Wednesday, May 9, 2007

WSJ: How the GOP Won Health Care

How the GOP Won Health Care
May 9, 2007 Wall Street Journal
By Holman W. Jenkins, Jr.

How goes the cold war? We refer to the never-ending twilight struggle between advocates of socialized medicine in America and those who believe economically competent Americans should be required to budget and save for their own health care, as they do for the rest of their personal consumption.

Any cold war wouldn't live up to its name and reputation if the two sides didn't occasionally change uniforms and borrow each other's rhetoric and tactics. But from a squinty angle, Republicans might just be winning this one.

The latest flashpoint is "Medicare Advantage," a GOP initiative to entice beneficiaries to sign up for a private insurance option in lieu of traditional Medicare's direct payment of doctor's and hospital's bills. More than eight million Medicare beneficiaries now get their benefits this way, about 20% of the eligible population. Democrats like Rep. Pete Stark of California are alarmed. They accuse Republicans of seeking to "privatize" Medicare, turning it into a voucher program to buy health insurance, with most of the subsidies restricted to needy seniors.

They're right.

Republicans like Rep. Jim McCrery respond that Democrats want to eliminate the private insurance option for Medicare and bring the country "one step closer to a socialist-style government-run health care system." He's right.

That's where clarity ends in the twilight struggle.

Notice, for starters, that Medicare Advantage is thriving because of deliberate subsidies, over and above the cost of existing Medicare, directed at private insurers. Taxpayers shell out about 12% more for each beneficiary than they do for a traditional Medicare subscriber -- worth about $922 year. The extra money buys extra benefits not available in the traditional program, as well as reduced copays and deductibles.

As they did with the big new Medicare drug benefit, Republicans have usurped Democrats' role as Santa Claus to the middle class. Health insurers, once reliable bad guys who elicited boos in movie theaters, have been reborn as giant government contractors. NAACP, once a reliable Democratic ally, now lobbies to keep subsidies flowing to private insurers, saying the extra benefits are a godsend to poor seniors.

It gets worse. AARP, the old folks lobby, has been turning itself into the insurance industry's marketing arm. It recently signed deals with two of the biggest insurers, UnitedHealth and Aetna, to sell AARP-branded insurance to the over-50 crowd, who will then be ripe to be rolled into AARP-branded Medicare plans when they hit 65.

Insurers have been losing corporate business as companies cut back on health benefits and shoo their employees into Health Savings Accounts. The industry increasingly looks to government to fill up their book of business. Result: a growing compatibility of interests between insurers and the senior lobby. AARP, for one, expects to earn $4.4 billion over six years by lending its name to plans peddled to seniors.

Even the universal access issue is slipping from Democratic grasp as Republican governors experiment with mandates requiring all citizens to have private insurance (with insurance lobbyists cheering on). And Democrats are being checkmated on the electoral map. According to Blue Cross, any attempt to cut back on Medicare Advantage would mean reduced benefits for 196,000 voters in Ohio, 196,000 in Pennsylvania, 180,000 in Michigan, etc.

So far, the counterstrategy has been pitiful, pitiful. Led by Hillary Clinton, Senate Democrats suddenly discovered an urgent need to expand spending on children's health care by $50 billion over five years -- a sum conveniently equal to Medicare Advantage's subsidy over the same period. Dutiful newspaper columnists peddled the predictable oldie-moldy: By resisting cuts in Medicare Advantage, Republicans are favoring insurance industry CEOs. Democrats favor children.

The fallacy here is obvious. All federal dollars are created equal. If more spending on children's health care is such a good idea, the federal budget is a cornucopia of programs to cut: farm price supports, ethanol subsidies, the homeland security boondoggle. And Democrats control the purse strings these days.

No wonder Mr. Stark, one of his party's authoritative voices on health care, laments the good old days when Democrats and Republicans had the same agenda for Medicare, expanding it while trying here and there to make it more efficient. "But in no circumstance did [Republicans] feel that we should disband Medicare and I think that is the principle difference," he complained late last year.

His nostalgia is touching, but omits a key fact. With an unfunded liability of $70.5 trillion in present value, business-as-usual for Medicare is not a practical agenda.

Quietly, means-testing is already arriving to sully the program's image as a universal entitlement, starting this year with seniors earning more than $80,000 a year. Quietly, Medicare's trustees, under a new law, have been required to declare their first "funding warning" because dedicated taxes and premiums will meet less than 55% of the program's costs within seven years.

Republicans, however convoluted and spendthrift, have a strategy -- turning Medicare into a welfare program for poor seniors. Democrats have only a feckless hope that if they stall long enough, the problems will be so bad that the American people will vote for a universal government-run health system. That strategy is already a loser, however long the war drags on.

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