Economic Scene Falling Far Short of Reform By DAVID LEONHARDT

November 11, 2009
Economic Scene Falling Far Short of Reform By DAVID LEONHARDT

WASHINGTON

Reduce the growth of health care costs. Bend the curve. Find the game changers. Reform the delivery system.

Yawn.

Health care reform has always had two main goals. The first — insuring the uninsured — carries grand overtones of social justice. The second — making the health care system more efficient — can seem abstract, technocratic and a bit nerdy.

Just listen to Rahm Emanuel, President Obama's chief of staff. He recently dismissed critics who say the current bills don't do enough to change health care by referring to them as "the executive board of the Brookings Institution" and "people sitting in the shade at the Aspen Institute." The goal, Mr. Emanuel told my colleague Sheryl Gay Stolberg, is to pass a bill through Congress, not to figure out what the ideal bill may look like.

Certainly, a bill that can't pass Congress won't help anyone. But I think it's important to step back and understand precisely what health experts mean when they argue for reforming the delivery system.

It is not simply about bending the curve, or slowing the growth, of Medicare's projected spending. It's also about preventing thousands of needless deaths from hospital infections. It's about making sure you get the best cancer treatment, even when that treatment is not the most profitable one. It's about keeping health costs from denying most families a decent pay increase, as has happened in recent years.

Making the medical system more efficient is, in short, about saving lives and giving Americans a long overdue raise. It is arguably the single most important step that the federal government could take to improve people's lives.

And the bill that the House of Representatives passed last weekend simply does not get it done.

That is not a judgment based on some civics class ideal, either. The House bill falls far short when compared with a bill that passed the Senate Finance Committee last month. It also fails to live up to Mr. Obama's campaign proposals and recent speeches. As Representative Jim Cooper, a Tennessee Democrat, told me: "The president and the White House have been much better than Congress on these issues. The Congressional challenge is to live up to presidential rhetoric."

You can argue, however, that these comparisons are actually reason for optimism — that the very existence of the Senate Finance bill suggests that Congress still has a good chance to live up to the challenge.

Jonathan Gruber, an economist who helped devise the universal coverage plan in Massachusetts, says the Senate's version of health reform does considerably more to control costs than he expected. A panel of experts led by Mark McClellan, a doctor and economist who used to run Medicare (and now happens to work at the Brookings Institution), concluded that the Senate Finance bill would help "slow long-term spending growth while building the high-value health care system our nation urgently needs." That panel also suggested some smart changes to the bill.

All along, Mr. Obama's aides have said they knew that Congress might pass bills with serious flaws. The White House strategy was to stand back and work with Congressional leaders to fix those flaws once the legislation entered its endgame.

The endgame is here.

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For anyone who cares about reducing medical costs and improving outcomes, there are probably six big issues to follow in the coming weeks. Let's take them one at a time:

THE EASY STUFF Each year, about 100,000 people die from preventable infections they contract in a hospital. When 108 hospitals in Michigan instituted a simple process to prevent some of these infections, it nearly eliminated them.

If Medicare reduced payments for the treatment of such infections, it would give hospitals a huge financial incentive to prevent them. The Senate bill takes a small step in this direction by cutting payments to hospitals with high infection rates by 1 percent. The House bill merely requires hospitals to report their rates publicly. There are also other basic patient safety areas in which the bills can do much better.

WHAT WORKS? Earlier this year, I used prostate cancer as an example of how our fee-for-service medical system leads to higher costs and worse outcomes. There are a handful of possible treatments for early-stage prostate cancer, and the fastest-growing are the most expensive. But no one knows which ones work best.

Modern medicine is full of such uncertainty. Again, the federal government could make a big difference here by giving Medicare a moderate amount of money for research, which would pay for itself many times over. The stimulus bill began paying for such research, but the health reform bills fail to pick up where the stimulus leaves off.

A FED FOR HEALTH Twice a year, an outside advisory board sends Congress a list of suggestions for Medicare payment rates, based on the available evidence. Congress generally ignores them, in deference to the various industry groups that oppose any cuts to their payments.

We already have a wonderful model for how to avoid such interference. It's called the Federal Reserve. The Fed is charged with setting interest rates based on economic conditions, not politics. The Senate bill would create such a commission for Medicare. Unfortunately, it initially applies to doctors and home health care providers but not hospitals, thanks to a deal between the hospitals and the White House. It expands to include everyone in 2019. The House bill has no such commission.

Whether one ends up in the final bill will be a good test of Mr. Obama's endgame leadership.

THE MCALLEN PROBLEM Both bills would create some promising voluntary programs meant to reward doctors and hospitals that provide good care rather than more care. But the doctors and hospitals providing the most expensive, wasteful care — like those in McAllen, Tex., described by Dr. Atul Gawande in a recent New Yorker article — surely will not sign up for these programs.

And the language in the current bills suggests that Medicare officials cannot make the programs mandatory without new legislation from Congress, which is an invitation for lobbying from places like McAllen. Giving Medicare the authority to expand even a single successful program would be a big improvement.

CHOICE Last week, the Democratic leaders in Congress sent out another e-mail message bragging that for people who didn't like their insurance, health reform would provide "affordable choices for you that can't be taken away." That isn't true. The bills would do nothing to expand the choices of people with employer-provided insurance.

Senator Ron Wyden, an Oregon Democrat, has been obsessively trying to change this — to give even a small slice of people with the most expensive employer plans a chance to buy insurance on the exchange for small businesses and the uninsured. It's not yet clear if he will succeed.

THE CADILLAC TAX Along with the Medicare commission, this tax is the biggest single difference between the Senate and House versions. Right now, health insurance — unlike income — is not taxed, effectively creating a subsidy for the costliest plans and health care providers. Labor leaders have helped persuade the House to keep the tax exclusion intact, largely because many of the most generous insurance plans are held by older unionized workers, who, in turn, have a lot of influence in their unions.

But the tax exclusion is terribly costly for the rest of us. If it were to disappear, employers would have an incentive to sign up for well-run insurance plans, leaving more money available for workers' salaries. If the Senate's tax on so-called Cadillac plans were enacted, the average household would be making an additional $1,000 every year (in today's dollars) by 2019, according to an analysis of Congressional estimates by Mr. Gruber. In my house, $1,000 a year counts as real money.

Are Congress and the White House likely to succeed on all six of these issues? Of course not. But if the final bill were just moderately better than the Senate Finance version, it would be a major victory. Even that Senate bill, as it is, would be worth celebrating. It has the potential to reduce cost growth significantly and to improve health — in spite of all the recent criticism on those counts.

And if the final bill ends up looking like the House bill? Well, then the criticism will have been far too tame.

E-mail: leonhardt@nytimes.com
Economic Scene - House Health Care Bill Fails to Live Up to Its Goals - NYTimes.com (15 November 2009)
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