The Price Of Inaction On Health Care

As the final health care votes approach, the Democrats' enduring dream of covering the uninsured rests mostly with Democratic lawmakers more concerned about controlling costs than expanding access.

These fiscally conservative, center-right members of Congress will likely cast the determining votes, especially in the House. Inevitably, they must decide whether they can sell the plan nearing completion to swing voters in their closely contested districts. But even if these Democrats cross that threshold, they also must decide whether the plan is more likely to slow or accelerate the crushing rise in health care spending. "There is risk either way," says Len Nichols, director of George Mason University's Center for Health Policy Research. "There is risk if you [pass it], and there is risk if you don't."

"Under the do-nothing scenario, everything gets worse."

From a fiscal perspective, reform's big risk is that it commits Washington to funding significantly expanded coverage. Because of the Democrats' complex legislative strategy, their final package will revolve around the Senate health bill; when fully implemented, that proposal would spend about $190 billion annually to cover the uninsured, the Congressional Budget Office estimates. The final tab could run slightly higher. No wonder fiscal hawks are skittish. But there's more to the bill's ledger. It contains an array of innovative ideas to modernize Medicare, save federal dollars, and promote efficiency. On those issues, the Senate bill that will guide the final product more closely tracks the House moderates' preferences than does the legislation their own chamber passed last November.

Across the board, the Senate moved more aggressively than the House did to nudge the medical system away from today's fee-for-service structure that encourages expensive, bloated treatment and toward an approach that increasingly links providers' compensation to results for patients. If the Senate's tougher provisions make it into the final bill, they could help attract wavering House moderates.

The House-passed legislation would establish only a pilot program to encourage providers to form "accountable care organizations" to better manage treatment of Medicare patients; the Senate would implement the idea nationwide. The Senate would move more directly to penalize doctors who prescribe excessive care for Medicare patients. And unlike the House, the Senate would tax high-end insurance plans. Although House leaders compelled President Obama to delay that "Cadillac" tax, the final measure could still encourage efficiency over time. Most important, the Senate bill would create an independent Medicare advisory board, which would be required to propose savings when the program's costs rise too fast and would likely become an effective vehicle for expanding promising payment reforms. In all, CBO has projected that the Senate bill would raise enough revenue and sufficiently cut existing spending to both cover its costs and reduce the federal deficit in the near and long term.

For fiscal hawks, that's a powerful incentive for action. But equally compelling could be the price of inaction. If Obama's plan fails, as President Clinton's did, it's likely that no president will attempt to seriously expand coverage for many years. The independent Medicare actuary has projected that under current trends the number of uninsured will increase by 10 million, to about 57 million, by 2019. Providing uncompensated care to so many uninsured people would further strain physicians and hospitals -- and inflate premiums as those providers shift costs to their insured patients.

Some fiscal conservatives want to attack rising costs without expanding coverage. But that approach looks impractical, politically and economically. While Republicans controlled Congress after the 1994 election, they never built enough of a consensus to pass the cost-control ideas they are now pressing on Obama, such as medical malpractice reform. Meanwhile, Nichols warns that imposing meaningful cost control on hospitals without reducing the number of uninsured patients they must treat "would bankrupt many and strain most to the breaking point."

Weighing such factors, Nichols concludes that the "risk of doing nothing" exceeds the risk of passing the bill. In interviews, Emory University's Kenneth Thorpe and Stanford University's Alan Garber, two other leading health economists, guardedly echoed his conclusion. Both men believe that the current proposal could move faster to control costs. But both also agree that it contains valuable first steps and establishes what Garber calls "a good platform" for further reform. By contrast, Thorpe says, "under the do-nothing scenario, everything gets worse." For Democratic fiscal hawks uncertain that approving Obama's plan will cure what ails U.S. health care, the real question may be whether defeating it guarantees that the system's chronic afflictions will metastasize further.

This article appears in the March 13, 2010, edition of National Journal.

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