Tuesday, August 4, 2009
Understanding Health Care Reform
With all the information floating around on health care reform, it may be difficult to understand exactly how national reform will affect you and your family.
Federal health care reform offers strong consumer protections. It is centered on preventive care and will lower costs for all Americans. The legislation will increase a patient's choice of doctor and will keep insurance companies from denying coverage for pre-existing conditions.
Much of the debate at the federal level has been focused on the most effective way to both insure millions of Americans while remaining fiscally responsible.
For your information, I have included two editorials on the above subjects:
July 26, 2009
EDITORIAL
Health Care Reform and You
The health care reform bills moving through Congress look as though they would do a good job of providing coverage for millions of uninsured Americans. But what would they do for the far greater number of people who already have insurance? As President Obama noted in his news conference last week, many of them are wondering: "What's in this for me? How does my family stand to benefit from health insurance reform?"
Many crucial decisions on coverage and financing have yet to be made, but the general direction of the legislation is clear enough to make some educated guesses about the likely winners and losers.
WHAT ARE THE ELEMENTS OF REFORM? The House bill and a similar bill in the Senate would require virtually all Americans to carry health insurance with specified minimum benefits or pay a penalty. They would require all but the smallest businesses to provide and subsidize insurance that meets minimum standards for their workers or pay a fee for failing to do so.
The reforms would help the poorest of the uninsured by expanding Medicaid. Some middle-class Americans — earning up to three or four times the poverty level, or $66,000 to $88,000 for a family of four — would get subsidies to help them buy coverage through new health insurance exchanges, national or state, which would offer a menu of policies from different companies.
IS THERE HELP FOR THE INSURED? Many insured people need help almost as much as the uninsured. Premiums and out-of-pocket spending for health care have been rising far faster than wages. Millions of people are "underinsured" — their policies don't come close to covering their medical bills. Many postpone medical care or don't fill prescriptions because they can't afford to pay their share of the costs. And many declare personal bankruptcy because they are unable to pay big medical debts.
The reform effort should help ease the burdens of many of them, some more quickly than others. The legislation seems almost certain to include a new marketplace, the so-called health insurance exchange. Since there will be tens of millions of new subscribers, virtually all major insurers are expected to offer policies through an exchange. To participate, these companies would have to agree to provide a specified level of benefits, and they would set premiums at rates more comparable to group rates for big employers than to the exorbitant rates typically charged for individual coverage.
Under the House bill, the exchanges would start operating in 2013. They would be open initially to people who lack any insurance; to the 13 million people who have bought individual policies from insurance companies, which often charge them high rates for relatively skimpy coverage; and to employees of small businesses, who often pay high rates for their group policies, especially if a few of their co-workers have run up high medical bills. By the third year, larger businesses might be allowed to shift their workers to an exchange. All told, the Congressional Budget Office estimates that 36 million people would be covered by policies purchased on an exchange by 2019.
IS THERE MORE SECURITY FOR ALL? As part of health reform, all insurance companies would be more tightly regulated. For Americans who are never quite certain that their policies will come through for them when needed, that is very good news.
The House bill, for example, would require that all new policies sold on or off the exchanges must offer yet-to-be-determined "essential benefits." It would prohibit those policies from excluding or charging higher rates to people with pre-existing conditions and would bar the companies from rescinding policies after people come down with a serious illness. It would also prohibit insurers from setting annual or lifetime limits on what a policy would pay. All this would kick in immediately for all new policies. These rules would start in 2013 for policies purchased on the exchange, and, after a grace period, would apply to employer-provided plans as well.
WHO PAYS? Current estimates suggest that it would cost in the neighborhood of $1 trillion over 10 years to extend coverage to tens of millions of uninsured Americans. Under current plans, half or more of that would be covered by reducing payments to providers within the giant Medicare program, but the rest would require new taxes or revenue sources.
If President Obama and House Democratic leaders have their way, the entire tax burden would be dropped on families earning more than $250,000 or $350,000 or $1 million a year, depending on who's talking. There is strong opposition in the Senate, and it seems likely that at least some burden would fall on the less wealthy.
