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Short Answers to Simple Questions: Affordable Care Act Edition

Paul Van de Water on Budget Arithmetic:

PVdW:

Testimony: Paul Van de Water: The Medicare actuary has raised questions about the sustainability of one particular category of Medicare savings in health reform — the reductions in payment updates for most providers to reflect economy-wide gains in productivity.  Although these concerns deserve a serious hearing, other experts see more room to extract efficiencies and improve productivity in the health care sector.  Notably, the Medicare Payment Advisory Commission (MedPAC), Congress’s expert advisory body on Medicare payment policies, generally expects that Medicare should benefit from productivity gains in the economy at large.  MedPAC finds that hospitals with low Medicare profit margins often have inadequate cost controls, not inadequate Medicare payments.

Because the productivity adjustments are now law, Congress would have to pass a new law to stop them from taking effect.  Under the statutory pay-as-you-go rules, that future legislation would have to be paid for, so that it didn’t increase the deficit....

[B]oth CBO and the Medicare actuary have always assumed [in the past] in their projections that the laws of the land will be implemented, rather than hazard guesses about how future Congresses might change those laws.... Gail Wilensky, who ran Medicare under President George H.W. Bush, has expressed it this way: “It would be very hard to know what you would use if you didn’t use current law — whose view you would use.”...

Bringing deficits under control will require making difficult trade-offs and tough political decisions on both taxes and spending, especially for health care.  If we can’t count any provision that is controversial and might later be changed, we would have to conclude that neither the Bowles-Simpson proposals, the Rivlin-Domenici plan, nor Congressman Ryan’s Roadmap would really reduce the deficit.  In fact, if we can’t count any provision that a later Congress might reverse, we can’t [ever] do serious deficit reduction...

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