A Prescription for Ruin

I've got some good news for deficit hawks: earlier this year, Congress passed legislation reducing the deficit by about $125 billion over the next 10 years. But, as they say on the infomercials, that's not all! The bill cuts the deficit by $1.3 trillion in the second decade. That more than pays for every dollar we've spent on stimulus since 2008. The bill also sets up a new—and actually credible—system to keep Medicare's costs under control. So hear that, fiscal conservatives? Hear that, bond markets? This is progress, baby. We'll lick our deficit problem, yet.

The bill in question is the Patient Protection and Affordable Care Act, better known as health-care reform. The numbers come from the nonpartisan Congressional Budget Office. But as always, there's a catch: the savings arrive only if the policies behind the savings are allowed to do their jobs. And in the GOP's zeal to repeal a bill it considers a deficit-busting nightmare, Republicans are focusing their fire on the parts they should like: the cost controls.

On July 27, Sen. Jon Cornyn (R-Texas) introduced the Health Care Bureaucrats Elimination Act, cosponsored by Sens. Orrin Hatch (R-Utah), Jon Kyl (R-Ariz.), Pat Roberts (R-Kans.) and Tom Coburn (R-Okla.). The legislation doesn't seek to repeal health-care reform (though many Republicans would also like to do that). Instead, it takes aim at perhaps its most promising cost control: the Independent Payment Advisory Board.

It's a boring name, but the board—IPAB to its friends—is a radical idea. Over the past decade, Congress has not exactly been a profile in courage when it comes to reforming Medicare. The program might be bankrupting our country over the long run, but congressfolk face reelection every few years. So they've punted. Some Republicans say IPAB is just one more punt: it hands the hard decisions off to someone else. But that's exactly why it might work.

Behind the acronym will be 15 presidential appointees, each confirmed by the Senate. They'll be drawn from the health-care industry, academia, think tanks, and consumer groups. Their reform proposals will have to pass through Congress, but they will have some advantages: if Congress doesn't act, their recommendations go into effect. If Congress says no but the president vetoes Congress and the veto isn't overturned, their recommendations go into effect. If Congress wants to change their recommendations in a way that'll save less money, it will need a three-fifths majority. Oh, and no filibusters allowed.

The hope is that this frees Congress to permit cuts by making it easier for them to dodge the blame. "Putting the knife in someone else's hand will be a relief," says Robert Reischauer, director of the Urban Institute and a former director of the Congressional Budget Office. "It will allow Congress to rant against the cuts without actually stopping them."

The board's first recommendations will be for 2015, but it'll take until 2018, when its purview expands to cover hospitals, for it to really start swinging its weight around. If the board makes it that far, it'll be the most aggressive effort lawmakers have ever made to control Medicare's costs.

But that's a big if. Republicans have zeroed in on the board as a soft target in their campaign to gut the health-care-reform bill. "In true fashion of Obama-Reid-Pelosi hubris," Cornyn said, "the IPAB is the definition of a government takeover." A government takeover of ... Medicare?

Putting aside the metaphysics of the government taking over a government program, Cornyn makes two arguments, and they show the difficulty Republicans are having opposing health-care reform without opposing fiscal responsibility and much-needed deficit reduction.

One of his arguments is that IPAB would take these decisions away from Congress, which is more accountable to voters (and thus hasn't been able to make any of these decisions), and so it should be done away with. "America's seniors deserve the ability to hold elected officials accountable for the decisions that affect their Medicare," he said.

"I think that's dead right," says Reischauer. "And when the political system is willing to assume those responsibilities, they should get them back." But in recent years, Congress has been feckless in the face of Medicare's spending. Repeal IPAB and you've restored the status quo on Medicare. That status quo was leading to federal bankruptcy.

Cornyn knows this, and so his other argument is that Congress buckled to special interests and IPAB doesn't go far enough. "Special-interest groups cut deals with Democrats to specifically exempt hospitals, 28 percent of Medicare's budget, from the IPAB's ax," his statement points out.

That deal is more of a three-year reprieve, as hospitals would come under IPAB's axe in 2018, but still, Cornyn is right. It's a bad deal. The sensible thing would be to remove it in order to make IPAB even stronger. It's the best shot we've had at entitlement reform in a generation, and Republicans have always said they're for entitlement reform.

The same goes for the other cost controls in the bill. The tax on high-value health insurance, which Sen. Scott Brown attacked during his campaign, begins to do what Sen. John McCain proposed doing in the 2008 presidential race: end the tax code's subsidy for employer-provided insurance. Republicans could make the policy stronger and achieve a longtime policy goal. Instead, they're attacking it because it's one of the bill's vulnerabilities.

There was another path here: one of the unnoticed dynamics of health-care reform was that Democrats were so desperate to pass a bill that they were willing to accept cost controls that they would've laughed at in normal circumstances. They ran over unions to begin taxing employer benefits and created a process making it harder to protect Medicare from future cost-cutting reforms. Republicans could've used the opportunity to strengthen the sort of cost controls they've long said they wanted, while focusing their repeal efforts on the bill's spending.

But they're doing the opposite, and there's a real risk to their strategy: if the bill's hard choices are political losers, the policies that cost money aren't. Subsidies for poor people are popular. Rules preventing insurers from discriminating based on preexisting conditions are popular. Tax credits for small businesses and closing the doughnut hole in the Medicare Prescription Drug Benefit are popular. Cost controls aren't. And Republicans, who've frequently argued that the bill is too costly, are taking direct aim at them.

If they repeal the parts but not the whole, we could end up with the bill's cost control wrecked but its spending intact. "You can't argue that you're for fiscal responsibility then argue for taking out all the fiscally responsible parts," says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

We talk a lot about the deficit these days. And when we talk about it, what we're really talking about is how to convince the bond markets that we'll do what's necessary to get our health-care spending under control and get our long-term budget into balance. If we don't convince them, one day the bond markets might conclude that our political system is too weak and divided to cut the deficit, and then they'll stop lending to us at low rates, sparking a fiscal catastrophe.

Which do you think would make them more confident? Seeing the two parties in a virtuous competition to make the cost controls in the health-care bill even stronger? Or watching as one party tries to systematically strip every cost control out of the first serious effort in memory to attack health-care spending?