Many Americans reflexively reject the idea of any new taxes — especially to pay for others' health insurance. They should remember that if this reform effort fails, there is little hope of reining in the relentless rise of health care costs. That means their own premiums and out-of-pocket medical expenses will continue to soar faster than their wages. And they will end up paying higher taxes anyway, to cover a swelling federal deficit driven by escalating Medicare and Medicaid costs.
WHO WON'T BE HAPPY? Healthy young people who might prefer not to buy insurance at all will probably be forced to by a federal mandate. That is all to the good. When such people get into a bad accident or contract a serious illness, they often can't pay the cost of their care, and the rest of us bear their burden. Moreover, conscripting healthy people into the insured pool would help reduce the premiums for sicker people.
Less clear is what financial burden middle-income Americans would bear when forced to buy coverage. There are concerns that the subsidies ultimately approved by Congress might not be generous enough.
WHAT IF I HAVE GOOD GROUP COVERAGE? The main gain for these people is greater security. If they got laid off or chose to leave their jobs, they would no longer be faced with the exorbitant costs of individually bought insurance but could buy new policies through the insurance exchanges at affordable rates.
President Obama has also pledged that if you like your current insurance you can keep it.
Right now employers are free to change or even drop your coverage at any time. Under likely reforms, they would remain free to do so, provided they paid a penalty to help offset the cost for their workers who would then buy coverage through an exchange. Under the House reform bill, all employers would eventually be allowed to enroll their workers in insurance exchanges that would offer an array of policies to choose from, including a public plan whose premiums would almost certainly be lower than those of competing private plans.
Some employers might well conclude that it is a better deal — for them or for you — to subsidize your coverage on the exchange rather than in your current plan. If so, you might end up with better or cheaper coverage. You would probably also have a wider choice of plans, since most employers offer only one or two options.
WILL I PAY LESS? Two factors could help drive down the premiums for those who are insured. In the short-term, if reform manages to cover most of the uninsured, that should greatly reduce the amount of charity care delivered by hospitals and eliminate the need for the hospitals to shift such costs to patients who have private insurance. One oft-cited study estimates that cost-shifting to cover care for the uninsured adds about $1,000 to a family's annual insurance premiums; other experts think it may be a few hundred dollars. In theory, eliminating most charity care should help hold down or even reduce the premiums charged for private insurance. When, if ever, that might happen is unclear.
In the long run, if reform efforts slow the growth of health care costs, then the increase in insurance costs should ease as well. And if the new health insurance exchanges — and possibly a new public plan — inject more competition into markets that are often dominated by one or two big private insurance companies, that, too, could help bring down premiums.
But these are big question marks, and the effects seem distant.
WILL MY CARE SUFFER? Critics have raised the specter that health care will be "rationed" to save money. The truth is that health care is already rationed. No insurance, public or private, covers everything at any cost. That will not change any time soon.
It is true that the long-term goal of health reform is to get rid of the fee-for-service system in which patients often get very expensive care but not necessarily the best care. Virtually all experts blame the system for runaway health care costs because it pays doctors and hospitals for each service they perform, thus providing a financial incentive to order excessive tests or treatments, some of which harm the patients.
An earlier wave of managed care plans concentrated on reining in costs and aroused a backlash among angry beneficiaries who were denied the care they wanted. The most expensive treatment is not always the best treatment. The reform bills call for research and pilot programs to find ways to both control costs and improve patients' care.
The bills would alter payment incentives in Medicare to reduce needless readmissions to hospitals. They would promote comparative effectiveness research to determine which treatments are best but would not force doctors to use them. And they call for pilot programs in Medicare to test the best ways for doctors to manage and coordinate a patient's total care.
Any changes in the organization of care would take time to percolate from Medicare throughout the health care system. They are unlikely to affect most people in the immediate future.
WHAT DOES IT MEAN FOR OLDER AMERICANS? People over 65 are already covered by Medicare and would seem to have little to gain. But many of the chronically ill elderly who use lots of drugs could save significant money. The drug industry has already agreed to provide 50 percent discounts on brand-name drugs to Medicare beneficiaries who have reached the so-called "doughnut hole" where they must pay the full cost of their medicines. The House reform bill would gradually phase out the doughnut hole entirely, thus making it less likely that beneficiaries will stop taking their drugs once they have to pay the whole cost.
