How Smart is Ezra Klein ? II

Ezra Klein explains that Medicare can’t cut payments too much or doctors will opt out

The problem is that Medicare can’t control costs too much better than private insurers or, as you see from the article above, doctors will simply abandon Medicare.

Klein seems oddly indifferent to the detailed text of the Afordable Care Act. I never would have guessed that I would ever type that. Medicare is four programs which are differently squeezable. Plan C (take advantage of Medicare) can be squeezed to death with relatively low costs to anyone but insurance companiies. Plan B can’t be squeezed easily. Doctors can and do refuse deal with the CMS. Plan A can be squeezed as I argued here and here.

Now his conclusion is that Medicare fees can be restrained, but he neglected the fact that the recent health care reform was designed with the problem of doctors with office practices opting out in mind. Matthew Yglesias (another very smart guy) excerpted the silly part of Klein’s post.

I blame myself. I wrote a post about how Klein is very smart and so he decided to write a dumb post just to spite me.

I recap the argument after the jump.

A half hour of googling once, convinced me that at most one hospital ever opted out of Medicare plan A That hospital is not named in something someone wrote on the web 10 years ago but it is obviously the Mayo Clinic. I’m pretty sure that either this was someone confused at the time (by Mayo Clinic staff making excuses for not admitting her) or that it is no longer true.

Many doctors with office practices can keep busy while refusing to see Medicare patients. 0 to 1 hospitals can. Almost any hospital (with one possible exception) which opts out of Medicare will lose a large fraction of its cash flow from one day to the next. I’d guess that it is at least a third for all hospitals (except maybe the Mayo Clinic) and usually more than half. In theory a hospital could gain by doing so by firing half it’s staff and renting out spare rooms as apartments. In the real world, it isn’t going to happen.

That’s why the ACA squeezes Medicare Plan A not Medicare Plan B. The restrictions on the growth of fees are restrictions on payments to hospitals, nursing homes and home health care agencies. The idea is that they won’t opt out.

In contrast payments to office practices for ambulatory care will not be squeezed by the ACA. Obama administration officals and congrespersons (or their staffs at least) understood that to squeeze doctors with office practices, they would have to mandate participation in Medicare.

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