Some Honest-to-God Impressive Ideas on Funding Health Care

Impressively, President Obama has another weekly address specifically devoted to health care.  In this one, he announced an additional $313 billion in savings that can be used to pay for health care reform.  Add up all of his proposals from the budget onwards, and the White House has earmarked $948 billion of the estimated $1.25 trillion over 10 years that would be needed to pull off something resembling the Obama plan.  I haven’t always been impressed with these savings and new revenue proposals, but this new batch actually makes a lot of sense and – shockingly – would likely also improve the quality of care.

You can watch his address here.

As strong as the president’s words are, his proposals this time are even better.  You’ll remember that of the $635 billion proposed in his FY 2010 budget, quite a few of the items seemed pretty politically improbable.  The new revenue piece that encountered the most resistance was the notion of capping the tax percentage that can be applied for charitable deductions – a reasonable and relatively painless way of generating new revenue that would only affect the richest 1%, but which was declared completely dead on arrival in Congress.  (Quick side laugh:  the specific line item funding of Obama’s health care reserve fund was dropped from the budget by none other than Sen. Kent Conrad, the originator of the half-baked and completely vague health co-op ideas.  Man, does that guy like persevering ambiguity!)  Similarly, the White House sought to reduced Medicare spending by cutting overpayments to Medicare Advantage private HMOs – an extra 12-15% per beneficiary that we’re paying for absolutely no extra benefit.  However, armies of lobbyists and conservatives are fighting tooth and nail to preserve an un-level playing field for these private plans.  It’s a fight that may well be as hard as getting health care reform passed in the first place.

Most of the previous round of savings was trimming obvious fat.  But this new round is focused on quality as well:

• Reducing what’s called “Disproportionate Share Hospital” or “Dish” payments– extra federal money for hospitals who see a disproportionately high number of uninsured patients who receive uncompensated care.  When I hear the president target this in his radio address, I was skeptical – even if his plan is successful, we’ll need to pay this money for the years it will take to get all the uninsured into quality coverage.  The proposal quelled my fears though – the payments would be reduced, not eliminated, and wouldn’t be phased in until 2013.  OK, you got me on this one, Peter Orszag.
• Get savings out of Medicare Part D.  As a program, Medicare Part D is tremendously wasteful.  We know all about the government waiving its right to negotiate the best prices, focusing on generics, or allowing reimportation of drugs that we sell to Canada.  Add a new one to this – changing reimbursement for people who are eligible for both Medicare and Medicaid, so it comes out of one instead of both.
• Change the payment rates for MRIs and CT Scans in Medicare, both to “reflect how these technologies are actually used” and also start to roll back the incentives to do more MRIs than we actually need.
• Implement the Medicare Payment Advisory Commission’s 2010 recommendations “for skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals” – another double whammy of cutting costs while streamlining the care given by those facilities to yield more efficiency.  Thrown in the fact that this means a MedPAC recommendation that makes a lot of sense will actually get a shot of being implemented for once, and it’s a triple whammy!

Look, I don’t realistically know that the dollar value on these savings is right, but all of these are good ideas – frightening good ideas at that. More to the point, since you can clearly detect the hand of White House OMB Director and former Congressional Budget Office Director Peter Orszag behind these proposals, you know they’ll score well at the CBO, the “referees” on whether your proposal is truly budget neutral or you need to go back to the drawing board.

The contrast is pretty sharp between the White House, which has thus far come up with novel, sophisticated and non-punitive measures to provide the savings and revenue for health care reform, and what Congress has been trying.  They’ve been trying to work the refs (most notably in Sen. Max Baucus’ suggestion that the CBO should be more “creative” in how it scored the savings that could be derived from prevention and Health IT), going after big pots of money like the employees tax exclusion largely without regard to whether it benefits the system to do so, and taking various politically problematic options “off the table.”  That makes sense up to a point.  The focus at this point should be on what does or does not go into the package.  Fighting about paying for it now is putting the cart before the horse.

But I’ll admit that I never quite hoped that any proposals for paying for health care would hit the double whammy of challenging our system to also be more efficient.  The White House hasn’t just raised those hopes – it’s upped my likely disappointment for when Congress inevitably tries to legislate an easy way out of responsibly funding health care reform.