Winehole23
05-13-2009, 12:37 PM
Health Care, a Lesson in Pain (http://www.nytimes.com/2009/05/13/business/economy/13leonhardt.html?_r=1&ref=politics)
By DAVID LEONHARDT (http://topics.nytimes.com/top/reference/timestopics/people/l/david_leonhardt/index.html?inline=nyt-per)
Published: May 12, 2009
The events of the last few weeks have raised the odds that a health care overhaul will really happen this year.
Democrats have suggested (http://www.nytimes.com/2009/04/25/us/politics/25budget.html) that they are willing to play hardball and pass a bill without Republican support. Arlen Specter (http://topics.nytimes.com/top/reference/timestopics/people/s/arlen_specter/index.html?inline=nyt-per), the senior Pennsylvania senator, became a Democrat, potentially adding one more vote. At the White House on Monday, lobbyists for doctors, insurers and other industry groups pledged (http://www.nytimes.com/2009/05/12/us/politics/12health.html) to reduce the growth of medical spending.
Yet none of these developments has removed the main hurdle to health care reform (http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/health_care_reform/index.html?inline=nyt-classifier): the matter of the missing $90 billion.
Providing health insurance to the roughly 50 million people without it will cost something like $120 billion a year. President Obama (http://topics.nytimes.com/top/reference/timestopics/people/o/barack_obama/index.html?inline=nyt-per) has proposed $60 billion or so in new revenue for this purpose — a “down payment,” his advisers say. But Congress seems set to reject about half of the down payment (a plan to limit high-income families’ tax deductions for charitable giving and other such things). That makes for the $90 billion health care hole.
And no one is quite sure how to fill it.
Because Mr. Obama has made it clear (http://www.nytimes.com/2009/05/03/magazine/03Obama-t.html?pagewanted=4) that health care is his top legislative priority, the $90 billion hole has become one of the biggest political issues of 2009. The Obama administration’s health care team is now preoccupied by it. On Tuesday, the Senate began to consider it, at a packed round-table discussion (http://finance.senate.gov/sitepages/hearing051209.html) among 13 prominent health experts and members of the finance committee.
“Now it’s time to think about money,” said Max Baucus, the Montana Democrat who heads the committee.
The experts at the round table — liberal and conservative — actually agreed to an impressive degree about the best way to fill the hole. They urged the senators to limit the tax deduction for employer-provided health insurance (http://content.healthaffairs.org/cgi/content/abstract/27/3/622).
The deduction may seem a wonderful thing, but it isn’t. It benefits the wealthy more than anyone else. It encourages employers to overspend on health insurance, because $100 in untaxed medical benefits is more valuable to workers than $100 in taxed income. And, as Mr. Baucus said, the deduction has a certain Willie Sutton appeal for Congress: it’s where the money is.
The government forgoes $250 billion a year in taxes because of the deduction (http://www.nytimes.com/2009/05/08/health/policy/08healthtax.html). Capping it, to apply only to reasonably priced health plans, would bring in enough money to fill most of the $90 billion hole.
The idea seems to be classic Obama: empirical, pragmatic, bipartisan. Unfortunately, it happens to be an idea that John McCain (http://topics.nytimes.com/top/reference/timestopics/people/m/john_mccain/index.html?inline=nyt-per) campaigned on last year and that Mr. Obama, sensing a political opening, blasted as a tax increase. “Taxing health care instead of fixing it,” intoned the narrator in an Obama campaign advertisement (http://www.youtube.com/watch?v=H6vnHmAfJCY&feature=channel_page), with ominous music playing in the background. “We can’t afford John McCain.”
Mr. Obama’s economic advisers would be happy to see him reverse his position. But his political advisers remember that ad and know it could be used against him. Further complicating matters, labor unions and Charles Rangel, the influential Democratic House member, say they remain firmly opposed (http://www.nytimes.com/2009/05/07/health/policy/07health.html) to capping the deduction.
All of which means that filling the $90 billion hole is going to be very tricky.
If the tax deduction can’t be touched, the first alternative is simply to add the $90 billion a year to the deficit, to cover the uninsured now and pay for it later, as President George W. Bush did (http://www.pbs.org/wgbh/pages/frontline/tentrillion/themes/bush.html) with his tax cuts, the Iraq war and the Medicare (http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicare/index.html?inline=nyt-classifier) prescription drug benefit. In another time, this might have been politically palatable. But it isn’t now, not when this year’s deficit is projected to be larger than any since the end of World War II.
