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It seems paradoxical, but some well-connected health reformers are arguing that a costly remake of U.S. insurance may be more likely in the wake of the economic slump. Their theory: Since we are already spending hundreds of billions to bail out the financial system and since the Obama Administration is likely to pump out a similar amount in fiscal stimulus early next year, the time may be right to spend a few hundred billion more on health coverage for the uninsured.
The old conventional wisdom that goes back, say, three weeks was that in the wake of massive deficits, President Obama would have to delay costly health reform for now. TPC, for instance, estimates Obama’s health plan would cost $1.6 trillion over the next 10 years.
But, yesterday, three health experts with good pipes into the Obama camp—John Rother of AARP and former Clinton advisers Judy Feder and Chris Jennings—all predicted major reform has an increasing chance of passage over the next year, perhaps packaged as a kind of stimulus itself. Speaking to the Gerontological Society of America, Jennings said “the economic crisis opens up opportunities.”
I remain skeptical about the politics. But this debate raises a critical policy question: Can we do reform without worrying about cost? Serious analysts, including Jennings, Feder, and Rother, know we cannot. And so does Peter Orszag, who Obama will name to run OMB. Orszag, currently CBO director, has made cutting medical costs his crusade for the past couple of years.
In what will likely be an environment of mind-numbing deficits, health costs will matter more than ever. Reform cannot be just about covering the uninsured, which is relatively easy. It also means reducing the unnecessary and wasteful spending that Orszag says inflates the nation’s health care bill by one-third, or almost $700 billion annually.
That will require changes in the way we buy health insurance, including rethinking tax subsidies for gold-plated employer-provided coverage. TPC’s Len Burman has gone another step by proposing a Value-Added Tax for health care. One benefit would be that rising medical costs would explicitly be reflected in higher taxes.
But these are indirect incentives. Today, we grossly misallocate health care dollars. Some of us get far too many, others not nearly enough. In the end, slowing medical cost growth will mean rationing care in a more, um, rational way. It will mean that somebody—insurance companies, government, and ultimately doctors themselves—will have to tell patients that exercise and pain management may be more appropriate than back surgery, or that they may not get costly drugs that may extend their life by only a few months. Comparative effectiveness research that looks at the benefits of specific treatments is all the rage now. We are still a long way from turning this analysis into a real decision-making tool. However, the far bigger challenge will be convincing consumers to accept the consequences.
If we are going to have health reform, especially in the face of massive deficits, Obama’s most important job may be to get Americans to change the way they think about medical care. More, we must all learn, is not always better.
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