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It's easy to understand why so many Americans are uneasy about the cost of health care reform. But the debate over reform's fiscal impact needs to consider both sides of the ledger -- not just its costs but also its potential for savings.

With the federal deficit already ballooning, the legislation the Senate is now debating would commit Washington to spending almost $200 billion annually by 2019 to guarantee nearly universal coverage. That's real money.

But many health reform experts agree that the bill formulated by Senate Majority Leader Harry Reid also makes real efforts to offset those federal costs and to "bend the curve" on overall medical spending. In a Nov. 17 letter to President Obama, 23 prominent economists identified four principles of fiscally-responsible health care reform. Reid's bill, inevitably, contains compromises and concessions that deviate from the economists' blueprint. But building on the cost-control proposals devised earlier by Senate Finance Committee Chairman Max Baucus, D-Mont., the legislation substantially meets each of the letter's four tests.

"I can't think of anything I'd do that they are not doing in the bill." --Jonathan Gruber, M.I.T.

Don't take my word for it. Listen to Mark McClellan, the former director of the Center for Medicare and Medicaid Services under George W. Bush and one of the economists who signed the letter. McClellan has some sensible suggestions for improving Reid's plan, like strengthening Washington's ability to monitor which reform proposals are working. But mostly he's pleased. "It has got all four of those elements in it," said McClellan, who now directs a health policy center at the Brookings Institution. "They kept a lot of the key elements of the Finance bill that I like. It would be good if more could be done, but this is the right direction to go."

Reid's plan follows the economists' call for a tax on high-end "Cadillac" health insurance plans, which could curb medical spending by encouraging people to buy less expensive plans. It likewise echoes the economists' call for establishing an independent Medicare commission with expedited authority to impose savings when the program's spending grows too fast (though the bill sets too many restrictions on the commission's authority).

The best available evidence also indicates that Reid's plan meets the economists' core principle that reform should reduce the federal deficit. The Congressional Budget Office concluded that through 2019, the Reid bill would raise revenue and cut spending on other federal programs by $130 billion more than it spends.

Critics have correctly complained that the bill inflates that 10-year number by starting to raise taxes and cut spending in 2011 while deferring the big spending to expand coverage until 2014. But those critics omit the larger point: Once the new spending, savings and revenue are all fully phased in, CBO says the combined effect will still reduce the deficit by $8 billion in 2019 and much larger sums through the following decade. Indeed, CBO concludes that the bill, while expanding coverage, would reduce the deficit indefinitely -- so long as Congress implements the legislation's revenue increases and spending cuts.

That's the next fallback for the fiscal skeptics: They insist Congress won't deliver the savings the bill relies on, particularly in Medicare. There's always that risk, but the proposed reductions may not be as politically onerous as is often assumed: Measured as a share of projected spending, the 1997 Balanced Budget Act signed by Bill Clinton cut Medicare more than twice as much as this year's Senate bill does. "We have done more significant [cuts] in the past," said Office of Management and Budget Director Peter Orszag.

In their letter, the economists identified as their final pillar of fiscally-responsible change a series of "delivery system reforms" intended to nudge the system away from today's fee-for-service model and toward a framework that more closely links compensation to results. Reid's bill is crowded with Medicare reforms meant to do just that, from penalizing hospitals that readmit too many patients too quickly; to cutting reimbursement rates for inefficient and ineffective physicians; to creating financial incentives for teams of providers to better manage patients' overall health. And it funds an innovation center in the Health and Human Services Department to incubate further reforms.

Jonathan Gruber, a prominent MIT health economist and another of the letter's signatories, says the bill embodies the most serious effort he's seen to "bend the curve" on long-term health care spending. "They really make the best effort anyone has ever made," Gruber said. "I can't think of anything I'd do that they are not doing in the bill."

More can always be done. Medical malpractice reform would strengthen the Reid bill's cost-control agenda, as would tougher sanctions on wasteful providers, a stronger Medicare commission and mechanisms to speed private insurers' adoption of payment reforms that show promise in Medicare. Truly slowing the unsustainable increase in health care spending will probably require all these reforms and more. But it's difficult to quarrel with McClellan when he concludes that in the struggle to re-engineer a more efficient, affordable 21st century medical system, the Reid bill takes "important steps in the right direction."