So the House Republican leadership is planning on making the Medicare “doc fix” permanent, at a cost of $200 billion over ten years, if Democrats will agree to entitlement means-testing and reforms totaling…$70 billion (Washington Examiner). Cue the arguments among House Republicans and pressure groups. Some argue that the deal would add to cumulative deficits, which it would in accounting terms over the next ten years. Others claim it would reduce them, either by looking past the 10-year interval or by recognizing that the “doc fix” is has always been enacted “temporarily” – meaning the actual cost of permanence is closer to zero. The problem supporters of the permanent “doc fix” have is that they’re wrong, in that the fix should not be enacted. The problem opponents have is that they too are wrong, in that they’re arguing against it for the wrong reason.
The problem with the “doc fix” isn’t macroeconomics, but microeconomics. The fix is but a symptom of Medicare handing over its pricing power to the very people from whom it buys medical services – the AMA. It’s the equivalent of a home buyer hiring the seller as his or her real estate agent. I’ve talked about the numerous problems with this cozy deal before, and one of them is that the prices of medicine – publicly and privately insured – has jumped through the roof. Medicare and Medicaid have spending ceilings that are supposed to counter this nonsense (and a spending ceiling is itself an unwieldy instrument), but Congress repeatedly coughs up the money to cover the increased prices for Medicare.
No such fix for Medicaid is enacted. Perhaps if the poor voted as often as the elderly…
…but I digress.
My point is, Congress has an opportunity – every time this comes up – to break the AMA monopoly on health care pricing, and unless this happens, any attempt at health reform will be suboptimal, at best. Making the “fix” permanent would lock in the AMA-Medicare arrangement in perpetuity, giving the Association permanent and unchallenged market power. That cannot be allowed to happen.
Congress should drop the “fix” and mandate either a new pricing system for Medicare or, better yet, force it to follow private insurers’ lead (rather than the other way around as it is presently). They definitely shouldn’t make it permanent.
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