The Unmentioned Option to Curb Health Care Costs

The Unmentioned Option to Curb Health Care Costs

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Congressional Budget Office chief Doug Elmendorf dropped a bombshell on his Director’s Blog this morning: federal spending on all health care programs will exceed $1 trillion this year. But when he turned to spelling out options for trimming that figure in the years ahead, he offered a limited and not very satisfying menu of choices, all of which involved doing less or charging people more. Why not do more with less, which is how most industries other than health care have operated over the last few generations?

Medicare and the federal share of Medicaid account for over three-quarters of the $1 trillion. Under current law, which includes last year’s health care reform law (the Affordable Care Act or ACA), this spending spree will continue to grow faster than the rest of the economy for the next decade and beyond. This growth will continue to put “increasing pressure on the federal budget,” Elmendorf said in a speech to the University of Maryland public policy school.

The government isn’t powerless to act, he told the students. But taking the necessary steps would not be painless. His list – “not meant to be comprehensive” – included:

• Reversing the expansion of Medicaid and the subsidies to purchase health insurance enacted last year;
• Changing the eligibility rules for Medicare or Medicaid; and
• Increasing the premiums paid by beneficiaries.

Translated, these painful options require cutting coverage for the uninsured; raising the age of eligibility for Medicare beyond 65; and increasing out-of-pocket costs.

There is another possibility that he should have mentioned. Why not transform the health care system to one that delivers more effective, higher quality care at affordable prices? Donald Berwick, the director of the Centers for Medicare and Medicaid Services, is no fool, and he believes it can be done. And there are doctors, hospital administrators, and health care leaders all over this country who are willing to give it a try.    

Okay. The economists at CBO are from Missouri. We don’t have an efficient health care system, and there’s not much precedent for thinking the cost-control demonstration projects in the ACA will work or become widespread if they do. But Elmendorf could at least have told the students that government has the option of capping the growth rate in health care spending at a level that’s sustainable over the long-term (a weak version of this is also in the ACA), and require providers in the Medicare program to deliver an adequate benefit package at those rates.

There’s an obvious rejoinder to this. Providers will simply drop out and refuse to serve Medicare patients as their reimbursement levels drop. But there are obvious rejoinders to all the options Elmendorf mentioned. Increase the number of uninsured and their costs will simply shows up on everyone else’s bills; raise the Medicare age and the number of people claiming disability will soar; increase premiums and people will self-ration based on affordability, a potential public health disaster that inflicts all its pain on the least well-off.

Poking holes in someone else’s preferred solution is easy.  In fact, Elmendorf did it himself at the end of his post. The plan proposed earlier this month by Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, which would turn the senior citizen health care program over to insurers with each senior given a voucher would mean that “most elderly people would eventually pay more for their health care than they would pay under current law,” he wrote.

Every option for controlling health care costs involves tradeoffs, he concluded. True enough. That’s why when the non-partisan head of the CBO speaks in public, he should mention a representative range of possibilities for controlling costs, not just the ones that inflict all their pain on individual seniors and their families.

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spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.