John Feehery: Speaking Engagements

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Medicare

Posted on April 11, 2011
Amid all the talk of a government shutdown, Democratically-aligned outside interest groups started running commercials against Congressional Republicans about something that had absolutely nothing to do with the government shutdown: Medicare.

This issue is where the Democrats hope to mount their comeback in the next campaign. This is where they believe Republicans are vulnerable to charges of hypocrisy. This is where they think they can best recapture the senior citizen vote. And this is where they have a long and successful history of demagoguery that has helped them win elections in the past.

Lyndon Johnson signed Medicare in 1964 as part of his Great Society program. At the time, Republicans denounced it as socialism, but as the program became more and more popular, they changed their tune. If you can’t beat them, join them.

Johnson created Medicare because of a market breakdown. Older Americans couldn’t get access to health insurance because health insurance companies didn’t benefit in selling an insurance policy that was certain to cost them a lot of money. Government stepped in where the market would not.

But over the years, the government has distorted the rest of the health care marketplace, and worse, has put the taxpayers on the hook for a huge, unfunded liability. Because politicians don’t like to make tough choices, they have decided to take the easy approach on Medicare spending up until this point, and let the deficit continue to grow. After all, kids can’t vote.

The government has tried to put in price controls as one way to control costs, but the result has not been controlled prices, but rather an uncontrolled departure of quality doctors from the Medicare program. Good doctors would rather leave the program than stick around and get paid at a diminished rate.

Medicare has four parts. The first two, Part A and Part B, reimburse hospitals and doctors for care, and are the traditional Democratic responses to a problem. The government institute price controls and pays the bills. Part C and Part D, the so-called Medicare Advantage program and the Prescription Drug benefit, attempt to use market force and competition to provide seniors with higher quality, but lower cost health care.

Not surprisingly, Part A and Part B are the parts of Medicare that are causing the most problems. Part C and Part D are the parts that Democrats hate the most and have been under attack from liberals from their start.

Paul Ryan, in his budget proposal, is trying to implement a premium support Medicare model, based loosely on the Medicare Part D model. He is trying to use market forces to create a better market place for hospital and doctor care for senior citizens. He believes that market forces can help slow down the exponential growth of Medicare spending.

The market for senior citizen health insurance is more viable now than it was in 1964. One reason is that seniors are living longer, in most instances 20 years longer, which means that insurance companies can find a model to make some money. Second, the rise of prescription drugs gives doctors a cheaper and more efficient way to deliver care.

That is not to say that the marketplace can take care of seniors health care by itself. Clearly, the government needs to help some folks, especially poorer seniors who have planned well for their retirement or are beset by bad health and bad luck.

But the government shouldn’t unnecessarily and inefficiently distort the marketplace. It can achieve a happy medium that uses market forces to hold down costs while providing superior service to our seniors and a strong safety net for our most vulnerable citizens.

It is hard to communicate what Ryan is trying to do, especially when the Democrats are trying so hard to obfuscate the issue and score political points. But communicating effectively is essential to the ultimate survival of Congressional Republicans in the next election, and the ultimate survival of a more balanced approach to making Medicare solvent for the future.

There are no absolutes when it comes to Medicare. The government rushed in to fix a market failure in the 60’s, and now it is the principle cause of the market failure. Finding a balanced approach that protects the most vulnerable as it protects the taxpayer and using market forces and competition will be difficult, but it is not impossible. It will require leadership from the President and courage from Republicans. Republicans have shown that they have plenty of courage. We are all still waiting for some sign of the leadership from the President.