Can the health care bill control costs?

Short of rationing, lawmakers have pulled nearly every available cost-control lever in the sweeping health care overhaul President Barack Obama and Democratic congressional leaders are pushing to finish.

Will it work?

It may take 10 years or more to find out. Costs are expected first to go up, as tens of millions of previously uninsured Americans get coverage and start going for checkups, mammograms and MRIs. Over time, if the plan works, health care inflation would slow. With the magic of compounding, shaving even 1 or 2 percentage points a year from rising spending rates would translate into big savings across the economy.

That’s a rosy scenario, skeptics say. Even some supporters of the legislation say cost controls could have been fine-tuned to make them more effective.

“On cost containment, this bill moves the ball to the opponent’s 30-yard line, but it doesn’t score,” said Sen. Mark Warner, D-Va., who has taken a leading role in trying to squeeze more savings. “We didn’t move as far as I would have liked.”

Taken together, the bills get a C-plus to B-minus on cost control, grading on the curve of what’s politically doable.

White House Chief of Staff Rahm Emanuel acknowledged the doubts Monday. “A lot of people said, ‘Can you really control costs?’” he noted in an interview with MSNBC. The legislation will deliver lower costs, he asserted, while expanding coverage and providing consumers more rights. Obama wants to finish it by the time of his State of the Union address, not yet scheduled.

The Democratic legislation would, for the first time, require nearly all Americans to get health insurance. Medicaid would be expanded to pick up the near-poor, and middle-class households would get subsidies to help pay premiums.

Despite concerns raised by opponents, rationing was never really on the table. The four big ideas for slowing costs are: discouraging high-priced health insurance by taxing it; paying hospitals and doctors for quality care and coordination instead of sheer volume of procedures; aggressively seeking savings from Medicare; and restructuring the health insurance marketplace to make it more competitive.

Combine that with an ongoing push on prevention and an unprecedented research effort to identify effective treatments.

Of the two bills, many experts give the Senate’s higher marks for controlling costs, but some find the House version superior at reshaping the insurance market.

Democrats have tossed out one potentially promising idea. Limits on malpractice lawsuits to reduce defensive medicine are nowhere in their legislation.

The uncertain outlook for costs was reflected in a report on the Senate bill issued over the weekend from Medicare economic analysts.

If no bill passes and no attempt is made to check medical inflation, Americans will spend an average of $13,939 on health care for every man, woman and child in 2019, the analysts said.

With the Senate bill, the corresponding figure would be $14,013.

Such a modest increase — about $75 per capita — may actually be a sign of thriftiness, considering that 34 million more people get covered.

But it’s not the turnaround Obama envisioned on costs when he pledged to save the typical family $2,500 on premiums _although White House economic experts still predict significant savings.

Highly unlikely, says Republican health economist Gail Wilensky, who once ran Medicare. When it comes to controlling costs, the Democratic legislation “is pretty darn pitiful,” she said. Still, Wilensky does not dismiss it.

“It’s setting the stage, but that is not enough,” she said, arguing for stronger language to quickly translate successful cost control experiments into national policy.

Here’s an overview of the main proposals in the Democratic bills:

• INSURANCE TAX

Employer-sponsored health insurance is part of total compensation, but traditionally it’s been tax-free.

The Senate bill would slap a 40 percent tax on health insurance premiums above $23,000 for a family plan, $8,500 for individual coverage. (Family coverage now averages $13,375.)

A firm nudge to get people into more frugal coverage, the new tax would affect about 20 percent of insured workers in 2019.

“That will lead to changes in behavior across the board,” said economist Len Nichols of the nonpartisan New America Foundation.

But the idea could get watered down in the face of strong union opposition.

• PAYMENT REFORMS

Using Medicare as the lab, both bills would launch a range of experiments changing the way medical providers are paid, encouraging them to keep patients healthier by avoiding foreseeable complications.

Doctors and hospitals would be able to band together to better coordinate care. Instead of paying piecemeal for visits and tests, providers would get a lump sum for managing patients with certain health conditions.

The Senate bill authorizes a broader range of such experiments and makes it easier to adopt successes as national policy, following changes proposed by Warner and other freshmen senators.

• MEDICARE BOARD

The Senate bill sets up a board to ferret out Medicare savings on an ongoing basis. Congress could reject the proposals, but it wouldn’t be able to tinker with them. The strategy could save $28 billion over 10 years.

• INSURANCE MARKET

Both bills would set up new insurance supermarkets called exchanges, so small businesses and people buying on their own coverage could pool purchasing power. The House bill would create a national exchange, while the Senate would set up separate state-based exchanges for small businesses and individuals.

The national exchange in the House bill would promote stiffer competition, allowing consumers to reap the dividends, some advocates say.

One Response to "Can the health care bill control costs?"

  1. woody188  January 11, 2010 at 10:06 pm

    Here’s why it will fail:

    INSURANCE TAX

    40 percent tax on health insurance premiums above $23,000 for a family plan, $8,500 for individual coverage.

    From zero to 40%!  It’s akin to the Stamp Act of the colonial era.  Our individual plan premiums come to $5,500 for a very modest plan.  It’s not hard to see premiums increasing to $8,499 by insurance companies on purpose.  That’s nearly double, so it will take roughly 3 years to get there.  So by 2015 most plans will be subject to 40% tax on premiums.

    PAYMENT REFORMS

    These are mostly about reducing Medicare costs.  I guess I don’t understand how doctors are supposed to keep patients healthier.  Does this mean your doctor will hold an intervention if you are a smoker?  Will they demand you go on a diet if you are overweight or obese?

    Experiments on live payments seems like a bad idea.  This is going to cause all sorts of headaches for health professionals and patients alike.

    It also removes doctor autonomy.  What they call “banding together” will work out to hospitals making demands on doctors ultimately bringing them under hospital control.  And isn’t control what it’s all about?

    MEDICARE BOARD

    How is this not a death panel?  Isn’t “ferret out savings” another way of saying keep from making payments for services?

    INSURANCE MARKET

    Enron style electronic exchange. Ken Lay would be proud to see his failed ideas re-birthed in healthcare.  As Enron was the cause of the California electricity crisis early in the decade, what do you suppose will happen to insurance prices on these exchanges?

    These bills are a joke and if passed into law will make the United States the laughing stock of healthcare on the world stage.  Too bad it will take 10 years for our government to figure that out, at which point most of the US middle class will have sunk into poverty.

Comments are closed.