NCPA - National Center for Policy Analysis

Reforming Medicare

November 30, 2012

The idea behind a "grand bargain" to get the federal budget deficit under control is a simple one: Republicans agree to tax increases, and Democrats agree to spending cuts. Yet a budget agreement could be a trap for Republicans, just as similar budget deals have been in the past, says John C. Goodman, president of the National Center for Policy Analysis, a research fellow with the Independent Institute, and the author of Priceless: Curing the Healthcare Crisis.

There are two problems.

  • First, the tax increases would hit immediately, while the spending cuts would be mainly in the future. That means future Congresses would have an opportunity to renege on the agreement before any serious spending reduction took place.
  • Second, all the serious spending increases foreseen for future years are on health care and health care spending cannot be curtailed unless there is fundamental reform.

Reforming Medicare is a vital part of getting health care spending under control. Goodman and former Medicare trustee Thomas Saving offer a few proposals to do so.

  • Pay market prices. All over the country there are retail establishments that are offering primary care services to cash-paying patients. Walk-in clinics, doc-in-the-box clinics, and free-standing (that is, not connected with a hospital) emergency-care clinics post prices and usually deliver high-quality care. Many follow evidence-based protocols, keep records electronically, and order prescriptions electronically.
  • Contract selectively. Medicare should contract with low-cost, high-quality facilities. If patients for some reason prefer to go to a more expensive hospital for their surgery, they should be free to do so. But let them pay the extra cost out of their own pockets, rather than out of the taxpayer's pocket.
  • Liberate paramedical personnel. One way to expand the supply of low-cost medical care is through the increased use of nurses and physician assistants to perform tasks that do not require a physician's level of expertise. The current system discourages the creative use of paramedical personnel, however. The reason: When a task is performed by a nurse rather than a physician, Medicare automatically reduces its fee.
  • Encourage bundling. Providers should be encouraged to offer package prices for bundled services, and Medicare should be willing to pay the package price whenever it is expected to be lower than what the taxpayers would otherwise have paid.
  • Encourage medical tourism.

In each of these cases the principle is the same: Let markets do what only markets can do well.

Source: John C. Goodman, "Reforming Medicare," National Review Online, November 29, 2012.


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