Gaming the Game-Changers

Gaming the Game-Changers

Gaming the Game-Changers

Gaming the Game-Changers

Gaming the Game-Changers
How to fix health policy.
June 25 2009 3:20 PM

Gaming the Game-Changers

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Peter Orszag.

This week and next, I am exchanging questions and answers with Peter Orszag, the director of the Office of Management and Budget, on the issue of health care. Our first Q&A is here.

John Dickerson John Dickerson

John Dickerson is a Slate political columnist, the moderator of CBS’s Face the Nation, and author of Whistlestop and On Her Trail

Q: In your last post you said, "Under any reform he will sign into law, if you like your doctor or health care plan, you can keep them." Sounds great—but people trying to figure out how their lives might change under a new system might think this statement promises more than you mean it to. As the president pointed out in his recent press conference, all that means is that the government won't take your doctor and plan away from you. What if I'm worried that the systemic changes caused by the legislation set in motion forces that mean my doctor and my health care plan can't survive? What's the floor that keeps the effort to reward lower costs from going too far? What's the floor that keeps doctors' salaries from going so low that no talented people become doctors?

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A. Your worries are understandable, but remember that the status quo is unsustainable and therefore not a real option. (As Herb Stein once famously noted, "If something cannot go on forever, it will stop.") So failing to address the underlying problems in our health system over time will become the largest threat to your doctor and health plan.

Over the past nine years, premiums have doubled—rising at a rate three times faster than wages. You risk losing your coverage because your employer stops offering it or because rising premiums price insurance out of reach for you. And economists have documented the deleterious effects from "job lock"—the impact on millions of people who fear losing jobs or are afraid to change jobs because they will be dropped from the coverage they have or precluded from finding new, comprehensive coverage due to a pre-existing condition.

Finally and perhaps most fundamentally, lots of medical care currently provided in the United States—costing perhaps as much as $700 billion a year—does not improve health outcomes.  That unnecessary care actually poses health risks to you, by exposing you to potentially harmful tests and hospital-acquired infections. And since our system pays for more care rather than better care, your doctor and hospital have to suffer financially under the current system if they provide high-quality, low-cost care to you.

None of that makes sense. We need to make sure that you can keep the coverage you have—but that your doctors and hospitals are rewarded for success. That will allow your doctor to earn a good living by helping to keep you healthy—rather than just by ordering more tests for you. Furthermore, no longer will insurance companies be able to deny coverage to you based on a pre-existing condition or charge you more based on health status or gender. And you will always have choices of quality, affordable health insurance if you lose your job, switch jobs, go off to start a business, move, or get sick.

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Q: You mention that the president has put down $950 billion in savings, but isn't that mostly a mirage? Changes in deductions are not being well-received in Congress, and the president's call for $300 billion in Medicare/Medicaid cuts are receiving strong resistance. The real money is in the employer tax exclusion for health benefits. The administration has been sending subtle messages to groups it has been working with that it wants to be pushed into capping the employer-provided health care exclusion. Experts, the media, everyone seems to be trying to help you to move in that direction. When are you finally going to say, "OK, you persuaded us" and acknowledge it is a sensible health care and tax policy?

A. First, those who have been around Washington for a while will tell you that the fact that there's real opposition to our savings proposals should be an indication that these are real savings—not a "mirage." The approximately $950 billion in savings and revenue that the president put forward are hard, concrete initiatives that can be scored by the Congressional Budget Office (CBO).

Perhaps by "mirage" you meant not that they weren't concrete and scoreable but instead that our proposals will not be adopted by Congress. The committees actually seem to be adopting the majority of our proposals (for example, on scaling back Medicare Advantage payments and other Medicare provider reimbursements). And, in any case, we have been clear—and congressional rules require—that health care reform must be deficit neutral. We believe that we have put forward the right mix of savings and revenue proposals, but however it ends up, it will all be paid for with real offsets. The health care reform must not add a dime to the deficit.

With regard to the health care tax exclusion: The president did not include any change to the tax exclusion in his campaign plan. We did not include any change in our budget.  Instead, we favor an approach in which we scale back itemized deductions for high-income taxpayers.

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Q: What's the most constructive idea the administration has received from Republicans on the issue of health care?

A. Republicans often tend to focus on choice and competition.  And a key component of health reform is an exchange, through which health insurers would compete for consumers' business and would succeed only to the extent that they deliver a high-quality product for a reasonable price. Similar exchanges were the bedrock of the health care reform package supported and signed into law by a Republican governor of Massachusetts.

Q: In our last round, you reiterated that the health plan will be scored over 10 years. You and the president have been very clear about that, but what I was trying to get at are the worries that even a fully offset plan would cost more in the second decade, pushing deficits back up. I know we can't guess that far in advance. But part of your pitch is that second-decade costs will be trimmed by the "game-changers." CBO agrees with you on the nature of the game-changers, but disagrees with your assessment that they can transform the system's costs. You're going to give us 10 years of certainty, but after that, isn't the budget discipline totally speculative?

A. No, for two reasons.

First, in addition to committing to deficit neutrality over the next 10 years, we are also committed to deficit neutrality in the 10th yearitself. This may seem like some meaningless budget wonkery, but it's actually quite significant. CBO only does 10-year cost estimates, and that 10th-year constraint is the best proxy we have for what the second decade will look like. Since the system should be fully phased in well before the end of 10 years, deficit neutrality in the 10th year alone means that we are not falling off a fiscal cliff toward the end of the scoreable budget window.

Second, remember that we are committed to going beyond the hard, scoreable savings that will fully finance the plan. We have another prong to our plan—the "game-changers." I wrote about these game-changers in my answers yesterday. In short, they're meant to represent just about everything that serious health care analysts—such as the Institute of Medicine and CBO itself—have suggested could change the underlying dynamics of the health care system and "bend the curve" of long-term health care costs.

It's true that the effects of many of the game-changers aren't certain enough to be scored in the "hard" models we and CBO use to project costs.  But it's also true that a menu of hard, scoreable policy options to achieve long-term actuarial balance for Medicare just does not exist today. As a result, the game-changers represent our best hope for bending the curve. Even skeptics would admit that they are likely necessary (even if not sufficient) for moving toward a higher-quality, lower-cost system.

We're thus adopting a belt-and-suspenders approach to budget discipline—hard, scoreable offsets to ensure deficit neutrality not only over 10 years but in the 10th year alone, combined with an aggressive set of game-changers.