President Obama’s Medicare cuts don’t cut it

But suppose the implausible happened and Congress accepted the president’s cuts. The cumulative effect of the ACA and the 2013 budget would drive providers out of Medicare, making it increasingly difficult for seniors to get the care they need. Medicare’s actuary reported that in 2019 the ACA reductions by themselves would cause 15 percent of hospitals, nursing facilities, and home health agencies to lose money. Piling on with more cuts will only make the problem worse.
 
{mosads}There is a better approach. A report that will be released this week by the American Enterprise Institute finds that competitive bidding can save more money than the President’s budget proposals without endangering the care of millions of seniors. The authors—Roger Feldman of the University of Minnesota, Robert Coulam of Simmons College, and Bryan Dowd of the University of Minnesota—estimate that competitive bidding that includes all Medicare plans could save $339 billion over a decade. That is the approach taken by Sen. Ron Wyden (D-Ore.) and Rep. Paul Ryan (R-Wis.) in their bipartisan Medicare reform proposal.
 
Better yet, these savings reflect what health plans already say they can do. They are based on the actual bids of Medicare Advantage plans and the actual cost of traditional Medicare to provide full benefits without scrimping on health services.
 
The president’s 2013 budget is less a serious policy proposal and more a political statement with misleading numbers mixed in to give it faux credibility.  But the document reflects a long tradition in Washington of using arbitrary cuts in provider payments to claim credit for budget savings that are elusive at best, and that have serious consequences for Medicare beneficiaries. Competitive bidding offers a better solution, but only if we are willing to give it a chance.
 
Antos is the Wilson H. Taylor scholar in healthcare and retirement policy at the American Enterprise Institute (AEI) and a health adviser to the Congressional Budget Office (CBO). Prior to joining AEI, Mr. Antos was assistant director for Health and Human Resources at CBO.