Not everyone in Medicare will be happy. The prospective losers are likely to include many people enrolled in the private plans that participate in Medicare, known as Medicare Advantage plans. They are heavily subsidized, and to pay for reform, Congress is likely to reduce or do away with those subsidies. If so, many of these plans are apt to charge their clients more for their current policies or offer them fewer benefits. The subsidies are hard to justify when the care could be delivered more cheaply in traditional Medicare, and the subsidies force up the premiums for the beneficiaries in traditional Medicare to cover their cost.
Reformers are planning to finance universal coverage in large part by saving money in the traditional Medicare program, raising the question of whether all beneficiaries will face a reduction in benefits. President Obama insisted that benefits won't be reduced, they'll simply be delivered in more efficient ways, like better coordination of care, elimination of duplicate tests and reliance on treatments known to work best.
The AARP, the main lobby for older Americans, has praised the emerging bills and thrown its weight behind the cause. All of this suggests to us that the great majority of Americans — those with insurance and those without — would benefit from health care reform.
August 2, 2009
Editorial
Curbing Runaway Health Inflation
This year's effort to reform health care revolves around two powerful, conflicting imperatives. One is to cover tens of millions of uninsured Americans. The other is to absorb the enormous cost of that plan — which could reach $1 trillion over 10 years — without increasing the budget deficit in the next decade or setting the nation on a course that will drive up deficits later.
It is easier to see how to accomplish the first task than the second. But Congress should not slow the push for near-universal coverage while it looks for ways to apply the brakes to the growth in costs. We can be virtually certain that the reforms enacted will be deficit-neutral over the first 10 years. President Obama and Democratic leaders will find cuts in Medicare and raise sufficient taxes to offset the initial cost of insurance expansion.
It is much harder to find ways to slow inflation in health care costs. Peter Orszag, Mr. Obama's budget director, has been searching for what he calls "game changers" that can "bend down the cost curve" in coming years. The question is how well he and Congressional champions of health care reform have succeeded.
WHY IT'S IMPORTANT The skyrocketing cost of health care is driving up federal deficits, threatening to bankrupt Medicare, forcing employers to cut or drop benefits, and leaving workers and their families with unaffordable bills. Even a relatively small reduction in the average annual growth rate over the next decade — from, say, 6.2 percent to 4.7 percent — could save more than $2 trillion for the health care system and hundreds or thousands of dollars for the average family. There is an enormous amount of money in the health care system, much of it spent on tests and procedures that do not improve health. It should be possible to wring out some of that spending.
HOW CAN WE JUDGE SUCCESS? Douglas Elmendorf, director of the Congressional Budget Office, testified in mid-July that he saw no fundamental changes offered by the bills then emerging that would reduce the trajectory of federal health spending significantly. The implication was that the pending bills could actually make deficits bigger after the initial break-even decade. That's because covering the uninsured would increase federal spending and a high rate of medical inflation applied to that larger base would make future deficits worse. However, Mr. Elmendorf was looking only at bills that had cleared committees, which did not include one still being fashioned by the pivotal Senate Finance Committee.
Senator Max Baucus, the Democrat who heads that committee, revealed last week that the C.B.O. had evaluated a draft of his bill and concluded that it would cover 95 percent of all Americans, for a cost below $900 billion, and would actually start reducing the deficit in 2019. That is better than the administration's goal of being deficit-neutral in that final year, but we will not know for sure until the C.B.O. issues a verdict on a final bill.
The budget office provides vitally important guidance to Congress, but focuses primarily on how new legislation might affect federal spending and federal deficits. The office gives only a cursory glance at how reforms might cut costs for the overall system and yield savings for employers, families and state and local governments, the issue that concerns most people.
Moreover, the office makes middle-of-the road estimates of cost and more pessimistic estimates of savings. That makes sense (lawmakers and government agencies routinely exaggerate the virtues of their proposals), but it makes it harder to evaluate proposed innovations.
