The Medicare Modernization Act proved that combining the efficiencies of private industry with government oversight could provide the highest quality prescription drug coverage to seniors. It’s known as Medicare Part D. It gave seniors access to many choices of drug providers. Some Americans wondered, an article Nov. 16, 2009 in Politico said, whether private industry could keep costs reasonable and if people would be in control of their choices. In 2009, the Centers for Medicare and Medicaid (CMS) found that 26 million enrollees in Part D had access to more than 2,000 plans offered by a range of providers. Costs have remained reasonable for customers. The Politico article went on to report a nonpartisan national poll found that 88 percent of its customers favor the prescription drug plan.

Astonishingly, the long-standing British health system (NHS), born in 1948, is now being recognized as too complex and unwieldy, The New York Times reported July 24. The health Secretary is promising to put more power in the hands of patients rather than 150 bureaucrats.

The Galen Institute study explaining why Obamacare is unworkable was written by an eminently qualified expert in the health field, James C. Capretta, a fellow in the Economics and Ethics Program at the Ethics and Public Policy Center. He formerly was top budget officer for health care as associate director of the Office of Management and Budget (OMB). He also is a health policy and research consultant with Civic Enterprises, LLC, and is with the Hudson Institute. Earlier, he served Congress for a decade as a senior analyst for health care issues.

The Galen Institute study focused its analysis on Medicare, the largest culprit in national health costs. It’s estimated to cost $497 billion in 2009. Congress has known for many years that Medicare and Medicaid spending threaten to push the nation’s finances past the breaking point, Capretta notes. “If the country can’t pay for its existing health care commitments,” how could we “subsidize health care to millions of new beneficiaries?” As the rest of the developed world “is moving toward retrenchment of their welfare states, Americans are rightly concerned that their government has just piled an enormous new budgetary risk onto an already precarious outlook.

“Between 2010 and 2030,” the Galen Institute study points out, “the population aged 65 and older is projected to  increase from 41 million to 71 million people” driving up entitlement spending even more rapidly…. “The health law does absolutely nothing to address this fundamental aspect of the entitlement crisis.” As for the ‘cost curve,’ which was promised to go down, the chief actuary at the Centers for Medicare and Medicaid, after passage of the law, projected “overall national health expenditures would be higher in 2019 than if the law had not been enacted at all.”

The Galen Institute study: “What’s needed more than anything else in health care is a coherent, reality-based policy prescription for altering the basic dynamics away from cost escalation to productivity improvement and more efficient patient care. That’s the goal. But getting there requires a clear and accurate diagnosis of what is creating the cost problem in the first place….The Medicare program, as it operates today, is a primary cause of the cost problem.” It is “pulling the rest of the health system down the tracks at an accelerated and dangerous rate….It is “the most important reason health care is expensive and needlessly inefficient….

“At the heart of” the inefficiency in our health system is “Medicare—and more precisely Medicare’s dominant fee-for-service (FFS) insurance structure.” FFS enrollees face no additional cost when they use more services, and health care providers earn more only when service use rises.” The result is a “fragmented dysfunctional system virtually frozen in place—for all users of health care, not just Medicare beneficiaries….

“The Obama White House and its allies” saw the solution as a “top-down payment reform program” through which patients would get their care through new organizational arrangements. “The alternative is a bottom-up approach in which cost-conscious customers choose between competing insurers and delivery systems based on price and quality.” Capretta points to Rep. Paul Ryan’s (R-Wis) proposed “Roadmap” as a comprehensive plan for health and other policies to solve the long-run budget problem. The “core reform is the conversion of the entitlement from a defined benefit to a defined contribution model.” With “cost-conscious consumers looking for the best value for their money, cost-cutting innovation would be rewarded….Physicians and hospitals would have strong financial incentives to reorganize themselves” to be more productive and capable of capturing more of “what would become a highly competitive marketplace. That’s the way to slow the growth of health care costs. Indeed, it’s the only way to do so without harming the quality of care.”

Under the Medicare prescription drug program, Capretta writes, “Beneficiaries get a fixed dollar entitlement that they can use to buy coverage from a number of different competing plans…” (and) “government has no role in setting premiums or drug prices. And how is it working? Costs have come in 40 percent below original expectations.” Bottom-up, not top-down, is what works.

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