Health bills too timid on cutting costs, experts say

White House budget director Peter Orszag said he is optimistic about the efforts to reduce health-care spending, calling them "realistic." (Charles Dharapak/associated Press)

What's more, Congress has a history of reversing itself on politically unpopular cuts, so it is risky to count on those savings, Altman said.

Unlike past reform efforts that barely gave a nod to tackling double-digit medical inflation, the bills this year "have some of the right rhetoric," but they fall short of real-world applicability, said Jack Lewin, chief executive of the American College of Cardiology. Without significant financial incentives and strict deadlines, he predicted, few doctors would rush to move toward the coordinated-care models reformers say are needed to save money and maintain high quality.

Ralph Neas, head of the nonpartisan National Coalition on Health Care, noted that "these bills do very little in terms of reining in long-term cost growth," adding: "There is not enough in the public sector and virtually none in the private sector."

Neas called on Congress to adopt up to $2 trillion worth of potential savings trumpeted by Obama and industry leaders at a White House event in May. Only a few of the specific ideas, such as streamlining insurance claims forms, have been included in the legislation.

"Voluntary efforts are never enough," Neas said. "There has to be some way to make it enforceable."

Richard Foster, the chief actuary of the federal Centers for Medicare and Medicaid Services, said lawmakers could achieve far greater savings in the health system if they aggressively pursued research that identifies the best, most cost-effective treatments.

"If you did comparative effectiveness in a way that looked at whether to approve a new therapy because it is cost effective and is an improvement, then you'd have a fighting chance of slowing down the rate of growth," he said in an interview. "Nobody's proposing that."

Taxing benefits

White House budget chief Peter Orszag said in an interview that changing the tax treatment of employer-sponsored health benefits "is among the most important single things that could be done to constrain costs and improve quality."

Employees currently do not pay taxes on insurance purchased through the workplace. Lifting the exemption would be likely to make workers more price sensitive and prompt insurance companies to market more affordable policies, according to most economists.

Eliminating the exemption could raise $250 billion a year and more than pay for the enormous expansion of coverage envisioned by Obama and Democrats. But the Senate compromised, with a proposal to tax only high-priced "Cadillac" plans. That approach is estimated to save $200 billion over a decade, and House Democrats have opposed the idea, raising concerns that it may be dropped.

Orszag also bragged that a set of Medicare pilot projects could dramatically reshape how medicine is practiced in this country. The proposals include reducing reimbursements to hospitals that have unnecessarily high readmission rates, "bundling" payments to medical teams that coordinate patient care and providing bonuses to doctors who meet quality standards.

"We're creating incentives for a more efficient system," he said. Because lawmakers are still negotiating and the proposals could change, Orszag said, it is impossible to quantify the eventual savings.