Friday, September 11, 2009

Obama "triggers" a recount of heath care bills' costs

David Brooks would have us believe that Obama's promise in Wednesday night's speech not to sign a health care bill if it "adds one dime to the deficit" "kills the kills the House health care bill," which allegedly would add $220 billion to the deficit over ten years.

But as Ezra Klein highlights for us, Obama's very next sentence indicates an intent to change the CBO scoring that determines each bill's alleged price tag. As several observers including John R. Gabel have pointed out, the CBO has a history of underestimating the savings from various enacted Congressional measures to reduce health care costs; it's difficult for lawmakers to get due credit for cost-cutting measures. Hence this proposal, immediately following the "dime" pledge:
And to prove that I’m serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don’t materialize."
Klein, I believe, had already flagged this possibility prior to Obama's speech (it was either him or Cohn). Today, he's all over it:
The idea was recently explained in a paper David Cutler and Judy Feder wrote for the Center for American Progress, so I called Feder today to ask what, exactly, the president was talking about.

How does a fiscal trigger work?

The idea of a trigger is that one establishes in advance a target for savings in the system, agrees on measures that need to be achieved, track that progress as the program is implemented, and if shortfalls are found, then certain actions are automatically triggered in.

What are those actions? What happens when you pull the trigger?

David Cutler and I put forward a range of options and believe a menu should be specified in the legislation. That menu could include further reductions in Medicare or changes in the tax treatment of employer-based efficiency or a strengthening of a public plan to further competition with insurers.

And why do we need this? I thought the plan already had savings in it.

The reason that David Cutler and I have been so supportive of a trigger is that we are firmly behind the cost-saving measures that are in legislative proposals and on which there is enormous agreement to change the health-care delivery system. Payment reform, a value-based purchasing system, moving away from the overprovision of low-value and high-cost procedures, and rewarding providers for better care and management of chronic illness. There's work and experience showing those measures can achieve huge savings systemwide. David Cutler and Rand's Melinda Buntin estimated (pdf) the savings at $2 trillion over the next decade.

But CBO is very cautious about scoring those measures. So it's our belief that for scoring purposes, we can put underneath them a failsafe that guarantees CBO will score the savings.

So the idea is that those savings will appear, but since CBO won't score them, you basically give CBO something it can score that's of similar value?


Presto. That house bill might be scored differently. More importantly, it may really accelerate the imposition of serious cost controls, i.e. changes to the fee-for-service payment structure, which by their nature must be incremental. Read the whole of Klein's interview of Feder.

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