Why conservatives say Obama hasn’t proposed meaningful entitlement reform

At Power Line, we maintain, as most conservatives do, that President Obama isn’t serious about entitlement reform. But those on the other side of the great political divide are equally insistent that Obama is open to, and in fact has proposed, serious reform of Medicare, Medicaid, and Social Security.

Who is right? It depends on the meaning of “reform.” For, as Yuval Levin shows, although Obama has proposed some cuts, to entitlements, he hasn’t entertained the possibility of serious reform.

For example, Obama has proposed reducing payments to drug companies. This means having Medicare dictate prices in the prescription-drug benefit. But that, says Levin, would undermine the benefit’s competitive design which has allowed the program to come in significantly below CBO’s cost estimates for years now.

Other core elements of Obama’s proposed “reform,” such as reducing hospital payments and “encouraging” beneficiaries to seek high value health care, also involve greater price controls. They would lower the amounts that Medicare will pay for certain services and attempt to micromanage behavior.

For Republicans, this doesn’t constitute reform. As Levin puts it:

These kinds of policies further consolidate the fee-for-service structure of Medicare and create profound perverse incentives for providers that lead to precisely the inefficiency that entitlement reform should seek to reverse. Lower payment rates without the freedom to engage in business-model innovation drive increases in the volume of medical services, which increase overall costs while reducing the efficiency and value of medical care. . . .[This] would exacerbate the problem conservative health reformers are hoping to solve. They. . .are steps in the wrong direction.

It’s not that they don’t cut enough, or that they reduce spending in a way that’s just not ideal: They’re outright bad policy that pushes in the wrong direction and would harm our health-care system, and Republicans should oppose them on the merits, as they did when the Democrats pursued such Medicare cuts in Obamacare to the tune of about $700 billion.

In the estimation of conservatives like Levin, real reform of Medicare would consist of “us[ing] the leverage of the program’s immense spending to drive efficiency improvements in the health system by having insurers (and their affiliated systems of providers) compete for seniors’ business and taxpayer dollars.” The goal “is to move away from administrative pricing and centralized command and control economics to competitive pricing and a more economically sensible health system—providing the same comprehensive, guaranteed package of benefits but at a much lower cost and with more choices for seniors.” In essence, real reform “would turn beneficiaries into consumers and providers into competitors.”

This kind of reform does not appear to be on the table while Barack Obama is president. Certainly, it hasn’t been offered. And what has been offered is, for conservatives, a step in the wrong direction. That, says Levin, is “why those Republicans who follow entitlement and health-care policy incline to say that he has made no meaningful offer.”