Can Obama Save Medicare?

President Obama thinks he can save Medicare from spiraling costs. Can he succeed?

His approach contrasts starkly with the one that Congressman Paul Ryan (R., Wis.) proposed last week. But, as it turns out, the two are surprisingly similar in an important way.

Obama would leave the basic structure of Medicare intact. Its foundation would remain as government insurance with free choice of providers and broad coverage of most medical services.

The plan attacks costs in a number of ways. More modest elements include efforts to reduce hospital errors. These could save $50 billion over 10 years, not to mention their value as a lifesaver for thousands of people. Measures to encourage greater use of generics would nudge down drug costs. Aggressive recovery of overpayments from Medicare Advantage plans would add some savings, as well.

The biggest payoff would come from new powers for the Independent Payment Advisory Board (IPAB), a panel of economists and health policy experts created by the health reform law. It would formulate significant cuts whenever Medicare spending rises more than a trigger amount, which is set at the increase in gross domestic product (GDP) plus one percent.

If Congress fails to act, the secretary of health and human services could implement a plan independently. For added clout, IPAB could sequester Medicare funds if neither Congress nor the secretary takes action.

These steps would supplement measures already contained in the health reform law. They include smaller subsidies for private Medicare Advantage plans and a slower growth rate for some hospital payments.

Congressman Ryan’s Republican plan offers a striking ideological contrast. It hands the cost-cutting ball to private insurance companies. They would eventually provide coverage for all seniors and have wide discretion to cut costs by limiting the choice of providers and slashing benefits.

But the ideological divide is not complete. Ryan realizes additional savings from an unlikely source: He keeps the Medicare cuts that are part of Obamacare. These are the same cuts that his party condemned as a betrayal of seniors during last year’s elections.

Could Obama’s plan succeed? Clearly, the cuts already contained in health reform will have an effect. Both parties now support them.

What about the IPAB? To succeed, it must have real teeth to resist pressures from outside interests. If it does, and that is a big if, it would be well-positioned to formulate solutions that are objective, evidence-based and fair.

What about the Ryan plan? It could succeed in cutting costs dramatically with the sledgehammer it gives to private companies. They face no outside pressures from special interests and respond solely to their own desire to maximize financial returns.

And by incorporating parts of Obamacare, the Ryan plan piggybacks on some of the political heavy lifting already done by Democrats.

At their core, the Obama and Ryan plans reflect fundamentally different views on the nature of Medicare. Obama sees it as a public trust with a comprehensive benefit structure that must be preserved. Ryan sees it as a form of public largess that can be altered if the expense becomes too great. Most people will judge the plans based on their own philosophical leanings.

But partisan dynamics are as important as ideology. As it turns out, some conservatives find major parts of Obamacare more appealing than they had let on. In the interests of bipartisanship, Congressman Ryan might begin the debate by acknowledging that, ideology aside, he owes a tremendous debt to his colleagues across the aisle.

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