That leaves two ways to pay for an expansion of health insurance: raise taxes or cut health spending.
Economically, spending cuts have a lot to recommend them. The United States spends vastly more per person (http://www.commonwealthfund.org/Content/Charts/Chartbook/Multinational-Comparisons-of-Health-Systems-Data--2008/I/International-Comparison-of-Spending-on-Health--1980-2006.aspx) on medical care than any other country. Much of that spending does nothing to improve health, as chronicled in this newspaper’s recent “Evidence Gap” series (http://topics.nytimes.com/top/news/health/series/the_evidence_gap/index.html). Getting rid of such waste could pay for universal health insurance, several times over, and prevent Medicare from going bankrupt (http://www.nytimes.com/2009/05/13/us/politics/13health.html).
The $30 billion that remains of Mr. Obama’s down payment plucks the low-hanging fruit of cost reduction, like the subsidies for private insurers to provide the same coverage as Medicare at a higher cost. But the precise strategy for finding a lot more savings is still murky. “Reducing spending without also affecting services that do improve health,” says Douglas Elmendorf (http://cboblog.cbo.gov/), director of the Congressional Budget Office (http://topics.nytimes.com/top/reference/timestopics/organizations/c/congressional_budget_office/index.html?inline=nyt-org), “is challenging.”
The Obama administration is laying the groundwork for a more efficient system by pushing for more research into medical effectiveness (http://www.nytimes.com/2009/05/07/business/07compare.html). But we’re not there yet, and getting there won’t be easy. Consider that some of the same industry groups that pledged to reduce medical spending this week are also trying to block effectiveness research — the very thing that would tell us how to reduce spending without damaging people’s health.
So over the short term, tax increases are probably necessary, though they have their own problems. Will the 85 percent (http://www.census.gov/prod/2008pubs/p60-235.pdf) of people with health insurance be willing to pay higher taxes for something approaching universal coverage?
Congress has already rejected several of Mr. Obama’s proposals to reduce the budget deficit, including the plan to limit charitable deductions for the affluent. The other ideas that have been floated, like taxing high-calorie sodas (http://www.yaleruddcenter.org/resources/upload/docs/what/industry/SodaTaxNEJMApr09.pdf), wouldn’t raise anywhere near $90 billion a year.
You can imagine a bill that mixes together lots of different revenue sources, in typical sausage-making style. But it’s hard to get to $90 billion without changing the deduction for employer-provided health insurance. “I just don’t know where else you get enough money,” says Jonathan Gruber (http://econ-www.mit.edu/faculty/gruberj/), an M.I.T. (http://topics.nytimes.com/top/reference/timestopics/organizations/m/massachusetts_institute_of_technology/index.html?inline=nyt-org) economist and one of the round-table panelists.
One possibility is that Congress will pass a bill capping the deduction, and Mr. Obama will be able to claim that he is signing it reluctantly. Another possibility, however, is that we need to begin thinking about whether health care reform is possible even if some significant number of people remain uninsured.
What might that look like?
The subsidies for insurance, which make up most of the $120 billion price tag, would have to be reduced, leaving some people unable to afford coverage but also cutting the bill’s cost. That would be the painful compromise.
The second, crucial step would be doing everything possible to get rid of wasteful medical spending: using the force of law to hold medical providers to their cost-reduction pledges; moving Medicare away from a fee-for-service model that pays for quantity, not quality; encouraging low-cost hospitals to grow and high-cost hospitals to change — or shrink.
During the campaign, Mr. Obama emphasized universal insurance more than costs. Since taking office, he has shifted his focus somewhat. “What we have done,” Rahm Emanuel (http://topics.nytimes.com/top/reference/timestopics/people/e/rahm_emanuel/index.html?inline=nyt-per), the White House chief of staff, told me this week, “is raise cost control to the same level as expanded coverage.”
Cost control has the political benefit of appealing to the 85 percent of people with insurance. And it has enormous economic benefits, too. If costs can be reduced, the price of covering the uninsured will come way down. Put differently, the only way to have a sustainable universal health care system is to control costs.