Respected analysts who are not bound by the C.B.O.'s conservatism have projected significant savings from reforms that the C.B.O. scores poorly. The Commonwealth Fund, a research organization, and David Cutler, a Harvard health economist, separately estimate that an array of reforms could save the government hundreds of billions of dollars in the first decade and the health care system even more. These estimates, coming from advocates of reform, may be too rosy, but underscore the point that the C.B.O. may undervalue savings.
POTENTIAL GAME CHANGERS It seems hard to believe that over the long haul the introduction of electronic medical records will not save substantial money. It would help eliminate the costly repetition of tests, and prevent medication errors that harm patients and lead to costly hospitalization. But it takes money to get started (Mr. Obama's stimulus package calls for $50 billion over five years) and time to overcome physicians' reluctance. Savings in the first decade, if any, are likely to be small.
So, too, it seems likely that a stimulus investment of $1.1 billion in comparative effectiveness research to gauge which medicines and procedures work best is likely to pay off in future decades.
The approach has been wrongly portrayed as an effort by government bureaucrats to dictate "cookbook" medicine that will prevent doctors from doing what's best for their patients and lead to rationing of care. More than 60 physicians' groups have urged Congress to make comparative effectiveness research an important component of reform. They believe the information would help doctors and patients understand which treatments work best. In some cases, the better treatments might be more expensive, in others less. Either way, patients benefit.
And so it goes, through such ideas as changing Medicare's payment incentives to encourage better care not just more care, and to encourage new arrangements of doctors and hospitals that might control costs and provide more coordinated care than the fee-for-service system does. All will take time to bear fruit.
TAXES One way to keep deficits in check would be to impose taxes within the health care system instead of more broadly, which should ensure that revenues increase at the rate of health care inflation. A tax on the value of an employer's contribution to insurance could lead beneficiaries to choose cheaper policies and think twice before undergoing costly tests. We have been leery of recommending a tax that would affect many workers, but a tax on very expensive plans might make sense.
OTHER IDEAS The administration seems to have scoured the health policy literature for ideas, and its proposals reflect the thinking of the nation's leading experts. Most of these ideas would first be tried on a small scale in Medicare — to see if they reduced costs while improving or at least maintaining the quality of care — before being adopted on a wide scale in government programs. Ideas that work for Medicare would presumably migrate out to the private sector.
We believe that some of the reforms in pending legislation could be strengthened. Both public and private insurance plans, for example, should be allowed — not forbidden — to base reimbursement policies on comparative effectiveness findings. But for the most part, the nation is embarking on a long-term experiment to see what works, so small-scale tests and pilot programs seem appropriate.
THE OVERSEER With so much uncertainty, it seems imperative to ensure that the government can change course rapidly to drop approaches that do not work and expand approaches that do. Proposals have been made to create an independent commission of experts, responsible to either the president or Congress, to perform this function at a step removed from the distorting influences of political lobbying.
It is a good idea, if the commission has sufficient power and resources to do an effective job. The panel should be directed to pursue both cost reduction and quality improvement. It should be given cost reduction targets to meet and a mandate to impose across-the-board cuts in Medicare if it falls short. It should have sufficient resources to evaluate and sponsor studies, a membership beholden to no special interest, and be insulated from political pressure by requiring Congress to approve or reject recommendations as a package, without fighting over individual items of interest to lobbyists.
WRONG-HEADED CRITICISM The Republican Party has started a campaign charging that President Obama is conducting a dangerous and reckless experiment in health care reform that will damage the economy, kill jobs, drive up health care costs, and harm patients. That is a bit hard to take after the Bush administration's reckless squandering of government surpluses with tax cuts for wealthy Americans that cost $1.7 trillion over 10 years and an expensive Medicare drug benefit that is projected to cost almost $1 trillion over the next 10 years, without making provisions to cover their costs.
The Obama administration is paying meticulous attention to the need for offsets and new revenues. Most important, it seems headed in the right direction to finally slow the rate of growth in health care spending — a beast that has defied past efforts to tame it.
