Paul Krugman’s column today, Reform or Else, urges Senate “centrists” who claim to be concerned about fiscal responsibility to consider what would happen if the current health reform efforts fail.
Since both present and future deficits are largely driven by rapid escalation in health care costs, the reform bills present the best chance to prevent an inevitable future budget crisis. So Krugman repeats the view of prominent economists who, following a letter to Obama, recently praised the Senate bill’s provisions for cost containment.
Are we talking about real savings, or just window dressing? Well, the health care economists I respect are seriously impressed by the cost-control measures in the Senate bill, which include efforts to improve incentives for cost-effective care, the use of medical research to guide doctors toward treatments that actually work, and more. This is “the best effort anyone has made,” says Jonathan Gruber of the Massachusetts Institute of Technology. A letter signed by 23 prominent health care experts — including Mark McClellan, who headed Medicare under the Bush administration — declares that the bill’s cost-control measures “will reduce long-term deficits.”
Unfortunately, that “best effort” seems to be unraveling. Time’s Karen Tumulty writes in Where Did Health Reform Go? (picking up on points Jon Walker has made) that several of the Senate’s key cost-containment features have been undermined from the start:
— The comparative cost studies lost their teeth:
. . . both the House and Senate bills explicitly prevent this research from being used to decide which services Medicare would pay for and how much it would reimburse.
— The Medicare Advisory Commission, doesn’t get to bite the biggest provider costs:
Under a deal to win hospitals’ support for the bill, the Senate Finance Committee agreed they would be exempt from the commission’s recommendations at least through 2019; doctors, hospices and medical-equipment suppliers would be beyond its reach entirely. Who is left? Maybe no one. . . .
[Even wrose,] the current version would allow it to make recommendations only when Medicare spending per capita grows faster than overall health costs. That almost never occurs.
— Key cost-saving pilot projects could be muzzled:
Under its version of the bill, three of the pilot programs that have the most potential to transform health care would require congressional approval before the Secretary could apply them to Medicare nationally. [accountable care organizations, bundling, and medical homes]
Not mentioned by Krugman or Tumulty are the “centrists” ongoing efforts to further weaken or remove the public option, which (in its “strong” form) the Urban Institute argues is essential to deal with both insurer and provider market power and bring down costs. (Ezra Klein notes the importance of this feature to cost containment here; more here.)
To be sure, Krugman may be right that this is the best shot we have for a long time in getting health care reform and health care costs under control.
That observation in itself should make anyone concerned with fiscal responsibility support this reform. Over the next decade, the Congressional Budget Office has concluded, the proposed legislation would reduce, not increase, the budget deficit. And by giving us a chance, finally, to rein in the ever-growing spending of Medicare, it would greatly improve our long-run fiscal prospects.
But Krugman is only half right is noting the irresponsible obstruction and opposition coming from Republicans. We’re also seeing massive resistance to cost containment from every element of the affected industries — insurers, hospitals, doctors and drug makers and other medical providers.
The insurance industry has become an easy target. But the providers’ political and market power also lie at the core of the cost explosion problem. Given their ability to flood Congress with campaign money, the industries seem to be winning, shielding themselves from competition or countervailing power from a strong public option and effective oversight and regulation. And so far, the Senate “centrists” seem to be aiding and abetting their efforts.