Health Care Reform Will Bring Costs Under Control

Center for American Progress: 

It’s important to remember that the private sector is, if anything, even less effective than Medicare in promoting efficiency. An effort that delivers effective, quality-driven cost containment measures in Medicare and Medicaid but not in private-sector health care plans risks limiting access for beneficiaries or shifting costs from public to private payers. Therefore, the broader the Independent Medicare Advisory Board’s authority to influence public and private spending the more effective it will be.

A focus on policy tools alone, however, obscures the most important element of the new board’s potential impact. Payment improvements in the past were stymied by legislators responding to health care providers’ resistance to change. Witness the previous failed efforts to introduce competitive bidding for managed care plans, oxygen providers, or medical devices. The Independent Medicare Advisory Board’s authority to make Medicare payment recommendations that become law unless explicitly overridden by legislative action gives a major boost to policy over politics in containing health care costs.

That said, with the exception of recognition for the new board’s potential impact of containing health care costs, the Congressional Budget Office and a number of health policy experts are skeptical of the reform legislation’s ability to contain health care costs. Indeed, CBO estimates that these and other efficiency incentives in pending health reform legislation would achieve minimal if any savings. The bill delivers on deficit reduction through cuts in payments to health care providers and new revenues rather than from payment “modernization.”

From a fiscal perspective, that is perhaps good news. It means that health reform is paid for—and reduces the federal budget deficit—even without a transformation of payment and delivery. But when health care payment reforms that encourage quality care over fee-for-service care kick in, all these savings will redound to deficit reduction and a stronger economy.

Drawing on experience with efficient health care delivery systems around the country, previous research by the Center for American Progress estimates potential savings from payment and other modernization as high as $500 billion to the federal government and $2 trillion to the whole health care system over 10 years. And lest that sound implausible, these savings simply means that the health care industry would achieve the same level of productivity growth improvements that every other U.S. industry has accomplished in recent years.

Health reform’s potential to actually produce these savings—of critical importance to the nation’s long-run economic health as well the individual financial health of all Americans —is just one more reason to challenge the argument that we cannot afford to enact health reform. The fact is, we simply cannot afford not to.

Posted via email from Jim Nichols for GA State House