Daniel P. Kessler on Depoliticizing Medicare

Daniel P. Kessler offers a highly original take on addressing Medicare cost growth in the new National Affairs. His basic diagnosis is that Medicare is a victim of Congressional micromanagement, that both the Independent Payment Advisory Board (IPAB) in the Affordable Care Act and premium support are design to insulate cost containment from politics. IPAB aims to achieve this by creating an alternative route to payment reform, albeit one that can be overridden by Congress relatively easily. Premium support, in contrast, aims to empower competing providers to embrace productivity-enhancing business model innovations outside the purview of the Medicare FFS mothership. 

And so, Kessler argues, premium support is both more promising as a strategy to contain costs and more politically threatening:


Competitive pricing is not inconsistent with the current structure of Medicare — but it is inconsistent with Congress’s interests. Again, the problem is politics. Administrative pricing creates opportunities to make decisions that favor narrow groups of providers, thereby giving politicians valuable benefits to distribute to their advantage. A series of articles in Health Affairs by researchers from the Medicare Payment Assessment Commission (also known as MedPAC) — an independent agency that advises Congress on Medicare policy — offers several examples of providers’ using the political process in this way. Many of Medicare’s administrative prices exceed market prices for the same goods and services, leading providers to furnish more of these “profitable” services than beneficiaries need. This system may be good for providers, but it is harmful to patients: In addition to causing wasteful spending, unnecessary procedures increase the risk of medical errors.

Premium support breaks this link between politics and pricing in a way that IPAB and bundled payment do not. Once the value of the overall support payment is determined, the myriad individual prices that the competing insurance plans pay and charge will be determined by the market. Different insurers will offer different approaches to care; consumers will see what most appeals to them. And the result of that process is more likely to be politically stable. Under traditional Medicare, providers who oppose competitive pricing have no natural counterparty pushing against them; under premium support, however, both insurers (who would claim some of the residual profits of successfully competing for customers) and beneficiaries (who would share in efficiency gains through lower premiums) would play this role.

Premium support would make use of markets on the demand side as well. Insurers would be forced to offer good value relative to their competitors; if they failed to do so, they would lose customers’ business. Beneficiaries, too, would face tradeoffs: between the extra features of more expensive coverage and their own money (in the form of savings from unspent premium subsidies or out-of-pocket spending for premiums above the legislated support level). Premium support would thus encourage innovation in spending-control techniques in ways that the current system does not — techniques that could be useful throughout the American health sector, not just in Medicare. [Emphasis added]

While Kessler makes a strong case that taxpayers and Medicare beneficiaries should embrace premium support, he also makes a strong case that it would cut against the interests of elected officials who profit from their ability “to favor narrow groups of providers.” I can’t imagine that this informs much of the Congressional opposition to premium support in any explicit way. But I wonder if it has had some subtle impact. 

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

Most Popular

Law & the Courts

Obstruction Confusions

In his Lawfare critique of one of my several columns about the purported obstruction case against President Trump, Gabriel Schoenfeld loses me — as I suspect he will lose others — when he says of himself, “I do not think I am Trump-deranged.” Gabe graciously expresses fondness for me, and the feeling is ... Read More
Politics & Policy

Students’ Anti-Gun Views

Are children innocents or are they leaders? Are teenagers fully autonomous decision-makers, or are they lumps of mental clay, still being molded by unfolding brain development? The Left seems to have a particularly hard time deciding these days. Take, for example, the high-school students from Parkland, ... Read More
PC Culture

Kill Chic

We live in a society in which gratuitous violence is the trademark of video games, movies, and popular music. Kill this, shoot that in repugnant detail becomes a race to the visual and spoken bottom. We have gone from Sam Peckinpah’s realistic portrayal of violent death to a gory ritual of metal ripping ... Read More

Romney Is a Misfit for America

Mitt’s back. The former governor of Massachusetts and occasional native son of Michigan has a new persona: Mr. Utah. He’s going to bring Utah conservatism to the whole Republican party and to the country at large. Wholesome, efficient, industrious, faithful. “Utah has a lot to teach the politicians in ... Read More
Law & the Courts

What the Second Amendment Means Today

The horrifying school massacre in Parkland, Fla., has prompted another national debate about guns. Unfortunately, it seems that these conversations are never terribly constructive — they are too often dominated by screeching extremists on both sides of the aisle and armchair pundits who offer sweeping opinions ... Read More

Fire the FBI Chief

American government is supposed to look and sound like George Washington. What it actually looks and sounds like is Henry Hill from Goodfellas: bad suit, hand out, intoning the eternal mantra: “F*** you, pay me.” American government mostly works by interposition, standing between us, the free people at ... Read More
Film & TV

Black Panther’s Circle of Hype

The Marvel Cinematic Universe (MCU) first infantilizes its audience, then banalizes it, and, finally, controls it through marketing. This commercial strategy, geared toward adolescents of all ages, resembles the Democratic party’s political manipulation of black Americans, targeting that audience through its ... Read More