White House defends cost-containment efforts in health-care reform bills

By Shailagh Murray
Thursday, November 26, 2009

Senior White House officials on Wednesday brushed aside criticism that Democrats aren't tackling cost containment in their health-care reform bills, although they acknowledged room for improvement as the bills move forward.

White House budget director Peter Orszag told reporters via conference call that the $848 billion bill pending before the Senate contains important cost-cutting tools. He added, however, that further adjustments could be made through amendments to the legislation, saying: "We're not at the end of the process."

On the same conference call, White House health-care adviser Nancy-Ann DeParle said the administration was pleased with the House bill and the one emerging in the Senate. She described the Medicare savings in both bills -- about $500 billion under the Senate approach and $400 billion in the House version -- as the first serious effort to restrain the entitlement program's growth since the 1997 Balanced Budget Act.

"I think you really have to look at this in that context," she said.

Neither bill, however, would take the robust action that many health-care experts consider essential to controlling health-care costs for individuals, businesses and the government. President Obama has cited "bending the cost curve" as one of his primary goals of reform.

For instance, the Senate legislation would create an independent commission charged with making the major changes to Medicare reimbursement policies that experts view as mandatory to the program's solvency. The White House pressed for this new entity, the importance of which "cannot be overstated," DeParle said. In theory, the commission would represent a strong outside voice with the authority to trump the political considerations that inevitably influence congressional oversight of Medicare.

But senators already have clipped the commission's powers by exempting hospitals, and effectively doctors, from its reach, according to the nonpartisan Congressional Budget Office. Further restrictions could be imposed on the Senate floor as lawmakers attempt to defend other health-care interests.

Another key provision in the Senate bill would impose a new excise tax on high-cost insurance policies, known as Cadillac plans. A group of 23 health-care experts and economists, including Nobel Prize winners, Republicans and two former CBO directors, list the excise tax as one of four pillars of effective reform, serving a vital dual purpose beyond providing new revenue to subsidize coverage for the uninsured.

The tax "will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount," the economists explained in a letter last week. In addition, "as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase."

Yet Senate Majority Leader Harry M. Reid (D-Nev.) has already narrowed the scope of the tax from the original Finance Committee proposal to prevent it from hitting households with union members. And House Democrats are strongly opposed to the tax, opting for a surcharge on millionaires as its chief revenue raiser.

Critics of the Democratic bills point to cost control as a chief deficiency. Karen Ignagni, president of America's Health Insurance Plans, said the Senate bill includes only "pilot programs and timid steps" to reform the health-care delivery system, "given the scope of the cost challenge the nation faces."

Unless lawmakers institute changes across the entire system, Ignagni said in a statement Wednesday, "Health costs will continue to weigh down the economy and place a crushing burden on employers and families."

Republicans and their interest group allies have offered few ambitious proposals of their own to restrain health-care cost inflation.

Sen. Charles E. Grassley of Iowa, the ranking Republican on the Senate Finance Committee, helped to negotiate much of the bill his panel produced in September, although he declined to endorse the final version. He told local reporters on Wednesday that Republicans would offer amendments aimed at reducing the proposed Medicare cuts -- efforts that could further diminish the Senate bill's cost-cutting potential.

"We're going to zero in on trying to eliminate the $400 billion in cuts in Medicare because we think it's wrong to take $400 billion out of a Medicare program that's almost bankrupt and putting it into setting up a new entitlement program," Grassley said, referring to provisions in the bill that would expand coverage to 31 million people who are uninsured.

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