Thursday, July 17, 2008

Theatrics In Medicare Bill, Bush Veto, Override

As Paul Krugman said in his July 11th column in the New York Times, the passing of the Medicare amendment bill by Congress was a welcome development. McCain was on the wrong side of the issue here and unsurprisingly a prominent absentee in the senate vote.

In a move that plainly sought to protect special interests, President Bush followed through on his earlier threat and vetoed the bill. But Congress moved quickly for a dramatic override of Bush's veto, so the bill has now become law. Apart from preserving the doctors' Medicare fee rates the bill reduces the subsidies payable to health insurers who offer Medicare Advantage plans.

Here are some interesting features about all this activity:
  • This is one of the rare times that Republicans were caught between two powerful special interests in healthcare who are both typically strong Republican supporters. The doctors and the AMA ended up on the winning side and the large private health insurers on the losing side
  • Many Republicans switched votes only after doctor groups targeted them in effective ad campaigns in their home voting areas, specifically publicising their opposition up to that point on the bill
  • Many Republicans ignored directives from their own party whips and Congress leadership, and of course broke from Bush on this as well. Facing difficult re-elections can be effective in prodding lawmakers to do the right thing
  • By tying the Medicare fee protection for doctors with doing away with subsidies for insurers, the Democrats (and some like-minded Republicans) have won a high stakes game of chicken

The logic behind encouraging private insurers to run any Medicare type plans is that they will do so more efficiently and cheaply than a more wasteful government. But the private plans have been costing the government 13% to 17% more than what the government incurs in running its own plans. So what's the justification for these private plans with their extra subsidies? So far I've heard nothing beyond empty catch phrases like "more patient choice."

Still, the financial implications of this bill are miniscule ($20 billion over five years) compared to the $2.25 trillion US healthcare expenditure in 2007. Even for these amounts this is basically a transfer of wealth between industry players that doesn't of itself lower total costs. Hopefully it is a prelude to other reforms that bring US health costs somewhat in line with those in the rest of the developed world.

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