The Democratic co-chair of President Obama’s fiscal commission said 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.
Costs Will ‘Eat Us Alive’
Erskine Bowles, former White House chief of staff to President Bill Clinton, spoke about the new health law at a June event organized by the U.S. Chamber of Commerce.
“It didn’t do a lot to address cost factors in health care. So we’ve got a lot of work to do,” said Bowles.
Bowles said 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 the nation’s long-term fiscal problems to Congress in December.
Medicare the Real Problem
Bowles’ point was amplified by a new paper released by the Galen Institute, a conservative think tank, arguing Obama’s health plan “is not entitlement reform.” The event highlighted an alternative plan for reforming health care spending that is the brainchild of Rep. Paul Ryan (R-WI).
James C. Capretta, a former White House budget adviser on health care to President George W. Bush, presented the paper for the Galen Institute at an event on Capitol Hill with Ryan and Douglas Holtz-Eakin, a former director of the Congressional Budget Office.
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.”
Calls for Consumer Power
Capretta’s paper points out 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. Capretta says 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 said.
Capretta goes on to say 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 said. “Millions of otherwise passive Medicare participants would become active, cost-conscious consumers of insurance and alternative models for securing needed medical services. Cost-cutting innovation would be rewarded, not punished as it is today.”
White House Pushes Back
The White House disagrees with this depiction of the legislation. Administration officials pointed to recent blog posts by White House budget director Peter Orszag, who wrote, “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 care 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 their health care 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 June letter to the Chamber of Commerce, White House chief of staff Rahm Emanuel and top presidential adviser Valerie Jarrett said the health care law will “address one of the largest threats to our long term fiscal health.”
Yet 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 a total of $143 billion over the first 10 years. In a memo released on May 28, Elmendorf called those reductions “small steps” that do little to reduce cost problems.
“The rising costs of health care will put tremendous pressure on the federal budget during the next few decades and beyond,” Elmendorf wrote. “In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure.”
“Obamacare is Not Entitlement Reform,” the Galen Institute