Federal health care reform offers strong consumer protections. It is centered on preventive care and will lower costs for all Americans. The legislation will increase a patient's choice of doctor and will keep insurance companies from denying coverage for pre-existing conditions.
Much of the debate at the federal level has been focused on the most effective way to both insure millions of Americans while remaining fiscally responsible.
For your information, I have included two editorials on the above subjects:
- A New York Times editorial from last Sunday that explains the federal health care reform legislation in a manner that is easy to understand.
- A New York Times editorial from yesterday discussing the Obama administration's plan to slow the rate of growth in health care spending.
July 26, 2009
EDITORIAL
Health Care Reform and You
The health care reform bills moving through Congress look as though they would do a good job of providing coverage for millions of uninsured Americans. But what would they do for the far greater number of people who already have insurance? As President Obama noted in his news conference last week, many of them are wondering: "What's in this for me? How does my family stand to benefit from health insurance reform?"
Many crucial decisions on coverage and financing have yet to be made, but the general direction of the legislation is clear enough to make some educated guesses about the likely winners and losers.
WHAT ARE THE ELEMENTS OF REFORM? The House bill and a similar bill in the Senate would require virtually all Americans to carry health insurance with specified minimum benefits or pay a penalty. They would require all but the smallest businesses to provide and subsidize insurance that meets minimum standards for their workers or pay a fee for failing to do so.
The reforms would help the poorest of the uninsured by expanding Medicaid. Some middle-class Americans — earning up to three or four times the poverty level, or $66,000 to $88,000 for a family of four — would get subsidies to help them buy coverage through new health insurance exchanges, national or state, which would offer a menu of policies from different companies.
IS THERE HELP FOR THE INSURED? Many insured people need help almost as much as the uninsured. Premiums and out-of-pocket spending for health care have been rising far faster than wages. Millions of people are "underinsured" — their policies don't come close to covering their medical bills. Many postpone medical care or don't fill prescriptions because they can't afford to pay their share of the costs. And many declare personal bankruptcy because they are unable to pay big medical debts.
The reform effort should help ease the burdens of many of them, some more quickly than others. The legislation seems almost certain to include a new marketplace, the so-called health insurance exchange. Since there will be tens of millions of new subscribers, virtually all major insurers are expected to offer policies through an exchange. To participate, these companies would have to agree to provide a specified level of benefits, and they would set premiums at rates more comparable to group rates for big employers than to the exorbitant rates typically charged for individual coverage.
Under the House bill, the exchanges would start operating in 2013. They would be open initially to people who lack any insurance; to the 13 million people who have bought individual policies from insurance companies, which often charge them high rates for relatively skimpy coverage; and to employees of small businesses, who often pay high rates for their group policies, especially if a few of their co-workers have run up high medical bills. By the third year, larger businesses might be allowed to shift their workers to an exchange. All told, the Congressional Budget Office estimates that 36 million people would be covered by policies purchased on an exchange by 2019.
IS THERE MORE SECURITY FOR ALL? As part of health reform, all insurance companies would be more tightly regulated. For Americans who are never quite certain that their policies will come through for them when needed, that is very good news.
The House bill, for example, would require that all new policies sold on or off the exchanges must offer yet-to-be-determined "essential benefits." It would prohibit those policies from excluding or charging higher rates to people with pre-existing conditions and would bar the companies from rescinding policies after people come down with a serious illness. It would also prohibit insurers from setting annual or lifetime limits on what a policy would pay. All this would kick in immediately for all new policies. These rules would start in 2013 for policies purchased on the exchange, and, after a grace period, would apply to employer-provided plans as well.
WHO PAYS? Current estimates suggest that it would cost in the neighborhood of $1 trillion over 10 years to extend coverage to tens of millions of uninsured Americans. Under current plans, half or more of that would be covered by reducing payments to providers within the giant Medicare program, but the rest would require new taxes or revenue sources.
If President Obama and House Democratic leaders have their way, the entire tax burden would be dropped on families earning more than $250,000 or $350,000 or $1 million a year, depending on who's talking. There is strong opposition in the Senate, and it seems likely that at least some burden would fall on the less wealthy.
