Health Reform Legislation Would Accomplish More Than Critics Admit

Henry J. Aaron
Henry J. Aaron The Bruce and Virginia MacLaury Chair, Senior Fellow Emeritus - Economic Studies

December 18, 2009

In recent columns, Robert J. Samuelson has argued that extending health insurance to 25 million to 35 million uninsured Americans is undesirable unless and until health spending is controlled [“Obamacare: Buy now, pay later,” Nov. 16; “A savings mirage on health care,” Dec. 14].

The simple fact is that insuring tens of millions must initially raise health-care spending. How else could the previously uninsured enjoy an increase in health-care services? It is, however, fair to ask whether the bills under consideration pay for those added costs and promise credibly to slow the long-term growth of health-care spending.

The Congressional Budget Office has answered the first question: The House-passed bill and the one before the Senate would offset the spending necessary to extend coverage with other spending cuts and tax increases. These bills would reduce the deficit slightly over the first 10 years and more later.

Samuelson disparages the budget cuts because Congress has not always enforced promised spending reductions. Congress has, however, repeatedly stuck with promised cuts in health-care spending — in 1990 and 1993 as part of budget deals that helped balance the budget in that decade, in the Balanced Budget Act of 1997 and in the Deficit Reduction Act of 2005. Most of these cuts, like those proposed in the health-care bills, were gradual.

In contrast, Congress has refused to enforce poorly designed, meat-ax cuts in physicians’ fees. Those cuts were so draconian that thousands of physicians were likely to have stopped serving Medicare patients. The poor design is regrettable. The failure to enforce a bad policy is not.

In his column this week, Samuelson cited a Center for American Progress study and seemed to accept its estimates. But according to that study, the bills under consideration would shave more than $1 trillion from national health-care spending and use half that money to extend coverage. Yet Samuelson says that isn’t good enough.

He seems to want the legislation to identify sure-fire ways to slow the growth of health-care spending. What he does not note is that no one has guaranteed ways to slow the growth of health-care spending and that the pending bills include most of the ways experts believe are likely to succeed.

The bills would simplify the administration of health insurance, support the study of which medical procedures work best, invest in preventive care, foster the creation of health-care organizations accountable for a broad range of services, bundle payments for in-patient and post-acute care, extend tests of “medical homes” that would organize primary-care delivery, penalize hospitals with excessive re-admission rates, reform the sale of insurance to individuals and small groups, and more. In addition, the Senate bill would tax high-cost health plans.

It is easy to write about the need to transform health care and the evils of the fee-for-service system. But vague commentary does not help transform a $2.6 trillion industry — an entity as large as the economy of Britain.

It does not, as the proposed legislation would do, help to spread the team-oriented mode of health-care delivery that makes the Mayo Clinic both a high-quality and a low-cost deliverer of health care. It does not, as the proposed legislation would do, encourage all health providers to use health information technology as effectively as do Utah’s Intermountain Healthcare and the Department of Veterans Affairs.

It does not teach to every hospital administrator the advanced managerial techniques that make Pennsylvania’s Geisinger Health System a leader in health-care management. It does not show private insurers how to replace the admittedly flawed fee-for-service system.

Achieving these goals will take pilot programs, research and experimentation of the sort that the legislation before Congress would initiate. Enacting that legislation is the best way to slow the growth of health-care spending. But the reforms in that legislation will take effect slowly and they will operate against a powerful tide of population aging and advancing medical technology that will continue to drive up health-care spending.

Like virtually every health-care analyst, I wish the bills before Congress did even more than they promise to do. In particular, I wish they moved more aggressively than any of the bills now does to curb the tax breaks for employer-financed health insurance that push up health-care spending.

But waiting to pass reform until some undefined steps achieve unspecified additional savings would delay actions to improve the quality of health for all Americans. It would defer the very savings the nation needs. And it would force tens of millions of uninsured Americans to wait still more years (or even decades) for health coverage they need — and deserve.