Common-Sense Cost Controls? Yea, They’re In There Too.

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January 13, 2011, 3:47 pm

Wishful Thinking on Health Costs


Opponents of the health law sometimes like to suggest that cutting health costs would be easy, if only we’d be willing to try common-sense ideas. But that’s wishful thinking. The law does include most of the common-sense ideas supported by health economists ranging from Mark McClellan (the former Bush administration official) to David Cutler (a former Clinton and Obama adviser). There’s just no getting around the fact that reducing the growth rate of health costs will be difficult.

Several writers have done a nice job of explaining this idea in the last several days. Here’s David Wessel, the economics columnist at The Wall Street Journal:

At the National Business Group on Health, a collection of nearly 300 big employers, President Helen Darling, a former corporate-benefit administrator and Republican Senate staffer, says about executives who call for repeal: “If they really understood it, they wouldn’t.”

“I don’t think we’ll get a better solution in the U.S. in our lifetime” she said. “If it gets repealed, or gutted, we’ll have to start over and we’ll be worse off.”…

If the government fails, then costs will rise inexorably. Nothing in the law guarantees success: The law embodies almost every idea anyone has offered and hopes a couple of them will work. No wonder executives are skeptical. But here’s the question: Would repeal in the current political climate be followed by more muscular restraints on health-care costs? Or weaker ones?

Talking about repeal of the health law may be a winning political strategy for Republicans, a rare way to please both workers and business executives. As long as they don’t actually succeed in doing it.

And Austin Frakt, a Boston University health economist writing at Kaiser Health News:

One way to get serious is to embrace the cost control provisions of the new law and to protect them from the likely efforts of future policymakers to undo them. In this, I agree with health economist Henry Aaron, who wrote about the health reform law:

“[T]he bill contains, at least in embryonic form, virtually every idea for cost control that any analyst has come up with. … The most practical cost-control strategy that is now available to Congress is to accelerate the implementation of these provisions, not to stymie them.”

That is, the cost controls on the books should be strengthened, not repealed or demagogued. We need them to work, and to work even better than [projected now]. Changes to Medicare and Medicaid payment systems, the Cadillac tax and the creation of the Independent Payment Advisory Board can all be effective tools to reduce federal, state and private health care costs — if used wisely and to their fullest.

Finally, Ezra Klein of The Washington Post:

The health-care legislation might save less money than CBO projects. But it also might save more. People like Harvard’s David Cutler and CAP’s Judy Feder, people who have spent their lives studying health-care policy, think the CBO is far too conservative when it looks at the delivery-system reforms….

[F]ormer CBO director Robert Reischauer, best known for his unwillingness to bend to the White House during the Clinton reform effort, supports the legislation as a crucial first step in long-term cost containment, and so too does former CBO director Alice Rivlin….

If parts of it don’t work, we can change them. If parts of it work even better than we’re expecting, we can double down on them. The real concern is not that the reality won’t accord perfectly with the CBO’s predictions, but that the political system won’t be able to respond to reality.

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