Imperfect Health Reform Still Beats the Status Quo

By Steven Pearlstein
Wednesday, July 22, 2009

Among the range of options for health-care reform, there's one that is sure to raise your taxes, increase your out-of-pocket medical expenses, swell the federal deficit, leave more Americans without insurance and guarantee that wages will remain stagnant.

That's the option of doing nothing, letting things continue to drift as they have for the past two decades as we continue to search in vain for the perfect plan that would let everyone have everything they want and preserve everything they already have while getting someone else to pay for it.

So the next time you hear someone throwing a hissy fit because health reform might raise taxes on some people, or steer people into managed care, or require small businesses to contribute $2 a day for each employee's coverage, just remember to ask yourself: And that's compared with what?

In recent days, the rumors of the death of health-care reform have been greatly exaggerated. While each of the various proposals snaking their way through the legislative maze has its flaws, the outlines of a good reform plan are there -- universal coverage, insurance market reform, cost controls, computerized medical records, emphasis on effectiveness research and quality improvements. You might have to squint a bit, but they're all there.

The bigger problem now is that, in trying to build public support for reform, President Obama has made promises that will make it even more difficult to bring all the pieces together into an effective and viable reform plan.

Let's start with the promise, repeated often by the president and written explicitly into both House and Senate proposals, that if you like the insurance you have, you can keep it. But if we're aiming to fundamentally restructure the system, is it really credible to say that we can have all the good parts of the old one with none of the bad parts?

We know, for example, that people like to decide for themselves what medical care they will consume and send the bill off to their insurer. And doctors and hospitals like being paid for whatever they do, no matter whether it is needed or is the most cost-effective treatment. We also know, however, that moving away from "fee-for-service medicine," as it is called, is the key to taming runaway health spending and improving health outcomes. That will be a better system, but it will be a different one, and it won't come unless it is pushed and prodded into being by the government.

The president and legislative leaders have also put themselves in a box by promising that any health reform will not add a dime to the federal deficit, as projected by the Congressional Budget Office. The right way to think about health reform is to consider its impact on the whole economy, not just on the government.

Providing affordable health insurance to all Americans is a pretty expensive proposition, but the mechanisms set up to achieve that goal should also produce tens of billions of dollars in savings each year to workers and businesses who already buy insurance. Just looking at the government impact without also considering those private-sector savings gives an incomplete and distorted picture of the economic impact of health reform. It's not just about the deficit. One way to pay for universal coverage, of course, would be to tax those who are likely to benefit most from slowing the growth of health insurance premiums, such as workers who already get their health insurance tax-free. But Obama has also boxed himself in on that issue by reiterating his promise never to raise taxes on anyone who makes less than $250,000 a year. Having a little flexibility on that issue would go a long way to putting together a final package.

The promise of deficit "neutrality" also runs up against the natural conservatism of the CBO's budget analysts, particularly when it comes to the long-term cost savings that might come from restructuring the way doctors and hospitals are paid or moving patients from solo practitioners to clinics that make better use of nurses and coordinate care among a variety of specialists. There is a general consensus among health-care experts that these are the reforms that will finally "bend the curve" of ever-increasing health-care spending, and CBO Director Douglas Elmendorf made headlines the other day by telling Congress that lawmakers had not been aggressive enough in embracing these reforms.

Ironically, even if Congress had been more aggressive, Elmendorf and his CBO colleagues would probably not have given them very much weight in their deficit calculations. The reason: There isn't enough knowledge to say with any precision how much would be saved and when the savings would materialize. By lashing himself to the mast of CBO-certified "deficit neutrality," Capt. Obama has made it even more difficult to steer health reform through the rough political seas that lie ahead.

Steven Pearlstein will host a live discussion today at 11 a.m. at He can be reached at

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