Prognosis: Debt

By Fred Hiatt
Monday, June 22, 2009

If you listened to President Obama addressing the American Medical Association last week, you might think that the primary purpose of health-care reform is, as he said, "to control the spiraling cost of health care in America."

Obama spoke passionately about the damage that rising costs cause to families, businesses and the economy. He insisted that if Congress passes legislation that fails to change how America practices and pays for care, it will "not earn the title of reform." Not until the sixth page of an 8 1/2 -page speech did he come to the subject of extending coverage to all Americans.

Yet extending coverage is overwhelmingly the focus of congressional attention so far, and it is quite likely that any legislation that emerges will create a hugely expensive health-care entitlement with no guarantee of the upward cost spiral being slowed.

Why the disconnect? There are both substantive and political reasons.

Broadly speaking, we know how to insure most Americans: Order them to get insurance, help pay for those who can't afford it and tell insurance companies to enroll anyone who asks.

When it comes to slowing the cost spiral, we have some promising but tenuous ideas. It will take years to see which ones bear fruit, and even then many will require sustained, politically unpleasant pressure on influential industries and interest groups.

As Douglas W. Elmendorf, director of the politically neutral Congressional Budget Office (CBO), wrote last week, "many of the specific changes that might ultimately prove most important cannot be foreseen today and could be developed only over time through experimentation and learning."

Obama said, for example, that we should "invest more in preventive care so that we can avoid illness and disease in the first place." But the CBO cautions that preventive care is "less broadly effective at reducing health care spending than might be expected." Many tests or procedures, applied across a population, end up costing more than is saved for the few who avoid illness. Reducing obesity would save billions by helping control diabetes. "Unfortunately," the CBO letter notes, "the design and costs of effective programs to reduce obesity are very unclear."

Obama wants to encourage more medical students to become primary care physicians. But the CBO reminds that only simultaneously "reducing the number of specialists" will save money, and that is a long-term and politically dicey proposition.

And so it goes with Obama's other cost-saving ideas: changing incentives for doctors; paying not per procedure but for disease management or patient wellness; figuring out what procedures work and refusing to pay for those that don't. All promising; all calling out for more experimentation; all sure to involve huge battles.

Even on universal coverage, which Obama said would be "in all of our economic interests . . . further reducing costs for everyone," the CBO insists on spoiling the party: "By themselves, insurance expansions would also cause national spending on health care to increase, in part because insured people generally receive somewhat more medical care than do uninsured people."

Nonetheless, congressional Democrats and the most involved interest groups behind them are far more passionate about universal coverage than about controlling costs. Thus Obama's political calculation: Push for health-care reform that delivers universal coverage -- and insist on as many levers to control costs going forward as possible. He would reduce the deficit risk by insisting that the reform is "paid for," in higher taxes or reduced spending, over the next 10 years.

You may believe that universal coverage is such a moral imperative that Obama's calculation is more than reasonable. But, given a national debt already growing out of control and the risks that health-care costs won't be controlled, you may worry about taking on a large new burden ($1.6 trillion over 10 years, perhaps). If so, here are a few alternative ideas, in ascending order of difficulty:

-- Insist that the new entitlement is really paid for. No gimmicks; no costs that explode in the second decade, running ahead of revenue that grows more slowly; no paper promises to cut costs years from now, if necessary, that will never get fulfilled.

-- Insist that it be paid for only with health-related savings and revenue. Obama proposes to finance a chunk of the new entitlement by raising general taxes on the rich, limiting their deductions. That is revenue that won't be available for other deficit reduction.

-- Build in trigger mechanisms so that the entitlement grows only as health-care savings emerge. You could, for example, extend coverage to every American 25 and younger; as they age, they would maintain their coverage, and the share of insured Americans would grow. If the cost spiral slowed, you could expand coverage more quickly.

-- Mindful of the next generation, get a handle on exploding health-care costs, and only then take on additional government burdens.

Good luck with that one.

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