ryan-Rivlin. But the target is not really the important part. The important part is how you achieve the target. And the Affordable Care Act actually includes reforms and new processes for future reforms that would help Medicare — and the rest of the medical system — get to where the costs can be saved, rather than just shifted.

The Affordable Care Act’s central hope is that Medicare can lead the health-care system to pay for value, cut down on overtreatment, and cut out treatments that simply don’t work. The law develops Accountable Care Organizations, in which Medicare pays one provider to coordinate all of your care successfully, rather than paying many doctors and providers to add to your care no matter the cost or outcome, as is the current practice. It also begins experimenting with bundled payments, in which Medicare pays one lump-sum for all care related to the successful treatment of a condition rather than paying for every piece of care separately. To help these reforms succeed, and to help all doctors make more cost-effective treatment decisions, the law accelerates research on which drugs and treatments are most effective, and creates and funds the Patient-Centered Outcomes Research Institute to disseminate the data.

If those initiatives work, they head over to the Independent Payment Advisory Board (IPAB), which can implement cost-controlling reforms across Medicare without congressional approval — an effort to make continuous reform the default for Medicare, even if Congress is gridlocked or focused on other matters. And if they don’t work, then it’s up to the Center for Medicare and Medicaid Innovation, a funded body that will be continually testing payment and practice reforms, to keep searching and experimenting, and when it hits on successful ideas, handing them to the IPAB to implement throughout the system.

The law also goes after bad and wasted care: It cuts payments to hospitals with high rates of re-admission, as that tends to signal care isn’t being delivered well, or isn’t being follow up on effectively. It cuts payments to hospitals for care related to infections caught in the hospitals. It develops new plans to help Medicare base its purchasing decisions on value, and new programs to help Medicaid move patients with chronic illnesses into systems that rely on the sort of maintenance-based care that’s been shown to successfully lower costs and improve outcomes.

I could go on, but instead, I’ll just link to the Kaiser Family Foundation’s excellent primer (pdf) on everything the law does. The bottom line is this: The Affordable Care Act is actually doing the hard work of reforming the health-care system that’s needed to make cost control possible. Ryan’s budget just makes seniors pay more for their Medicare and choose their own plans — worthy ideas, you can argue, but ideas that have been tried many times before, and that have never cut costs in the way Ryan’s budget suggests they will.

That’s why, when the Congressional Budget Office looked at Ryan’s plan, they said it would make Medicare more expensive for seniors, not less. The reason the deficit goes down is because seniors are paying 70 percent of the cost of their insurance out-of-pocket rather than 30 percent. But that’s not sustainable: We’ve just taken the government’s medical-costs problem and pushed it onto families.
No one who knows health-care policy will tell you that the Affordable Care Act does everything we need to do in exactly the way we need it done. That’s why Resichauer gave it a five, not a 10. But it does a lot of what we need to do and it sets up systems to help us continue doing what’s needed in the future.

Ryan’s proposal, by contrast, does almost none of what we need to do. It appeals to people who have an ideological take on health-care reform and believe we can make Medicare cheaper by handing it over to private insurers and telling seniors to act like consumers. It’s a plan that suggests health-care costs are about insurance, as opposed to about health care. There’s precious little evidence of that, and when added to the fact that Ryan’s targets are so low that even his allies can’t defend them, the reality is that his savings are largely an illusion.

The Affordable Care Act has taken a lot of hits. It’s not popular, and though very few of the political actors confidently attacking or advocating it can explain the many things it’s doing to try and control costs, people have very strong opinions on whether it will succeed at controlling costs. But the irony of everyone demanding Democrats come up with a vision for addressing the drivers of our deficit in the years to come is that, on the central driver of costs and the central element of Ryan’s budget, Democrats actually have something better than a vision. They have a law, and for all its flaws, their law actually makes some sense. Republicans don’t have a law, and their vision, at this point, doesn’t make any sense at all.