Many Americans reflexively reject the idea of any new taxes — especially to pay for others' health insurance. They should remember that if this reform effort fails, there is little hope of reining in the relentless rise of health care costs. That means their own premiums and out-of-pocket medical expenses will continue to soar faster than their wages. And they will end up paying higher taxes anyway, to cover a swelling federal deficit driven by escalating Medicare and Medicaid costs.
WHO WON'T BE HAPPY? Healthy young people who might prefer not to buy insurance at all will probably be forced to by a federal mandate. That is all to the good. When such people get into a bad accident or contract a serious illness, they often can't pay the cost of their care, and the rest of us bear their burden. Moreover, conscripting healthy people into the insured pool would help reduce the premiums for sicker people.
Less clear is what financial burden middle-income Americans would bear when forced to buy coverage. There are concerns that the subsidies ultimately approved by Congress might not be generous enough.
WHAT IF I HAVE GOOD GROUP COVERAGE? The main gain for these people is greater security. If they got laid off or chose to leave their jobs, they would no longer be faced with the exorbitant costs of individually bought insurance but could buy new policies through the insurance exchanges at affordable rates.
President Obama has also pledged that if you like your current insurance you can keep it.
Right now employers are free to change or even drop your coverage at any time. Under likely reforms, they would remain free to do so, provided they paid a penalty to help offset the cost for their workers who would then buy coverage through an exchange. Under the House reform bill, all employers would eventually be allowed to enroll their workers in insurance exchanges that would offer an array of policies to choose from, including a public plan whose premiums would almost certainly be lower than those of competing private plans.
Some employers might well conclude that it is a better deal — for them or for you — to subsidize your coverage on the exchange rather than in your current plan. If so, you might end up with better or cheaper coverage. You would probably also have a wider choice of plans, since most employers offer only one or two options.
WILL I PAY LESS? Two factors could help drive down the premiums for those who are insured. In the short-term, if reform manages to cover most of the uninsured, that should greatly reduce the amount of charity care delivered by hospitals and eliminate the need for the hospitals to shift such costs to patients who have private insurance. One oft-cited study estimates that cost-shifting to cover care for the uninsured adds about $1,000 to a family's annual insurance premiums; other experts think it may be a few hundred dollars. In theory, eliminating most charity care should help hold down or even reduce the premiums charged for private insurance. When, if ever, that might happen is unclear.
In the long run, if reform efforts slow the growth of health care costs, then the increase in insurance costs should ease as well. And if the new health insurance exchanges — and possibly a new public plan — inject more competition into markets that are often dominated by one or two big private insurance companies, that, too, could help bring down premiums.
But these are big question marks, and the effects seem distant.
WILL MY CARE SUFFER? Critics have raised the specter that health care will be "rationed" to save money. The truth is that health care is already rationed. No insurance, public or private, covers everything at any cost. That will not change any time soon.
It is true that the long-term goal of health reform is to get rid of the fee-for-service system in which patients often get very expensive care but not necessarily the best care. Virtually all experts blame the system for runaway health care costs because it pays doctors and hospitals for each service they perform, thus providing a financial incentive to order excessive tests or treatments, some of which harm the patients.
An earlier wave of managed care plans concentrated on reining in costs and aroused a backlash among angry beneficiaries who were denied the care they wanted. The most expensive treatment is not always the best treatment. The reform bills call for research and pilot programs to find ways to both control costs and improve patients' care.
The bills would alter payment incentives in Medicare to reduce needless readmissions to hospitals. They would promote comparative effectiveness research to determine which treatments are best but would not force doctors to use them. And they call for pilot programs in Medicare to test the best ways for doctors to manage and coordinate a patient's total care.
Any changes in the organization of care would take time to percolate from Medicare throughout the health care system. They are unlikely to affect most people in the immediate future.
WHAT DOES IT MEAN FOR OLDER AMERICANS? People over 65 are already covered by Medicare and would seem to have little to gain. But many of the chronically ill elderly who use lots of drugs could save significant money. The drug industry has already agreed to provide 50 percent discounts on brand-name drugs to Medicare beneficiaries who have reached the so-called "doughnut hole" where they must pay the full cost of their medicines. The House reform bill would gradually phase out the doughnut hole entirely, thus making it less likely that beneficiaries will stop taking their drugs once they have to pay the whole cost.
