Cost Control Is A Political Problem

Doug Elmendorf, who runs the Congressional Budget Office, testified today that the health care bills under suggestion in Congress would increase public health care spending and continue to threaten the long-term budget outlook.

Under questioning by members of the Senate Budget Committee, CBO director Douglas Elmendorf said bills crafted by House leaders and the Senate health committee do not propose "the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount."

"On the contrary," Elmendorf said, "the legislation significantly expands the federal responsibility for health-care costs."

Though President Obama and Democratic leaders have said repeatedly that reining in the skyrocketing growth in spending on government health programs such as Medicaid and Medicare is their top priority, the reform measures put forth so far would not fulfill their pledge to "bend the cost curve" downward, Elmendorf said. Instead, he said, "The curve is being raised."

To which I respond, of course. This is the fundamental problem with health care reform that I've mentioned earlier. Nobody wants to do the trade-offs. There are plenty of cost-control options on the table. One would be capping or eliminating the employer deduction on health benefits, which Elmendorf cites as "a federal "subsidy" that encourages spending on ever more expensive health packages." Another would be putting public health reimbursement rates into the hands of MedPAC and away from the parochial concerns of Congress members, which leads to overpaying for providers in many cases (though lots of Medicaid and Medicare reimbursement rates are low). There are comparative effectiveness reviews that would sweep away ineffective treatments that are too expensive relative to their benefit. There are proposals to change the long-term pay structure of Medicare for providers, away from fee-for-service and toward primary care emphasis and bundled payments. There's the option to make insurers pay the negative externality of denying care by slapping an operating fee on them. And there's a public option that can use Medicare bargaining rates, which would lower costs by 20-30% per individual.

But the unions don't want to break up the inefficient employer-based system and put their gold-plated insurance policies at risk. Congresscritters don't want to lose the power to set Medicare reimbursement rates for their localities. Device makers and their allies want to ensure that their devices aren't rendered useless through research and study. Doctors and hospitals and insurers all want to preserve their profits. And nobody is intellectually honest enough to call for cost controls and a public option that would legitmately drive costs down. Harry Reid's rejoinder is instructive:

Senate Majority Leader Harry M. Reid (Nev.) dismissed Elmendorf's push for the benefits tax. "What he should do is maybe run for Congress," Reid said.

The truth is that we have too shitty a political system right now to get real reform. We might get it incrementally, and can build on it. But the CBO isn't saying anything people don't know. It's just that politicians are afraid to lead.