Coercing Consciences

The Catholic Difference | Published on

By George Weigel

During his homily at the Mass pro eligendo Romano Pontifice [for the election of the Roman Pontiff] on April 18, 2005, Cardinal Joseph Ratzinger cautioned his fellow-cardinals that John Paul II’s successor would have to deal with an emerging “dictatorship of relativism” throughout the western world: the use of coercive state power to impose an agenda of dramatic moral deconstruction on all of society.

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The Case for Reforming Medicare with Premium Support

economics21 | Published on

By James C. Capretta

This article is published in the Brookings Institution's Premium Support: A Primer. The full report is available here.

In coming years, the United States must take steps to address the serious challenges of a large and growing fiscal gap as well as rapidly rising costs for both public and private purchasers of medical services. These problems are of course inter-related, as rapid cost growth in federal health entitlement programs is the most important reason that budget estimates show long-term deficits and debt soaring to levels that would be crippling for the American economy.

At the center of these twin challenges is the Medicare program. It is the largest federal health entitlement program, and Medicare spending is already putting tremendous pressure on federal finances due to many years of rapid cost growth. In the coming two decades, federal spending on Medicare is set to soar even more rapidly as the baby boom generation heads into its retirement years. Medicare is also the single largest insurance plan in the United States, and thus central to solving the problem of rapidly rising costs in the nation's broader health system.

While a political consensus has emerged that Medicare must be modified and reformed for both fiscal and health policy reasons, there is not yet a consensus around what are the key elements of an effective reform plan.

One prominent reform concept—so-called “premium support”—has been discussed for more than fifteen years as a possible organizing principle for modernizing Medicare. In previous debates, including one that occurred during deliberations of the 1998-99 National Bipartisan Commission on the Future of Medicare, premium support was advanced but ultimately not adopted by policymakers due to vigorous opposition from factions committed to preserving Medicare's current design.

And yet, despite the setbacks and continued opposition, premium support is the idea that just won't go away—and for good reason. That's because it's the most promising reform concept available, with the potential to bring about serious and continuous cost discipline without eroding the quality of care provided to Medicare's participants.

Medicare Fee-for-Service's Role in the Cost Problem

To see the value of premium support as a reform concept, it is necessary to understand how Medicare works today, and especially the role that Medicare plays in today's inefficient arrangements for delivering health care services.

Health care in the United States has many virtues. We have the world's most skilled physician workforce, as well as the world's most advanced hospitals and outpatient clinics. Most Americans have fairly ready access to the care that can be provided by the nation's sophisticated network of hospitals and physician offices through third-party insurance arrangements. U.S. health care also remains open to innovation in ways that other systems around the world are not.

But there's no question that U.S. health care also suffers from serious deficiencies. The primary problem is that health care in this country is highly fragmented and uncoordinated. In the main, physicians, hospitals, clinics, labs, and pharmacies are autonomous, financially independent units. They bill separately for the services they render to patients, with very little need to coordinate with anyone else in the system. The result is an incredible level of duplication and waste, overemphasis on procedure-based medicine, as well as burdensome paperwork, excessive bureaucracy, and a lack of accountability for the all-too-frequent cases of low quality care.

Why does health care delivery in this country suffer from these deficiencies? There are a number of reasons, but by far the most important one is the dominant role played by Medicare's traditional fee-for-service (FFS) insurance arrangements.

Medicare FFS is the largest and most influential payer in most markets. As the name implies, FFS pays any licensed health care provider when a Medicare patient uses services—no questions asked. Nearly 75 percent of Medicare's 49 million enrollees are in the FFS program (p. 173, Table IV.C1). Physicians, hospitals, clinics, and other care organizations most often set up their operations to maximize revenue from Medicare FFS payments.

For FFS insurance to make any economic sense at all, the patients need to pay some of the cost when they receive health care services. Otherwise, there is no financial check against the understandable inclination to agree to all of the tests, consultations, and procedures that could be possible, but not guaranteed, steps to better health.

But Medicare FFS does not have effective cost-sharing at the point of service. Yes, the program requires cost-sharing, including 20 percent coinsurance to see a physician, but more than 90 percent of FFS beneficiaries have additional insurance in the form of Medigap coverage, retiree wrap-around plans, or Medicaid that pays for nearly all costs not covered by FFS. Further, Medicare's rules require providers to accept Medicare's reimbursement rates as payment in full, effectively precluding any additional billing to the patient.

In the vast majority of cases, then, FFS enrollees incur no additional cost when they use more services, and health care providers earn more only when service use rises. It is therefore not at all surprising that Medicare's costs have risen rapidly over the years due a relentless rise in the volume of services used by FFS participants. For instance, the Congressional Budget Office (CBO) reports that the average beneficiary used 40 percent more physician services in 2005 than just eight years earlier (p. 15, Table 3). Spending for physician-administered imaging and other tests was up approximately 40 percent from 2002 to 2007 (p. 102).

Medicare's dominant FFS design also stifles much needed innovation in service delivery. As Mark McClellan, former Administrator of the Centers for Medicare and Medicaid Services (CMS), put it:

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A Choice of Two Temperaments

National Review Online | Published on

By Yuval Levin

What an odd pair of front runners Republicans appear to have ended up with. Not the usual conservative vs. moderate pairing, but two quite unusual political figures with remarkably similar policy and political profiles but remarkably different temperaments and dispositions.

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Books for Christmas

The Catholic Difference | Published on

By George Weigel

If memory serves, this past year saw electronic books top printed books in the sales figures at Be that as it may, books — real books — still make wonderful Christmas gifts. Here are some recently published (and read) titles I can recommend with enthusiasm.

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The Most Sacramental Season

The Catholic Thing | Published on

By Stephen P. White

Several years ago, I had the good fortune to spend Christmas just outside of Rome. There is a town called Rocca di Papa perched high in the Alban Hills, and I visited there by mistake one afternoon because I'd boarded the wrong bus. As I waited in the piazza for a new bus to take me back from where I came, I noticed a sign on the door of one local establishment. It read: “Partito Comunisto di Rocca di Papa.” Just below that was another sign, which read: “Buon Natale!” The local communist party wishing me a Merry Christmas . . . how delightful!

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