Not everyone in Medicare will be happy. The prospective losers are likely to include many people enrolled in the private plans that participate in Medicare, known as Medicare Advantage plans. They are heavily subsidized, and to pay for reform, Congress is likely to reduce or do away with those subsidies. If so, many of these plans are apt to charge their clients more for their current policies or offer them fewer benefits. The subsidies are hard to justify when the care could be delivered more cheaply in traditional Medicare, and the subsidies force up the premiums for the beneficiaries in traditional Medicare to cover their cost.
Reformers are planning to finance universal coverage in large part by saving money in the traditional Medicare program, raising the question of whether all beneficiaries will face a reduction in benefits. President Obama insisted that benefits won't be reduced, they'll simply be delivered in more efficient ways, like better coordination of care, elimination of duplicate tests and reliance on treatments known to work best.
The AARP, the main lobby for older Americans, has praised the emerging bills and thrown its weight behind the cause. All of this suggests to us that the great majority of Americans — those with insurance and those without — would benefit from health care reform.
August 2, 2009
Editorial
Curbing Runaway Health Inflation
This year's effort to reform health care revolves around two powerful, conflicting imperatives. One is to cover tens of millions of uninsured Americans. The other is to absorb the enormous cost of that plan — which could reach $1 trillion over 10 years — without increasing the budget deficit in the next decade or setting the nation on a course that will drive up deficits later.
It is easier to see how to accomplish the first task than the second. But Congress should not slow the push for near-universal coverage while it looks for ways to apply the brakes to the growth in costs. We can be virtually certain that the reforms enacted will be deficit-neutral over the first 10 years. President Obama and Democratic leaders will find cuts in Medicare and raise sufficient taxes to offset the initial cost of insurance expansion.
It is much harder to find ways to slow inflation in health care costs. Peter Orszag, Mr. Obama's budget director, has been searching for what he calls "game changers" that can "bend down the cost curve" in coming years. The question is how well he and Congressional champions of health care reform have succeeded.
WHY IT'S IMPORTANT The skyrocketing cost of health care is driving up federal deficits, threatening to bankrupt Medicare, forcing employers to cut or drop benefits, and leaving workers and their families with unaffordable bills. Even a relatively small reduction in the average annual growth rate over the next decade — from, say, 6.2 percent to 4.7 percent — could save more than $2 trillion for the health care system and hundreds or thousands of dollars for the average family. There is an enormous amount of money in the health care system, much of it spent on tests and procedures that do not improve health. It should be possible to wring out some of that spending.
HOW CAN WE JUDGE SUCCESS? Douglas Elmendorf, director of the Congressional Budget Office, testified in mid-July that he saw no fundamental changes offered by the bills then emerging that would reduce the trajectory of federal health spending significantly. The implication was that the pending bills could actually make deficits bigger after the initial break-even decade. That's because covering the uninsured would increase federal spending and a high rate of medical inflation applied to that larger base would make future deficits worse. However, Mr. Elmendorf was looking only at bills that had cleared committees, which did not include one still being fashioned by the pivotal Senate Finance Committee.
Senator Max Baucus, the Democrat who heads that committee, revealed last week that the C.B.O. had evaluated a draft of his bill and concluded that it would cover 95 percent of all Americans, for a cost below $900 billion, and would actually start reducing the deficit in 2019. That is better than the administration's goal of being deficit-neutral in that final year, but we will not know for sure until the C.B.O. issues a verdict on a final bill.
The budget office provides vitally important guidance to Congress, but focuses primarily on how new legislation might affect federal spending and federal deficits. The office gives only a cursory glance at how reforms might cut costs for the overall system and yield savings for employers, families and state and local governments, the issue that concerns most people.
Moreover, the office makes middle-of-the road estimates of cost and more pessimistic estimates of savings. That makes sense (lawmakers and government agencies routinely exaggerate the virtues of their proposals), but it makes it harder to evaluate proposed innovations.
