As a professional economist who writes on health policy, I should probably be inured to claims that one policy or another is a free lunch. Still, I have been shocked by the extent to which some supporters of the ACA (aka "Obamacare") have made such claims. Take, for instance, this "fact check" provided by Reuters listing 6 "myths" about Medicare. There are misleading statements strewn throughout the piece, which all stem from the idea that there is such a thing as a free lunch.
Let's start with "Myth" #3, which is that the ACA cuts $700 billion from Medicare over the next 10 years. This is incontrovertibly true, as the "fact check" itself admits. The interesting thing to me is that the author of the fact check somehow claims that these cuts will actually expand benefits and improve the quality of care. It's probably enough to dismiss this sophomoric thought as unworthy of adult conversation, but it's worth delving a little into the argument.
How will the government cut Medicare so dramatically? The ACA adopts three strategies. First, it will dramatically cut payments to Medicare Advantage providers. Medicare Advantage is the private replacement for Medicare that was authorized by the Republican Congress in 1997 and signed into law by Pres. Clinton. There are now over 10 million people who get their health insurance through a Medicare Advantage plan.
Let's leave aside the relative merits of Medicare Advantage against traditional Medicare. The incontrovertible point is that Medicare Advantage plans will become much less attractive as a result of the ACA's cuts. Elderly people who are accustomed to the benefits such plans provide will no doubt be forced to switch out of their insurance plan. So much for Pres. Obama's famous promise that if you like your insurance, you can keep your insurance.
Second, the ACA will require dramatic payment cuts to doctors. In "Myth" #4, we learn that these cuts will not result in doctors being unwilling to see Medicare patients. As it happens, we have great empirical evidence about what happens when payments to doctors are slashed, and we don't have to look outside the U.S. to find it.
Medicaid, which is the government insurance program for the poor, pays doctors at substantially lower rates than Medicare or private insurance. It is notoriously difficult to find a doctor who actually takes Medicaid. In one 2005 study published in the Journal of the American Medical Association, actors posing as seriously ill Medicaid patients were only able to get a timely doctor appointment 34 percent of the time. The ACA cuts will make Medicare a lot more like Medicaid, dubious "fact checks" aside.
In "Myth" #1, we learn (contrary to reality) that Medicare costs are not really growing all that fast. That anyone, much less a neutral "fact-checker," can make such a claim is frankly shocking. But don't take my word on it -- here's the latest Medicare Trustee's Report if you want nightmares. Medicare is growing so fast in part because the graying of our population (contrary to "Myth" #6, an older population does mean more Medicare costs), and in part because of the development of expensive new medical technologies.
This brings us to the third way that the ACA will cut Medicare -- the 15 member Independent Payment Advisory Board (affectionately known among us health economists as IPAB). The IPAB is President Obama's answer to how he intends to control the growth of Medicare expenditures, though for some reason he hasn't touted it much on the campaign trail. The IPAB is mandated to cut Medicare expenditures, and they have been given a broad set of policy tools to do so. It's not clear yet at this point where or what they will cut, but once they decide what to cut, it will take a two-thirds vote of Congress to override their decisions.
I don't want to give anyone the wrong impression. Medicare needs to be cut. It is on an unsustainable path and will bankrupt the government if it continues on it. We arrive finally at the crux of the disagreement between the parties -- who should decide what to cut? The biggest problem with free lunch thinking, such as the wretched attempt at a "fact check" that I have been discussing, is that it obscures what is fundamentally at stake in the health care debate. Should a small expert board have the power to decide what health care every elderly American has, or should the American people individually have such power?