For many years some economists and many conservatives have touted business management practice as the most efficient, cost-effective way to manage any complex enterprise. Curiously, no one seems to have suggested that the Medicare program is a fine candidate for just that approach. The provision in the Senate health reform bill for an Independent Payment Advisory Board may provide the opening to make that happen.

The classical prototype of a successful company is that it is centrally managed, with a CEO at the top, given strong decision-making authority by shareholders, and that it is efficient, keeps its costs under control, and sets an annual budget. Why is this model never invoked by conservatives for managing health care systems? For the obvious reason, I suppose, that it would logically move them toward a centrally controlled single payer system. But since we have in the Medicare program a home grown – but defective – model of such a system, paid for by taxpayers, run by the government, and delivering its benefits through the private sector, what better place to test a full business model?

As presently organized, Medicare violates every rule of an efficient enterprise. It has no CEO with powers of a kind expected in business. Its stakeholders, the Congress, have a right to interfere with its day-to-day operation. It has no annual budget or the fiscal discipline that imposes. It can set few limits to its expenditures, even to the present point of running an annual deficit. And it underpays its administrators in comparison with those with like responsibilities in the private sector – just as it has too few administrators in the first place.

The National Institutes of Health, the world’s preeminent biomedical research institution, exemplifies everything Medicare lacks. It has a director with strong authority, an annual and tightly managed budget, lay advisory groups, and a good relationship with Congress, one marked by deference on the latter’s part and considerable discretion in setting its priorities. Atul Gawande among others has celebrated the quality and efficiency of the Mayo Clinic, the Geisinger Health System, and Intermountain. They are all private but share a similar budget and administrative structure akin to that of the NIH—everything Medicare lacks.

The Independent Payment Advisory Board, a provision of the Senate reform bill, would provide the opportunity to put Medicare on a more solid administrative and budgetary footing, particularly for the control of costs. It would be comprised of 15 independent members whose duty would be to submit legislative proposals to reduce the per capita rise in Medicare spending. Beginning in 2118, the Board would be charged with making recommendations if Medicare spending exceeds GDP per capita plus 1%; in other words, moving down from the present 6% annual cost increase to 3%. For the first time, Medicare would have to live with an annual budget. Nothing could do more than that to make Medicare solvent in the long run, now projected by its trustees to run out of money in eight years.

To do its job properly, however, some limitations in the Senate bill would have to be removed or softened. The Board would be forbidden by the Senate bill to make recommendations that would ration care, increase revenues or change benefits, or to propose cuts in hospital or hospice coverage.

But can one imagine a good CEO running a business would continue to sell a product that would cost a huge amount to make but faced a guaranteed loss? Rationing for Medicare would simply entail making an assessment that some drugs or treatments are unaffordable or not worth the costs, threatening the overall fiscal stability of the program. It would not deny access to them. It just would not pay for them. Would such judgments in any and all cases necessarily be unsound? Can we really expect that the coming flood of baby boomers – projected to rise from 46 million in 2010 to 77 million in 2030 – can be supported in the years ahead without an increase in revenue (aka, higher taxes) and with no change in benefits?

At the least Congress should lift the long-time prohibition against taking costs into account in making Medicare coverage decisions. Would any business impose such as a rule on itself? That prohibition, together with the other restrictions in the Senate bill, makes no sense in controlling costs. They subvert its very possibility.

The trouble with taking seriously the notion that business management techniques are pertinent to health care is that, if you push far enough down that road, you can find yourself in some strange land. Given suitable power, the CEOs of large American corporations might do a fine job running Medicare. Where is Jack Welch when we need him?

Daniel Callahan is the editor of the Health Care Cost Monitor. His latest book is Taming the Beloved Beast: How Medical Technology Costs are Destroying Our Health Care System.