Monday, July 27, 2009

Why I Like IMAC

Keith Hennessey is skeptical about the power of the president's proposed Independent Medicare Advisory Commission (IMAC) to reduce costs. He notes that the CBO has predicted only very modest savings.

What happened to bending the long-term cost curve down?  Director Orszag’s letter weakens the test to “We won’t increase the deficit.”  This means that if a bill “raises the health cost curve,” as Director Elmendorf  says about the pending legislation, the Administration is OK, as long as they increase taxes so that the net does not increase the long-term budget deficit.  The Administration’s legislative proposal matches this rhetoric.  They are lowering the bar.

I will guess that there is a struggle both within the Administration and among Capitol Hill Democrats between the small deficit reduction crowd and the much larger “don’t cut health care providers” crowd, and that this weakened language represents a new balance point in that struggle.  It’s odd, because it’s in an Orszag letter, and it’s inconsistent with the President’s and his consistent message that we need long-term deficit reduction, aka “health care reform is entitlement reform.”

My sense is that Orszag is being cautious. I also sense that he's right about IMAC having a big effect over the long term.

The point of the proposal, however, was never to generate savings over the next decade.  (Indeed, under the Administration’s approach, the IMAC system would not even begin to make recommendations until 2015.)  Instead, the goal is to provide a mechanism for improving quality of care for beneficiaries and reducing costs over the long term.  In other words, in the terminology of our belt-and-suspenders approach to a fiscally responsible health reform, the IMAC is a game changer not a scoreable offset.

Why am I more optimistic about IMAC? As Hennessy explains, it gives the executive branch tremendous power to remake Medicare.

The proposal creates a fast-track process in which the President has to send the council’s recommendations to Congress with a binary yes-or-no recommendation.  If the President approves the recommendations, he would have the authority to implement them unless both Houses of Congress voted to stop him within 30 days.  The details of the Congressional disapproval procedure mean that you would effectively need at least one more vote than 2/3 of the House and 2/3 of the Senate to overrule recommendations made by the IMAC and approved by the President.

And at some point, a conservative president will be able to use IMAC to great effect. This, by the way, is why Congress will probably gut the proposal.

07/27 04:25 PMShare