In an ideal world, Congress and Mr. Obama would find the $90 billion to cover all the uninsured now. But if they don’t, health care reform is not an all-or-nothing proposition.
By DAVID LEONHARDT (http://topics.nytimes.com/top/reference/timestopics/people/l/david_leonhardt/index.html?inline=nyt-per)
Published: May 12, 2009
The events of the last few weeks have raised the odds that a health care overhaul will really happen this year.
Democrats have suggested (http://www.nytimes.com/2009/04/25/us/politics/25budget.html) that they are willing to play hardball and pass a bill without Republican support. Arlen Specter (http://topics.nytimes.com/top/reference/timestopics/people/s/arlen_specter/index.html?inline=nyt-per), the senior Pennsylvania senator, became a Democrat, potentially adding one more vote. At the White House on Monday, lobbyists for doctors, insurers and other industry groups pledged (http://www.nytimes.com/2009/05/12/us/politics/12health.html) to reduce the growth of medical spending.
Yet none of these developments has removed the main hurdle to health care reform (http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/health_care_reform/index.html?inline=nyt-classifier): the matter of the missing $90 billion.
Providing health insurance to the roughly 50 million people without it will cost something like $120 billion a year. President Obama (http://topics.nytimes.com/top/reference/timestopics/people/o/barack_obama/index.html?inline=nyt-per) has proposed $60 billion or so in new revenue for this purpose — a “down payment,” his advisers say. But Congress seems set to reject about half of the down payment (a plan to limit high-income families’ tax deductions for charitable giving and other such things). That makes for the $90 billion health care hole.
And no one is quite sure how to fill it.
Because Mr. Obama has made it clear (http://www.nytimes.com/2009/05/03/magazine/03Obama-t.html?pagewanted=4) that health care is his top legislative priority, the $90 billion hole has become one of the biggest political issues of 2009. The Obama administration’s health care team is now preoccupied by it. On Tuesday, the Senate began to consider it, at a packed round-table discussion (http://finance.senate.gov/sitepages/hearing051209.html) among 13 prominent health experts and members of the finance committee.
“Now it’s time to think about money,” said Max Baucus, the Montana Democrat who heads the committee.
The experts at the round table — liberal and conservative — actually agreed to an impressive degree about the best way to fill the hole. They urged the senators to limit the tax deduction for employer-provided health insurance (http://content.healthaffairs.org/cgi/content/abstract/27/3/622).
The deduction may seem a wonderful thing, but it isn’t. It benefits the wealthy more than anyone else. It encourages employers to overspend on health insurance, because $100 in untaxed medical benefits is more valuable to workers than $100 in taxed income. And, as Mr. Baucus said, the deduction has a certain Willie Sutton appeal for Congress: it’s where the money is.
The government forgoes $250 billion a year in taxes because of the deduction (http://www.nytimes.com/2009/05/08/health/policy/08healthtax.html). Capping it, to apply only to reasonably priced health plans, would bring in enough money to fill most of the $90 billion hole.
The idea seems to be classic Obama: empirical, pragmatic, bipartisan. Unfortunately, it happens to be an idea that John McCain (http://topics.nytimes.com/top/reference/timestopics/people/m/john_mccain/index.html?inline=nyt-per) campaigned on last year and that Mr. Obama, sensing a political opening, blasted as a tax increase. “Taxing health care instead of fixing it,” intoned the narrator in an Obama campaign advertisement (http://www.youtube.com/watch?v=H6vnHmAfJCY&feature=channel_page), with ominous music playing in the background. “We can’t afford John McCain.”
Mr. Obama’s economic advisers would be happy to see him reverse his position. But his political advisers remember that ad and know it could be used against him. Further complicating matters, labor unions and Charles Rangel, the influential Democratic House member, say they remain firmly opposed (http://www.nytimes.com/2009/05/07/health/policy/07health.html) to capping the deduction.
All of which means that filling the $90 billion hole is going to be very tricky.
If the tax deduction can’t be touched, the first alternative is simply to add the $90 billion a year to the deficit, to cover the uninsured now and pay for it later, as President George W. Bush did (http://www.pbs.org/wgbh/pages/frontline/tentrillion/themes/bush.html) with his tax cuts, the Iraq war and the Medicare (http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicare/index.html?inline=nyt-classifier) prescription drug benefit. In another time, this might have been politically palatable. But it isn’t now, not when this year’s deficit is projected to be larger than any since the end of World War II.
