Ryan Medicare plan defender Betsy McCaughey challenged

A prominent supporter of House Republicans' Medicare proposal is misrepresenting conclusions from a key study she cites in the plan's defense, one of the authors told The Hill.

Former New York Lt. Gov. Betsy McCaughey (R) has been arguing via conservative editorial pages that competing private plans would lead to lower healthcare costs than traditional Medicare. She gave the example of research on private Medicare Advantage plans, but one of the economists whose work she cites has raised several caveats.

ADVERTISEMENT
First off, said study co-author Michael Chernew of Harvard University, the MA plans he looked at were able to save money not because of competition per se but because they often manage patients' care better than traditional Medicare. Tellingly, the study only found savings for patients who have at least one chronic condition.

Also, the study relied on data from the 1990s, before the healthcare reform law cut Medicare payments and began to reward quality of care. Chernew said the new law "changed the bar" in that regard.

“Our study doesn't speak to either competition among managed care plans, nor does it speak to what managed care plans could do relative to a (traditional Medicare) system that had lower prices set by law,” Chernew said. “The notion that the Ryan plan would have a bunch of competing managed care plans and they would inherently save a lot of money relative to the existing status quo as outlined in the Affordable Care Act is not clear to me."

McCaughey told The Hill that she stands by her editorials, which ran in The Wall Street Journal and The Washington Times over the past couple of weeks.

“It's just a matter of historical evidence versus sheer speculation on the part of the government,” she said. “That's the difference.”

McCaughey is a controversial figure who is reviled by many on the left. She is widely credited with helping bring down Hillary Clinton's healthcare reform plan in the 1990s, and her claims about rationing under President Obama's bill led the way for others to issue warnings about “death panels” that have largely been debunked.

Despite a flood of criticism, McCaughey has stayed on the offensive.

Her latest target has been the nonpartisan Congressional Budget Office, which created a giant headache for Republicans last month when it estimated that their proposal to replace Medicare with subsidies for seniors to buy private insurance would drive healthcare costs up. The proposal, put forth by Budget Committee Chairman Paul Ryan (R-Wis.), was included in the 2012 budget blueprint the House approved along party line just before the spring recess.

McCaughey called the CBO's analysis “deceptive.”

“The CBO once produced reliable, impartial assessments of policy proposals,” she wrote. “It's time for Congress to find a new source of honest, independent research.”

CBO explained its reasoning in an April 5 letter to Ryan.

"A private health insurance plan covering the standardized benefit would, CBO estimates, be more expensive currently than traditional Medicare," the letter said. "Both administrative costs (including profits) and payment rates to providers are higher for private plans than for Medicare."

Insurance plans indeed often complain that they end up paying physicians and hospitals more to make up for underpayments by Medicare and Medicaid. According to the Centers for Medicare and Medicaid Services, Medicare costs per beneficiary grew 8.8 percent per year on average between 1970 and 2009 versus 9.9 percent for private insurance premiums for the non-elderly.

But in her editorials, McCaughey writes that the study co-authored by Chernew found that traditional Medicare spending dropped as more people enrolled in private Medicare Advantage managed care plans.

“Research shows that competing private plans are likely to control costs better than government-run Medicare," McCaughey wrote. "A study from the prestigious National Bureau of Economic Research demonstrated that in regions of the United States with competition between private Medicare Advantage plans, the cost of care was reduced."

However, data from the state of California show that in 2007 Medicare managed care plans reimbursed hospitals for 101.5 percent of their costs versus 139.2 percent for other private payers. This suggests the private plans proposed by Ryan would end up paying providers more than the Medicare Advantage plans in the research cited by McCaughey.

Chernew said his research does show that private managed care plans were able to drive down costs through better coordination of patients' care. But he said the new healthcare reform law might be able to achieve similar results, depending on how it's implemented.

"There are aspects of the Affordable Care Act that try to mimic things that managed care plans might be able to do,” Chernew said. “It's conceivable that the existing system, without managed care plans per se but with these other reforms, could also achieve savings.”

Informed of Chernew's comments, McCaughey didn't back down.

“I suggest that you read his study rather than getting his take on it. He may be embarrassed that he wrote something that now doesn't support the president,” she said. “I've read his study, I've read it carefully and … I believe that I'm on very firm ground.”

She went on to cite three other studies she said she didn't have enough room to write about in her editorials. One of these was co-authored in 1997 by Harvard economist David Cutler, a prominent supporter of the Democrats' law.

“Gosh that was a long time ago,” Cutler told The Hill via e-mail. “We have a lot more evidence now. More importantly, we know that managed care was a failure in the non-elderly population [because of public opposition]. I've been surprised that the Ryan-ites seem not to have read about that, and basically want to recreate the managed care era, this time for the elderly. Why they have any belief that it will work out better this time, I have no idea.”

Cutler said he agrees with the CBO's analysis of the Ryan proposal.