Health Care

Cruise Control

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When conservatives scream about socialized medicine and death panels, you should tune them out. But lately conservatives have been making an argument you should hear. It's about whether we can believe Congress when it promises to raise taxes or cut spending--and, as such, whether we can believe that health care reform can actually be fiscally responsible.

As you may know, many promoters of health care reform say that the proposals in Congress will pay for themselves and, over the long run, actually reduce what we spend, as taxpayers and as a society. As proof, they point to (among other things) a series of changes in the way Medicare pays for services--changes that would, over time, pay the providers of medical care less and, accordingly, restrain the growth in overall Medicare spending. They also cite a reduction in the tax subsidy for the most generous health job-based insurance policies, or so-called "Cadillac plans." Experts believe this will induce employers and employees to seek out cheaper, more efficient insurance arrangements.

The Congressional Budget Office agrees that these measures would save the government money. (CBO doesn't predict the effect on health care spending overall, but it's a reasonable inference.) Still, the CBO delivered that judgment with a caveat: Cost control will only work if future lawmakers let those changes take effect. As CBO noted--and as conservatives have been arguing, in some cases very loudly--that's hardly a sure thing.

A big reason for doubt is the fate of a law called the "Sustainable Growth Rate." SGR is basically an effort to set a hard budget on physician payments in Medicare. After any year when Medicare reimbursements grew more quickly than the SGR, the government is supposed to cut those payments back. But thanks in no small part to physician lobbying, Congress has in recent years flinched at letting the cuts go into effect, instead passing yearly "postponements."

You can see where this argument is going. If politicians in Washington aren't willing to let the SGR take effect, why should we believe they'd be willing to let the planned Medicare reductions and insurance taxes take effect? It's a good question. But, it turns out, there are some good answers, as well.

For starters, the policies are structured differently. The SGR is a cut, plain and simple, that would affect physicians no matter how they changed their behavior. The planned Medicare reductions are part of a broader package, full of financial incentives that should, at least in theory, reward more efficient care. There would be bonuses, for example, that would reward the formation of integrated groups that deliver more coordinated chronic care. Similarly, both employers and employees would be able to avoid paying the Cadillac tax by shifting to plans that don't cost as much.

Severity and timing of the changes is another distinction. At least today, SGR is a joke because--if it went into effect--the reduction in physician payments would be a highly disruptive 20 percent. The adjustments in the new reform law would be less stark and, in the case of the insurance tax, less direct. The Cadillac tax falls on the insurer, not the individual. That ought to soften the political blow--not entirely, for sure, but perhaps enough to make a difference.

Keep in mind that, notwithstanding the SGR experience, lawmakers in Washington have--from time to time--stuck by decisions to impose higher taxes or hold the line on Medicare spending. It happened in 1990, when President George H.W. Bush and a Democratic Congress agreed to raise taxes; it happened in 1993, when President Bill Clinton and a Democratic Congress agreed to raise taxes again; and it happened in 1997, when Clinton and a Republican Congress agreed to cut Medicare and Medicaid spending, although it later backed off some of the cuts.

Decision-makers in Washington stood by those changes because, during those periods, there was political will to reduce budget deficits. The same seems to be true today. President Obama has insisted reform be fiscally neutral, forcing Capitol Hill to reduce significantly the benefits reform will offer. Just two weeks ago, an effort to wipe out the SGR forever collapsed because, without offsetting revenues or savings, Congress itself was unwilling to authorize the extra money.

That doesn't mean the will to maintain fiscal balance will prevail throughout the next decade, or beyond, as the planned Medicare changes and insurance tax take full effect. But health care reform, done right, should make it easier to maintain that discipline in the future--not only by putting cost-saving measures on the books, putting the onus of action on those who wish to cancel them, but also by getting everybody covered.

For reasons that have as much to do with politics as policy, it's simply easier to control the cost of medicine if most people have insurance. As proof, just look at Massachusetts, where--three years after extending coverage to include 97 percent of the population--the state is looking seriously at truly sweeping changes in the way medical care is organized.

To be clear, a lot of reform advocates--this writer included--would support expansions of coverage even if it didn't reduce the deficit, purely on moral principle. And the case that health reform, as currently written, will actually pay for itself is a lot stronger than the case that health reform will restrain future medical spending. When it comes to the actions of future politicians, there are never guarantees.

But that's not a reason to oppose health care reform. It's a reason to push even harder on cost control--now, while lawmakers are still writing legislation, and in the future, when they have opportunities to improve upon it. Instead of ignoring complaints about cost control, reform advocates should answer them.

Jonathan Cohn is a senior editor of The New Republic. This column is a collaboration between TNR and Kaiser Health News. KHN is an editorially independent news service and is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization, which is not affiliated with Kaiser Permanente.

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