Costing the Senate health bill

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Ron Brownstein has an interesting column in National Journal arguing that the Senate health care bill makes a serious effort to curb costs. This longer piece on the Atlantic website, "A Milestone in the Health Care Journey" is also well worth reading.

Though I agree with much of what Ron says, and if I were a senator would vote for this bill rather than no bill, it depends what you mean by a serious effort to curb costs.

Certainly, the Senate measure is better on cost control than the House bill with which it will have to be merged. (For background, see this earlier piece by David Leonhardt, "Falling far Short of Reform", which compares the House bill with the Senate bill's precursor from the Senate finance committee; this Brookings analysis of the finance committee plan, which checks off ideas for bending the curve on health costs; and especially this newer piece by Leonhardt on the current Senate plan, "Budget hawks have a menu of options".)

As Brownstein says, the Senate bill  adopts four principles advanced by a non-partisan group of health economists in a recent letter to the White House: deficit neutrality, a tax on expensive insurance plans, a Medicare commission to suggest ways of improving quality and value, and delivery system reforms.

The problem is that many of the cost-reducing proposals are pilot projects, or voluntary schemes, or experiments of one kind or another. Fine: you have to find out what works, and many of these ideas are promising. The question in the meantime is whether the bill's taxes and hard spending curbs really do get you to deficit neutrality, or anywhere close. That seems doubtful, to put it mildly. On deficit reduction, the heavy lifting in the Senate bill is done by the tax and by the Medicare cuts. The tax, if it survives, is good. That's fiscal progress. It's what Brownstein says about Medicare that puzzles me:

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.

The Medicare cuts mandated by the 1997 act were indeed onerous--so onerous that the system intended to deliver them has been gutted year after year by Congress. This very month, at a cost of more than $200bn over ten years, the House passed a bill eliminating a 21.2 per cent Medicare pay cut supposed to take effect in January (that figure rolls up a bundle of previously postponed savings) deferring the promised fiscal discipline yet again. Yes, Congress has "done more significant cuts"--if you mean, has passed the legislation. But then it has neutralised its own commitments, year after year.

When it comes to promised Medicare savings, the fiscal sceptics have a better track record than Congress.

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Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

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