The Agenda

Quick Post on What Happens After the Debt Ceiling Deal and Medicare

Like Josh, I’m a fan of the debt ceiling deal. Unlike Josh, I am very naive and I briefly assumed that the deal might mean moving the ball forward on reforming health entitlements. In all likelihood, we are introducing yet another set of budget gimmicks that Congress will override. The really important thing, as Yuval Levin often reminds us, is convincing the voting public that serious, durable Medicare reform is (a) urgently necessary and (b) very beneficial over the long-run. 

The serious and durable requirement in my view rules out a repeat of something like the sustainable growth rate, i.e., crude cuts to provider reimbursement rates. As we’ve discussed in this space, it is important to look to the pricing power of hospitals and other medical providers across metropolitan areas. Where the pricing power of incumbent providers is high, we can expect cuts to provider reimbursement rates to result in higher costs for private plans. So we need a structural approach aimed at increasing cost-consciousness, yes, but also meaningfully changing the incentives facing providers.

All this is to say that Republican lawmakers need to familiarize themselves with Domenici-Rivlin. The reason we’re vulnerable to another we’ll-just-patch-over-this-and-increase-spending scenario is that stalwart House conservatives don’t seem to understand that winning deep cuts in FY 2012, which really could be destimulative, isn’t nearly as important as getting buy-in on some version of premium support from grassroots conservatives, moderates, and elected Democrats. 

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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