Bedside Bureaucrats: Why Medicare Reform Hasn't Worked

Abstract

Notwithstanding its obvious importance, Medicare is almost invisible in the legal literature. Part of the reason is that administrative law scholars typically train their attention on the sources of external control over agencies’ exercise of the vast discretion that Congress so often delegates to them. Medicare’s administrators, however, wield considerably less policy discretion than the agencies that feature prominently in the legal commentary. Traditional administrative law thus yields slim insight into Medicare’s operation.

But questions about external control do not - or at least they should not - exhaust the field. An old and often-disregarded tradition in administrative law focuses not on external constraints, but on the internal control measures that agencies employ to shape the behavior of the bureaucrats who implement government programs on the ground. A robust set of internal controls is necessary whenever central administrators seek to align the actions of line officers with programmatic goals. And they are all the more necessary when, as is so often the case in the modern administrative state, implementation authority is vested in private actors, not government officers.

So it is with Medicare, whose street-level bureaucrats are hundreds of thousands of private physicians with strong professional commitments and no particular allegiance to governmental priorities. Yet Congress’s persistent failure to address weaknesses in Medicare’s administrative structure has stymied a series of major reform efforts that have sought to make the program’s physicians more attentive to the cost and quality of the medical care for which it pays. This dismal history suggests that crafting an effective internal law for Medicare will require Congress to refashion the program around private organizations with the capacity, incentives, and legitimacy to align the practice patterns of private physicians - its bedside bureaucrats - with federal priorities. Measured against that baseline, the set of Medicare reforms included in the Affordable Care Act is a disappointment. A more muscular, thoughtful, and sustained effort is needed.

Keywords: Medicare, Affordable Care Act, administrative law, implementation authority

JEL Classification: K23