Here’s an idea for reforming Medicare, and Medicaid nursing home benefits: Copy the old, much-hated, never-implemented Medicare “sustainable growth rate” physician reimbursement system. 

Related: CBO grades Medicare doc fix bills

Congress came up with the SGR as an automatic, no-vote, politically safe way to control Medicare spending on physician services. The idea was to cap per-capita growth in Medicare physician reimbursement at about the same level as growth in gross domestic product. In practice, what always happened is that physicians hollered, and Congress always found some way to scrounge up some cash to keep the SGR rule from taking effect. Then they eliminated it a few years back, by pretending that newfangled efforts to get physicians to share risk will improve the quality of care and reduce the cost.

It’s not even really clear to an ordinary mortal what that means. And the more you read about it, the less clear it is.

The real idea behind the SGR rule seems to have been this: Congress had guaranteed people that per-capita Medicare physician care benefits would increase at least as fast as national income, and that they would then try to come up with enough extra cash to accommodate the reality that technology changes and the provider response to the existence of health insurance tend to make health care costs rise faster than the overall inflation rate.

It seems as if that’s actually a pretty good way to structure all “guaranteed” public or private benefits.

The issuer promises to tie growth in benefits to some major, relevant, revenue-related or asset-related benchmark, then provide a variable component tied either to changes in some other benchmark or investment portfolio, or to political reality.

The component tied to the base benchmark should make the promised benefit fair. People expecting the benefit then have an idea of how a promised benefit will compare with a government’s or insurers’ resources.

The variable component should make the promised benefit realistic, and reflect the reality that the true benefits paid might reflect a compromise between what’s possible and what’s optimal. 

Related:

Pension fears haunt Trump Treasury pick hearing

Health insurers may pay for long-term care insurer failures

We’re on Facebook, are you?