Paying for health care reform

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My new column for the FT doubts that savings from greater efficiency will go very far to pay for the administration's health care ambitions, and looks at less palatable options for raising the cash.

Last week, after meeting groups representing hospitals and insurance companies, Barack Obama announced a breakthrough on reforming US health care. It was "a historic day", he said. The providers had made "an unprecedented commitment" to curb the system's costs, running at 16 per cent of gross domestic product. They had agreed, he said, to reduce growth in healthcare spending by 1.5 percentage points a year, enough to save $2,000bn (€1,480bn, £1,320bn) over the next decade.

Exactly how was something of a mystery. Was this an aspiration, a target or a forecast? Within hours all parties began clarifying the declaration to the point of meaninglessness. The producer groups, facing agitated members demanding an explanation, denied they promised anything. White House officials repeated the president's assertion, then withdrew it saying he had misspoken, then affirmed it again.

Political slapstick is routine on this issue. What matters is whether the administration, the health care industry and the US electorate are moving any closer to facing the hard choices that Mr Obama is always telling the country he is willing to confront. So far the answer is no.


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