Obama fiscal commission co-chair pans health bill’s impact on costs

Jon Ward Contributor
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The Democratic co-chair of President Obama’s fiscal commission said Wednesday that the president’s health care bill will do very little to bring down costs, contradicting claims from the White House that their sweeping legislation will dramatically impact runaway entitlement spending.

“It didn’t do a lot to address cost factors in health care. So we’ve got a lot of work to do,” said Erskine Bowles, former White House chief of staff to President Bill Clinton, speaking about the new health law, which was signed into law by Obama this past spring after a nearly year-long fight in Congress.

Bowles, speaking at an event hosted by the U.S. Chamber of Commerce, said that even with the passage of Obama’s legislation, health care costs are still going to “really eat us alive” unless dramatic changes are made. The commission will submit recommendations on how to fix America’s long term fiscal problems to Congress in December.

Bowles’ point will be amplified Thursday when a conservative think tank releases a paper arguing that Obama’s health plan “is not entitlement reform,” at an event intended to highlight an alternative plan for reforming health care spending that is the brainchild of Rep. Paul Ryan, Wisconsin Republican.

James C. Capretta, a former White House budget adviser on health care to President George W. Bush, will present the paper for the Galen Institute at an event on Capitol Hill with Ryan, one of the Republican Party’s rising stars, and Douglas Holtz-Eakin, a top conservative economist.

Even as many on Capitol Hill are talking about addressing Social Security spending, Capretta writes in the 19-page paper that Medicare is the real problem.

Most Democrats and Republicans agree, Capretta says, that the 30 to 35 million seniors in Medicare’s fee-for-service (FFS) insurance program are “the engine … pulling the rest of the health system down the tracks at an accelerated and dangerous rate.”

Most FFS participants pay nothing out of their own pockets for health care, and hospitals and doctors are incentivized to provide them with as many services and tests as can be loosely justified.

But Capretta says in the paper that the Obama health bill is not reform because it attempts to stop price inflation and inefficient care through top-down government control rather than bottom-up consumer demand.

“When attempts have been made in the past to steer patients toward preferred physicians or hospitals, they have failed miserably because politicians and regulators find it impossible to make distinctions among hospitals and physician groups based on quality measures that can themselves be disputed,” Capretta says.

Capretta goes on to say that Paul Ryan’s plan would move Medicare recipients from defined benefits to defined contributions, in which “cost-conscious consumers choose between competing insurers and delivery systems based on price and quality.”

“Beneficiaries would get to decide which insurance plan they want to enroll in. If the premium were more than the amount they are entitled to from Medicare, then they would pay the difference. If it were less, they would keep all of the savings,” Capretta says.

“Millions of otherwise passive Medicare participants would become active, cost-conscious consumers of insurance and alternative models for securing needed medical services,” Capretta writes. “Cost cutting innovation would be rewarded, not punished as it is today.”

White House officials pointed to recent blog posts by White House budget director Peter Orszag, who said that “if implemented effectively, [Obama’s health care bill] can play an important role in moving toward a healthier fiscal future.”
But Orszag’s rhetoric on the health bill has shifted from the categorical statements he made during 2009, when trying to sell the legislation. At the time, one of Orszag’s favorite lines, often used by Obama, was: “Health care reform is entitlement reform.” Orszag and Obama argued that their health bill was the best way to address entitlements and deficits.

Now, Orszag has begun to make a more nuanced case.

“Even with enactment of the Affordable Care Act, we remain on an unsustainable fiscal course,” Orszag wrote July 8 on his White House blog. “More needs to be done. But the bottom line is that, after years of going in the wrong long-term fiscal direction, the Affordable Care Act changes our course by enacting substantial, long-term deficit reduction.”

White House officials continue to claim the health bill as a fiscal accomplishment. In a letter to the U.S. Chamber of Commerce Wednesday, White House chief of staff Rahm Emanuel and top presidential adviser Valerie Jarrett said the health law will “address one of the largest threats to our long term fiscal health.”

Bowles’ comments are similar to those made by Congressional Budget Office Director Douglas Elmendorf, who in March scored the health bill as reducing the deficit by $143 billion over the first 10 years. But Elmendorf called those reductions “small steps.”

“The rising costs of health care will put tremendous pressure on the federal budget during the next few decades and beyond,” Elmendorf wrote on May 28. “In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure.”

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