Respected analysts who are not bound by the C.B.O.'s conservatism have projected significant savings from reforms that the C.B.O. scores poorly. The Commonwealth Fund, a research organization, and David Cutler, a Harvard health economist, separately estimate that an array of reforms could save the government hundreds of billions of dollars in the first decade and the health care system even more. These estimates, coming from advocates of reform, may be too rosy, but underscore the point that the C.B.O. may undervalue savings.
POTENTIAL GAME CHANGERS It seems hard to believe that over the long haul the introduction of electronic medical records will not save substantial money. It would help eliminate the costly repetition of tests, and prevent medication errors that harm patients and lead to costly hospitalization. But it takes money to get started (Mr. Obama's stimulus package calls for $50 billion over five years) and time to overcome physicians' reluctance. Savings in the first decade, if any, are likely to be small.
So, too, it seems likely that a stimulus investment of $1.1 billion in comparative effectiveness research to gauge which medicines and procedures work best is likely to pay off in future decades.
The approach has been wrongly portrayed as an effort by government bureaucrats to dictate "cookbook" medicine that will prevent doctors from doing what's best for their patients and lead to rationing of care. More than 60 physicians' groups have urged Congress to make comparative effectiveness research an important component of reform. They believe the information would help doctors and patients understand which treatments work best. In some cases, the better treatments might be more expensive, in others less. Either way, patients benefit.
And so it goes, through such ideas as changing Medicare's payment incentives to encourage better care not just more care, and to encourage new arrangements of doctors and hospitals that might control costs and provide more coordinated care than the fee-for-service system does. All will take time to bear fruit.
TAXES One way to keep deficits in check would be to impose taxes within the health care system instead of more broadly, which should ensure that revenues increase at the rate of health care inflation. A tax on the value of an employer's contribution to insurance could lead beneficiaries to choose cheaper policies and think twice before undergoing costly tests. We have been leery of recommending a tax that would affect many workers, but a tax on very expensive plans might make sense.
OTHER IDEAS The administration seems to have scoured the health policy literature for ideas, and its proposals reflect the thinking of the nation's leading experts. Most of these ideas would first be tried on a small scale in Medicare — to see if they reduced costs while improving or at least maintaining the quality of care — before being adopted on a wide scale in government programs. Ideas that work for Medicare would presumably migrate out to the private sector.
We believe that some of the reforms in pending legislation could be strengthened. Both public and private insurance plans, for example, should be allowed — not forbidden — to base reimbursement policies on comparative effectiveness findings. But for the most part, the nation is embarking on a long-term experiment to see what works, so small-scale tests and pilot programs seem appropriate.
THE OVERSEER With so much uncertainty, it seems imperative to ensure that the government can change course rapidly to drop approaches that do not work and expand approaches that do. Proposals have been made to create an independent commission of experts, responsible to either the president or Congress, to perform this function at a step removed from the distorting influences of political lobbying.
It is a good idea, if the commission has sufficient power and resources to do an effective job. The panel should be directed to pursue both cost reduction and quality improvement. It should be given cost reduction targets to meet and a mandate to impose across-the-board cuts in Medicare if it falls short. It should have sufficient resources to evaluate and sponsor studies, a membership beholden to no special interest, and be insulated from political pressure by requiring Congress to approve or reject recommendations as a package, without fighting over individual items of interest to lobbyists.
WRONG-HEADED CRITICISM The Republican Party has started a campaign charging that President Obama is conducting a dangerous and reckless experiment in health care reform that will damage the economy, kill jobs, drive up health care costs, and harm patients. That is a bit hard to take after the Bush administration's reckless squandering of government surpluses with tax cuts for wealthy Americans that cost $1.7 trillion over 10 years and an expensive Medicare drug benefit that is projected to cost almost $1 trillion over the next 10 years, without making provisions to cover their costs.
The Obama administration is paying meticulous attention to the need for offsets and new revenues. Most important, it seems headed in the right direction to finally slow the rate of growth in health care spending — a beast that has defied past efforts to tame it.
posted by Rep. Garnet F. Coleman at
12:53 PM
<< Home