That leaves two ways to pay for an expansion of health insurance: raise taxes or cut health spending.
Economically, spending cuts have a lot to recommend them. The United States spends vastly more per person (http://www.commonwealthfund.org/Content/Charts/Chartbook/Multinational-Comparisons-of-Health-Systems-Data--2008/I/International-Comparison-of-Spending-on-Health--1980-2006.aspx) on medical care than any other country. Much of that spending does nothing to improve health, as chronicled in this newspaper’s recent “Evidence Gap” series (http://topics.nytimes.com/top/news/health/series/the_evidence_gap/index.html). Getting rid of such waste could pay for universal health insurance, several times over, and prevent Medicare from going bankrupt (http://www.nytimes.com/2009/05/13/us/politics/13health.html).
The $30 billion that remains of Mr. Obama’s down payment plucks the low-hanging fruit of cost reduction, like the subsidies for private insurers to provide the same coverage as Medicare at a higher cost. But the precise strategy for finding a lot more savings is still murky. “Reducing spending without also affecting services that do improve health,” says Douglas Elmendorf (http://cboblog.cbo.gov/), director of the Congressional Budget Office (http://topics.nytimes.com/top/reference/timestopics/organizations/c/congressional_budget_office/index.html?inline=nyt-org), “is challenging.”
The Obama administration is laying the groundwork for a more efficient system by pushing for more research into medical effectiveness (http://www.nytimes.com/2009/05/07/business/07compare.html). But we’re not there yet, and getting there won’t be easy. Consider that some of the same industry groups that pledged to reduce medical spending this week are also trying to block effectiveness research — the very thing that would tell us how to reduce spending without damaging people’s health.
So over the short term, tax increases are probably necessary, though they have their own problems. Will the 85 percent (http://www.census.gov/prod/2008pubs/p60-235.pdf) of people with health insurance be willing to pay higher taxes for something approaching universal coverage?
Congress has already rejected several of Mr. Obama’s proposals to reduce the budget deficit, including the plan to limit charitable deductions for the affluent. The other ideas that have been floated, like taxing high-calorie sodas (http://www.yaleruddcenter.org/resources/upload/docs/what/industry/SodaTaxNEJMApr09.pdf), wouldn’t raise anywhere near $90 billion a year.
You can imagine a bill that mixes together lots of different revenue sources, in typical sausage-making style. But it’s hard to get to $90 billion without changing the deduction for employer-provided health insurance. “I just don’t know where else you get enough money,” says Jonathan Gruber (http://econ-www.mit.edu/faculty/gruberj/), an M.I.T. (http://topics.nytimes.com/top/reference/timestopics/organizations/m/massachusetts_institute_of_technology/index.html?inline=nyt-org) economist and one of the round-table panelists.
One possibility is that Congress will pass a bill capping the deduction, and Mr. Obama will be able to claim that he is signing it reluctantly. Another possibility, however, is that we need to begin thinking about whether health care reform is possible even if some significant number of people remain uninsured.
What might that look like?
The subsidies for insurance, which make up most of the $120 billion price tag, would have to be reduced, leaving some people unable to afford coverage but also cutting the bill’s cost. That would be the painful compromise.
The second, crucial step would be doing everything possible to get rid of wasteful medical spending: using the force of law to hold medical providers to their cost-reduction pledges; moving Medicare away from a fee-for-service model that pays for quantity, not quality; encouraging low-cost hospitals to grow and high-cost hospitals to change — or shrink.
During the campaign, Mr. Obama emphasized universal insurance more than costs. Since taking office, he has shifted his focus somewhat. “What we have done,” Rahm Emanuel (http://topics.nytimes.com/top/reference/timestopics/people/e/rahm_emanuel/index.html?inline=nyt-per), the White House chief of staff, told me this week, “is raise cost control to the same level as expanded coverage.”
Cost control has the political benefit of appealing to the 85 percent of people with insurance. And it has enormous economic benefits, too. If costs can be reduced, the price of covering the uninsured will come way down. Put differently, the only way to have a sustainable universal health care system is to control costs.
In an ideal world, Congress and Mr. Obama would find the $90 billion to cover all the uninsured now. But if they don’t, health care reform is not an all-or-nothing proposition.