Entitlement Reform Is Health Care Reform

Ezra Klein sums up the theme of today’s White House Fiscal Summit: “Fiscal responsibility, in other words, is no longer a stand-in for entitlement reform. In Obama’s Washington, it means health reform.”

Indeed, for decades, so-called budget hawks have argued that growing Medicare spending will bankrupt the nation. To save ourselves from pools of red ink, we must either cut benefits, increase the eligibility age, or increase the amount beneficiares pay for services.

But blaming Medicare for the fiscal crisis ignores the fact that private health care spending grows at the same rate as public spending:

The real problem then, is not “entitlements” but rather skyrocketing health care costs as a whole (we’re spending too much money on each beneficiary). Obama is arguing that until you contain the health care spending of the entire health system, you won’t set the nation on a sustainable fiscal path.


One could start controlling costs eliminating the extra reimbursements for private health insurers that operate Medicare Advantage plans, re-orienting Medicare reimbursement rates to reflect value instead of quantity, addressing the enormous variation in service under Medicare across geographical areas and investing in coordinated care, but any cost savings must be reinvested into health care reform.

Thankfully, Obama is willing to address the actual root of the ‘budget crisis’ — rising per capita cost of health care — and put the choice honestly to the public: “accept limits on health spending or pay for the care you insist on having.”


From Obama’s opening remarks:

In the coming years, we’ll be forced to make more tough choices and do much more to address our long-term challenges, from the rising cost of health care that Peter described, which is the single most pressing fiscal challenge we face by far, to the long-term solvency of Social Security.

Peter Orszag, speaking at the summit:

In charting a new fiscal course, we need to be clear in diagnosing the problem. The single most important thing we can do to improve the long-term fiscal health of our nation is slow the growth rate in health care costs. Health care is the key to our fiscal future.

So to my fellow budget hawks in this room and in the rest of the country, let me be very clear: health care reform is entitlement reform.

The path of fiscal responsibility must run directly through health care.