Cutting Health Care Costs With a Chainsaw

The Congressional Budget Office (CBO) recently published a letter to the House majority leader regarding a proposal to establish a commission to cut Medicare spending. The council would consist of five medical doctors or health care experts who will suggest cuts that the president must approve.

This is the model of the public option, a top-down plan that takes the individual’s (and doctor’s) agency out of health care. As the Baby Boomer generation becomes eligible for Medicare, the program will inevitably expand — expanding a plan while simultaneously requiring cost cuts is counterintuitive. Cuts are best made through increased efficiency and better preventive care, not because a panel of five people decides to stop covering certain procedures.

The CBO estimates that $2 billion can be saved in the latter half of the next decade. However, this amount is minuscule in comparison to the $1 trillion proposed cost of the public option in that same time period.

Two of the more disturbing recommendations from the CBO letter appear on page 5:

• Setting explicit and feasible quantitative goals for reducing outlays in the Medicare program.
• Incorporating an explicit fall-back mechanism (such as an across-the-board reduction in payments) if goals for cost reduction are not met.

Health care costs have increased significantly since the creation of Medicare. This can be attributed in part to cost floors and the regulations imposed on doctors by Medicaid and Medicare. As it is, some doctors cannot afford to accept Medicare patients, and some are reimbursed for less than the required procedures cost. These added costs are foisted onto private insurance companies.

The Kaiser Family Foundation estimates that Missouri spent $7,029 per enrollee in 2004, slightly below the national average. Could these costs be lowered? Probably, but outright cuts to what treatments will (and won’t) be paid for will only have a dire outcome for the health care system.

Health care costs need to come down, but mandating cuts is not the best way to achieve that. Instead, increasing efficiency by lowering regulatory barriers or lowering fixed costs through tort reform, in order to lower malpractice insurance rates, would help ensure that patient needs continue to be met. Mandated cuts are just another way of imposing health care rationing.