The Good Trigger?

The worst part about the Obama Administration's back room deals with the health industry wasn't just that they would impose far less cuts on stakeholders than they ought to shoulder, but that there was no mechanism beyond a handshake to ensure that the industry would even bother with those cuts. But in the President's speech the other night, he talked about imposing "automatic cuts" to reimbursement if the industry didn't abide by their commitments. It's basically a trigger - if health care growth fails to slow by the prescribed amount, then a variety of options at government's disposal would kick in. It's the brainchild of a health policy wonk named Judy Feder, and she explains the idea here.

How does a fiscal trigger work?

The idea of a trigger is that one establishes in advance a target for savings in the system, agrees on measures that need to be achieved, track that progress as the program is implemented, and if shortfalls are found, then certain actions are automatically triggered in.

What are those actions? What happens when you pull the trigger?

David Cutler and I put forward a range of options and believe a menu should be specified in the legislation. That menu could include further reductions in Medicare or changes in the tax treatment of employer-based efficiency or a strengthening of a public plan to further competition with insurers.

And why do we need this? I thought the plan already had savings in it.

The reason that David Cutler and I have been so supportive of a trigger is that we are firmly behind the cost-saving measures that are in legislative proposals and on which there is enormous agreement to change the health-care delivery system. Payment reform, a value-based purchasing system, moving away from the overprovision of low-value and high-cost procedures, and rewarding providers for better care and management of chronic illness. There's work and experience showing those measures can achieve huge savings systemwide. David Cutler and Rand's Melinda Buntin estimated (pdf) the savings at $2 trillion over the next decade.

But CBO is very cautious about scoring those measures. So it's our belief that for scoring purposes, we can put underneath them a failsafe that guarantees CBO will score the savings.

The basic idea is to force stakeholders to live up to their commitments, because the outcome would be far worse for them. And it would get us past the often arbitrary, almost always conservative scoring mechanism from the CBO (which is actually the bigger deal here, since the fiscal scolds always rely on those numbers to stop reform, but it would be harder to do so with a favorable score).

This is not a substitute for a public plan. It's a completely different area of the policy. And it can surely be screwed up or watered down in innumerate ways. But a smart legislator could use this tool to basically threaten the health industry with major cuts to their payments or essentially kicking a leg out from the stool that keeps them fat and happy. And they could ratchet up the savings the industry would have to provide year over year to keep them in line. I'm not totally convinced that will be the end result, but if Henry Waxman's in the room, we've got a fighting chance.