Super Power for the Super Committee

October 13th, 2011

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This piece was originally posted by Kaiser Health News.

To succeed, the so-called ‘super committee’ will need all of its super powers, and then some. To get a deal on reducing the deficit, it must leap across the chasm between the GOP stance of spending-cuts only and Democrats’ insistence that revenue must be part of any deal in a single bound. And, to get it done by Thanksgiving, it will have to move faster than a speeding bullet. However, one issue that’s typically kryptonite in budget talks may provide the committee with a chance to save the day.

The rising cost of health care is squeezing the federal budget, making it a common enemy. For Republicans, spiraling costs have placed them in the increasingly untenable position of proposing steep Medicare cuts in order to avoid tax increases in their budget proposals. Democrats are looking at a budget where health care spending crowds out other progressive priorities such as education, housing and public investments in general.

In the comics, super heroes and their rivals occasionally enter an uneasy alliance against a common enemy. In the face of a looming fiscal crisis, can the two parties use the super committee to follow suit? Despite the rancor that’s characterized the health care debate so far, there are opportunities to move toward mutually acceptable goals: improved patient care, fiscal sustainability and broad-based cost restraint. Third Way has included several in our recently proposed plan for super committee success. The health-related items in our plan would provide a foundation for more ambitious reform in the future and save $133 billion over 10 years. Here are some examples:

  • Improve patient care. The dual eligibles — low income seniors and people with disabilities who are enrolled in both Medicare and Medicaid — often receive uncoordinated care for their complex chronic conditions. (This population is generally made up of the sickest and poorest people covered by either program.) Coordinated care that keeps problems from getting worse can avoid costly nursing home care and hospitalizations. States should be required to adopt one of a variety of coordinated care programs including enrolling the dual eligible in health plans that combine the financing from Medicare and Medicaid under one pot of money and achieve savings over time.
  • Move toward fiscal sustainability for Medicare. Over the next 40 years, the cost of Medicare will roughly double in real terms and the number of beneficiaries also will double, while the number of taxpayers will grow by only one-third. One way to create a more sustainable fiscal future for Medicare is to ask more of those who can afford to pay more. Unlike Social Security, workers’ Medicare taxes pay only for hospital coverage under Medicare. Physician services (Part B) and prescription drug coverage (Part D) are mostly paid for with general revenues. This financing should be revamped so that upper-income retirees — those making more than $150,000 annually or $300,000 for a couple — would pay the full cost of their coverage.
  • Encourage broad-based cost restraint. The best way to save money in Medicare and Medicaid is to lower costs throughout the health care system. That prevents cost cutting from simply shifting to costs elsewhere. States could help reduce underlying costs by streamlining the regulatory and legal climates for health care. They should have a stronger incentive to take on entrenched problems. The federal government should share a portion of the savings it would get from state-level reforms. This proposal was not part of Third Way’s original plan, but its development by America’s Health Insurance Plans has demonstrated great promise.

Third Way’s proposal doesn’t aim at a grand bargain in which Republicans agree to revenue increases from broad tax reform and Democrats agree to sweeping entitlement reform. Instead, it is a “break-the-glass-in-case-of-emergency” approach that would still tally the necessary savings should the super committee fail to reach that grand bargain. It would achieve the $1.2 trillion in deficit reduction and pay for the President’s job proposal by balancing key reductions in entitlement spending with the end of certain tax loopholes.  Both sides will have to give to create a successful deal regardless of the overall amount of savings it achieves.

A grand bargain would still be the best result from the super committee. But a $1.2 trillion deal along these lines would also be a success, especially if it can serve as a foundation for a future deal on taxes and entitlements. In Washington, that would qualify as a heroic effort.