Paul Krugman calls out John McCain for his double talk on controlling Medicare costs during this panel discussion with George Stephanopoulos on This W
August 24, 2009

Paul Krugman calls out John McCain for his double talk on controlling Medicare costs during this panel discussion with George Stephanopoulos on This Week. As Krugman notes, the Republicans and John McCain are trying to have it both ways and one one hand saying Medicare's costs need to be kept in check, and on the other hand scaring seniors into thinking that the President wants to cut their Medicare benefits, and refusing to have a rational debate on how those costs end up being controlled.

David Frum tries to defend the Medicare Advantage program which is one of the things the Obama administration wants to go after to control costs, and Krugman shoots a hole straight through his arguments and reminds him that wasteful spending is what Republicans are supposed to be against. George Will wraps things up with showing his love for the pharmaceutical industry and their profits.

WILL: We’ve been talking about this for about five minutes and the subject of cost, which is tiresome and depressing, has not come up.

REICH: I just mentioned it.

WILL: When we began this debate a few months ago, the costs were going to be paid primarily by two things. One, the proceeds from selling under cap and trade, the permits to emit carbon. And “B,” Medicare cuts. “B” is never going to happen. And we’ve given away what should have been sold, or so we say, the rights to emit carbon. Where are we going to pay for this?

KRUGMAN: Medicare stuff, I think, will, in fact, happen if anything passes. If you want to think about the utter, utter hypocrisy of the Republicans on this. We just heard John McCain . And early on in your conversation, he said basically Sarah Palin was right in saying death panels because the Democrats want Medicare to take into account the actual medical effectiveness --

STEPHANOPOULOS: They weren’t in support of the policy.

KRUGMAN: Right. And then later in the same conversation, he said, we have a terrible problem with entitlements with Medicare. We really need to do something to cut Medicare spending. And what possible way -- we should cut Medicare spending without any regard for the medical effectiveness of what it’s paying for? So, this is, you know, we have the Republicans actually standing fully against any sort of rational control of costs.

REICH: The Republicans are also against competition. I mean, having a public plan that competes with private insurers is not taking business away from the private insurers. In other words, there’s a fundamental...

WILL: That’s the point of it.

REICH: There’s a fundamental contradiction at the core of the Republican critique, which is, either the public plan is like the Post Office, and it’s going to be totally ineffective, or it’s going to be so effective that it drains business away from the private insurance.

FRUM: Nobody wants to have to compete with their regulator. The Post Office does not have power over its competition. And the Post Office is now an independent corporation. It’s not an arm of the government anymore.

But this talk of competition really means that you’re going to be having the same entity, or very close to it, making rules and also applying the rules to its competition. It’s not a competitor.

And when you say that the president wants to focus on the inefficient part of Medicare, I mean, he has made it very clear what he’s coming after, the Medicare Advantage programs. And that is, for the...

STEPHANOPOULOS: Explain what they are, quickly.

FRUM: For one-fifth of American seniors, you have an option of having a Medicare program organized by or run by a private insurance company. They -- now there are some problems with this, that the private insurance companies pick the healthiest seniors.

But it offers what senior experience as a superior alternative.


FRUM: The statistics may not match up. But that’s how seniors experience it. And the president wants to take it away from them.

KRUGMAN: In the ‘90s, Medicare Advantage was a flat fee per recipient. And so, the insurance companies cherry-picked the healthy people. In the late ‘90s, they started risk-adjusting the payments so that if you picked only healthy people, you only got -- you know, you got less. At that point, Medicare Advantage started fading out. Turned out that in a head-to-head competition, level playing field, Medicare -- the insurance companies could not actually match the public program.

Then in 2003, they increased the payments, so the federal government now spends 14 percent more per recipient on Medicare Advantage than on straight Medicare. And now, it’s expanding.

So this is -- it makes total sense. Why would a Republican support subsidizing excess payments, something that purely inflates the cost of Medicare? Yes, it provides some extra benefits...

WILL: But there is a larger...

KRUGMAN: ... but I thought that was what they were supposed to be against.

REICH: There’s a larger question here, and that is whether Medicare and also this putative public option, are going to have an opportunity to negotiate, to use their bargaining leverage to get drug prices down.

This is a critical part of cost control over the long term. And, George, for people who are concerned about cost control, for the Republicans who are saying, we have got to control costs, it seems to me that this is absolutely essential, using this bargaining leverage.

WILL: First of all, do drugs cost too much? I don’t know if they cost too much. We’re told that pharmaceutical companies make obscene profits. I hope so. Because it sometimes takes a billion dollars to get a drug from conception, through research, development, through the regulatory process, and on the market.

And if you subtracted all of the profits of the pharmaceutical industry from our health care bill, it would shrink from 10 percent to 8 percent of our health care costs.

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