Details are slowly leaking about the health care provisions in Obama’s budget and so far, the news sounds promising. The administration plans to set aside $634 billion over 10 years for reforming the health care system, lower costs and expand coverage.

Because this is a budget proposal, we have some details on where the money is coming from, but we don’t really know how that money will be spent. The basic idea is this: cut-back on the waste in our health care system, improve the efficiency of Medicare and Medicaid and then re-invest that money back into the fund (for health care reform).

Where will the $634 billion come from? The administration wants to limit “the tax break on itemized deductions for families with incomes above $250,000″ and strip approximately $300 billion from both Medicare and Medicaid, without cutting benefits.

They believe that there is enough waste in the health system to finance at least part of the down payment for reform:

- Eliminate Medicare Advantage overpayments and modernize the competitive bidding process.

- Drug companies would be required to increase the rebate they now provide for medications sold to Medicaid.

- Competition in generic medications (move forward with creating a generic version of biologic drugs)

- Bundle payments for post-hospital providers.

Overall, the fund is a good start, but it’s certainly not enough to reach universal coverage. Still, the Obama administration has learned from the mistakes of past reform efforts. Unlike the Clinton strategy, which didn’t include any money for health reform in the budget, and left Congress to digest a 700+ page health plan, Obama and Congress will fill in the details of reform.

They’ll decide how to spend the fund and divide the pie between preventive care, managed care, reimbursement reform, etc. This leaves a lot of room for compromise, but in working out the details of reform, progressive principles of true universality and affordability must remain intact.

Today’s Senate Finance Committee hearing underlined one of the more important lessons from President Clinton’s failed effort to reform the health care system: when pushing through your plan, don’t let economists be the messengers for reform.

A high Congressional Budget Office score sunk Clinton’s reform plan, and today’s Democrats are trying to challenge the importance of “the number.”

Henry Aaron, a senior economics fellow at the Brookings Institution, has noted that “it’s not infrequent to hear people say it doesn’t make any difference what it really costs. It only matters what CBO says it costs.” But health care, of course, is about more than just numbers. It’s about securing the health of the nation, and real reform will require an upfront investment that doesn’t make for a balanced budget sheet in the short term.

The Congressional Budget Office has admitted as much. It uses a limited amount of evidence to score changes, without really examining the interactions of separate policies (for which there is little evidence) and as Sen. Pat Roberts (R-KS) suggested, insofar as the CBO “tries to predict people’s reactions to our policy changes, it’s almost impossible.”

Consider this interesting exchange between Sen. Max Baucus (D-MT) and Congressional Budget Office director Douglas Elmendorf:

BAUCUS: We’re not in the old situation where whatever CBO says is God. In my judgment you’re not God. My judgment is that the press — there’s a whole new era and, um, you might be Moses, but not God. But I do believe that there are several different intellectually honest pathways to get from here to there. It’s not just one automatic. And so it mean we gotta be ever more creative to find intellectually honest pathways to get the savings we’re going to have to have [inaudible] politically to get health care reform.

Listen to the exchange:

Paul Begala made a very similar argument during the Families USA health care conference, urging Obama to ignore traditional economic caution. In fact, reforming health care on an economic tight rope, is like deciding to respond to a terror attack by first determining if you can fund it. In both cases, there are other factors one must consider.

Today, during a Senate Finance Committee hearing on the costs of reforming the health care system, Sen. Bill Nelson (D-FL) asked Douglas Elmendorf, the director of the Congressional Budget Office, to debunk the myth that that comparative effectiveness research would lead to the rationing of health care:

NELSON: We got some extremist statements that came out from some sectors of the body politic about the stimulus bill, that there were in this comparative effectiveness research that it was going to cause a denial of medical treatments…Why don’t you debunk that theory?

Listen:

Elmendorf explained that comparative effectiveness research is a way to find out which treatments and procedures work, and which don’t. By itself, research “doesn’t change the care that is delivered; it provides the information,” Elmendorf stressed. The separate question is how will doctors and hospitals respond to this information and what incentives are “provided for them.” “The challenge is that information alone is not enough. It’s acting on the information”:

To generate more savings, we will need legislation to provide incentives on penalties for following or not following where that information leads and this particular legislation does not do that… it’s complicated…the studies are not going to say in general this whole type of medicine is completely worthless or this whole type of medicine is completely useful. It will be much more nuanced than that and that’s part of the challenge in creating incentives for providers to do these things that are useful and not.

In the long run, comparative effectiveness research could be used to make health care more cost-effective and government should be able to design policy (by tweaking Medicare reimbursement rules and getting doctors to adopt best practices) that promotes the best practices and lowers health care costs without refusing to pay for popular treatments. So as Elmendorf suggests, the argument isn’t about rationing or denying care; that’s a red herring. The question is: how do we encourage doctors to improve health quality and eliminate the use of wasteful and harmful treatments?

Just a quick note on Gov. Bobby Jindal’s (R-LA) remarks from last night. Note that, with just a few exceptions, the section about health care sounded like a Democratic press release:

To strengthen our economy, we also need to address the crisis in health care. Republicans believe in a simple principle: No American should have to worry about losing their health coverage – period. We stand for universal access to affordable health care coverage. We oppose universal government-run health care. Health care decisions should be made by doctors and patients – not by government bureaucrats. We believe Americans can do anything – and if we put aside partisan politics and work together, we can make our system of private medicine affordable and accessible for every one of our citizens.

So what’s the difference between progressive and conservative health proposals? Listening to Jindal’s speech, one can’t really tell.

Jindal is shrouding deeply unpopular conservative health principles in progressive rhetoric (and that’s no accident). Republicans don’t really want to guarantee everyone affordable care, they just want to sound like they do. As Sen. John McCain (R-AZ) indicated during the campaign, Republicans believe that health care is a responsibility, not a right. And as such, the Republican consumer-driven approach won’t produce universal coverage.

But most Americans support comprehensive reform that lowers costs and gets everyone into the health system and oppose consumer-driven plans. Republicans like Jindal are trying to co-opt some progressive buzzwords without tipping their hands.