Can DOGE Reach Entitlements?
It remains to be seen whether DOGE and Congress will really touch the third rails of Medicare and Social Security.
Former Domestic Policy Council (DPC) director Joe Grogan invited me onto his DC EKG podcast to talk about DOGE and government spending. The entire podcast is here. One part I particularly enjoyed is our exchange on what it would take to actually restore balance to the federal budget. Joe asked me to sketch out the situation:
Joe drew an interesting distinction between how politicians view Medicare and Medicaid, with Medicaid being the part of the welfare state that is on the chopping block. They don’t view Medicare as welfare, presumably because it is more universal in nature: almost all citizens and legal permanent residents over the age 65 has access to the program.
This is a perfect example of how it’s easier to cut government programs that affect only a segment of the population than to cut government programs that are available more broadly – even though the latter by definition are less based on need and less justifiable as pure poverty alleviation. Upper-income people get Medicare too, and so the political constituency for protecting it is much broader, as is the highly overlapping constituency that supports protecting Social Security. The dynamics that make it difficult to reform such essentally universal programs have been pointed out by political scientists including Berkeley’s Paul Pierson and Yale’s Jacob Hacker.
After we discussed Medicaid, I asked Joe whether he thought DOGE would touch Medicare. He gave the example of “site neutrality” as a policy within Medicare that could be introduced that could both save money and improve patient outcomes. Site neutrality, also a topic of interest of the House Budget Committee in the previous session of Congress, is the policy principle that Medicare should pay the same rate for a given medical service regardless of the setting in which it is delivered. That is, the federal government shouldn’t pay more for, say, a knee replacement in an in-patient clinic than it does in an ambulatory clinic. There seems to be bipartisan agreement on this. Disparate reimbursements create all kinds of perverse incentives, such as for hospitals to buy doctor practices so they can jack up costs relative to what the physician could bill Medicare for if the physician remained independent.
The Centers for Medicare & Medicaid Services (CMS), part of HHS has some regulatory authority to adjust payment policies, but major changes such as introducing site neutrality would require an act of Congress. It seems unlikely that Congress or the Administration would want to expose itself to accusations of having cut Medicare, given numerous promises not to. Yet this is the kind of cut that could be argued to improve outcomes. Even the American Cancer Society Action Network supports it.
One thing is for sure: if Congress is too politically sclerotic to take even this kind of low hanging fruit that in principle has bipartisan support and could save tens of billions of dollars, they are unlikely to be able to address bigger problem of $2 trillion deficits, given the large share of the budget taken up by Social Security and Medicare.