The Dirty Little Secret of Health Care Cost Control

The trickiest knot in health care reform isn't immigration or abortion or even a public option. It's who's going to pay for it. We've talked a-plenty about new revenue, be it the House's surtax on millionaires or the Senate's high-cost health insurance tax. But we also need money derived from the savings that can be wrung out of our bloated $2.4 trillion a year health care system (a figure that dwarfs the measly $90 billion a year we'll spend fixing it.) Half of the costs for each of the health care bills -- and more than half of what the Obama Administration has proposed throughout the year -- are recouped by policies that "bend the curve" of our accelerating health care costs. Indeed, Republicans have made bemoaning the proposed $500 billion over 10 years of cost containment provisions in Medicare into high kabuki theater. Nonetheless, we're hearing a new "conventional wisdom" that the reform plans aren't good because they don't do enough to control costs -- and some who push this thread into hyperbole by claiming there's no cost control at all.

Here's the dirty little secret of cost control at this stage of the game: most of the politicians making the claim that the reform bills don't do enough to control costs wouldn't be caught dead voting for the ideas that really will control costs!

Don't believe me? Well, let's take Mark Warner or Susan Collins or one of the other senators now looking to poke holes in a reform plan while being secretive about what their own method for controlling costs will be. Which of the following ideas would these so-called "fiscal conservatives" actually vote for?

First, there are the elements that we know with certainty that the Congressional Budget Office would score as an aggressive way to control costs. We can start with ending the program for overpaying Medicare Advantage for-profit HMOs per customer compared to traditional Medicare -- a proposal in all the bills that the CBO guarantees will cut costs but which the insurance industry and most Republicans and moderate Democrats are fighting. Or there's the "Cadillac" tax in the Senate Finance bill, itself a somewhat lame iteration of removing the tax exemption on employer-provided insurance, a guaranteed source of revenue that also exerts downwards pressure on the cost of insurance. Or how about a public option that pays Medicare-based rates, a tool that the CBO has repeatedly scored as a cost-saver and a significantly higher cost-saver than one with negotiated rates (Warner only supports the latter, Collins supports neither of the above)?

Second, you know what else would substantially save money? Having the federal government negotiate and/or set the rates for health care services. That's how every single-payer system, from Europe to Asia to Oceana, achieves the bulk of dramatic savings. That's how hybrid public-private systems like Japan have achieved such efficiency that our per-person costs are three times as much as theirs (if we waved a single-payer magic wand tomorrow and removed the administrative costs of private insurance, we'd still have 2.5 times the costs of Japan). That's even how the conservative and wholly privatized model of Switzerland operates. And I would have a heart attack and die if I saw a single centrist Senator propose it.

Finally, there are the cost control measures that will likely save money but which the Congressional Budget Office will score as netting very little savings. These are likely the proposals a Collins or a Warner will champion. But because the CBO is doubtful that they would produce guaranteed savings, we could implement them all and still be open to the charge of "This bill doesn't do enough to control costs." For example, many -- including Bob Laszewski -- are hailing the idea of either a bipartisan Congressional commission or an independent MedPAC-like board to propose and implement cost-control tools for Medicare free from the politicking of Congress. It's a good idea, but one that the CBO is not likely to score well (interestingly, because they don't think it will generate more savings that what's already included in the bills -- natch.) Investments in prevention, primary care, coordinate care, the medical home, electronic health records -- all elements that we know save money in state Medicaid programs, closed systems like the VA, and state-of-the-art high-quality health systems like the Mayo Clinic, all likely to leave the CBO unimpressed. Reducing hospital readmissions, making adjustments for productivity changes at hospitals, and allowing trimming waste, fraud and abuse? Already in the bill, chief. Tort reform? Fuggedaboutit.

I would love it if the reform bills in Congress did even more to reform the way Medicare delivers its payment systems, blazing a path for private payers to follow. Real cost containment won't come from a single bill but from creating tools that allow us to adjust and bend the curve next year, and the year after that, and the year after that. It's not that the proposals on the table do nothing -- that I fear is about to become an often-repeated lie -- and it's not like we don't know what we can do to bend costs even further. But getting these options past the so-called fiscal conservatives who should be championing them? That's the true Gordian knot.

The dirtiest secret of all is that in health care, one man's waste is another man's profit margin... and still another's campaign contribution.

(Photo credit: http://www.flickr.com/photos/13061661@N08/ / CC BY-ND 2.0)