Making Sure Health Care Reform Is Sustainable

Today, the Center for American Progress hosted a breakfast with former Sen. Tom Daschle and John Podesta to discuss the prospects of health care reform. “July will be the most historic and consequential in all of history,” Daschle explained, arguing that it will be “extraordinarily critical when it comes to health reform.”

Indeed, after the July 4th recess the Senate Finance Committee and the three House committees with jursidiction over health care will begin marking up legislation. All four are expected to focus on the great elephant in the room: how do we finance reform that could cost north of $1 trillion?

Most progressives propose a mix of different revenue streams. 1) Eliminating or reducing excessive or wasteful spending in Medicare and Medicaid could seed approximately $400 billion. 2) Modernizing the system by implementing electronic health records and instituting payment reform could yield costs savings of 1.5 percentage points annually (or over $500 billion). 3) Additional revenue from the employer mandate, limiting tax preferences for medical spending and sin taxes (taxes on alcohol and soda) would generate more than $400 billion.

This basket of pay-fors provides Congress with a menu of options, making fully financed health care reform more probable. As Podesta pointed out during the briefing:

One of the reasons I think this is important, is if you settle in on 400, 400, 400 then the cuts are sustainable. If you are imagining all of the costs coming from the revenue side, or all of the costs coming from traditional cuts in public program, it is very very hard to get the package put together right. But if you can take 400 out of over payments, 400 out of modernization, 400 out revenues, that’s a doable deal. None of it is easy. If it was easy, it would already have been done.

But what “if experience falls short of expectations?” What happens if productivity improvements, investments in health information technology and payment system reforms fail to slow the growth of health care spending and lower costs? How then do we ensure that health care reform is budget neutral? Well today, Harvard economist David Cutler and CAP Senior Fellow Judy Feder released a new report in which they argue that should reform fail to produce savings, Congress could rely on a series of so-called ‘failsafe’ proposals:

A commission would monitor health care spending and, after some time would have the authority to implement a series of measures to address the problematic areas. “The first piece is the trigger,” Feder explained. “You would have some combination of a mechanism to ensure adequate funding for health care reform and the other is a target for the rate of growth of health care spending. That’s the kind of trigger that we would see…A commission would at a point, say 5 years out, would evaluate experience and if we were somewhat short, if all of the modernization hasn’t happened or the savings hadn’t gone where we needed them to go, then that commission would make the decision as to what actual measures would be taken to get growth under control.”