Why Obama Is Obsessed With Health Care Costs

Whiter the argument about cost? In remarks today, President Obama warned Congress he wouldn't sign a health care reform bill into law unless it bended health care cost curve downward. At the same time, his chief budget officer, Peter Orszag, sent Congress a draft of legislation to create an Independent Medicare Advisory Committee -- what WH folks refer to as iMAC, apparently without asking Apple.

Here's how it would work:

This proposed legislation would require the President to approve or disapprove each set of the IMAC's recommendations as a package. If the President accepts the IMAC's recommendations, Congress would then have 30 days to intervene with a joint resolution before the Secretary of Health and Human Services is authorized to implement them. If either the President disapproves the recommendations of the IMAC or Congress passes such a joint resolution, the recommendations would be null and void, and current law would remain in effect. The review process would permit intervention if the IMAC's reforms are not in keeping with the goals of Congress or the President, while retaining autonomy for implementing annual payment updates and other Medicare reforms for the IMAC.

Sen. Jay Rockefeller has proposed something similar: his committee would be given the authority to set Medicare reimbursement rates and other payment schedules, and Congress would have to intervene, actively, in order to stop the changes from taking effect.  Congress, naturally, objects to the power invested in the committee, but it represents a step forward from the perspective of the White House. It's hard to see how the CBO could "score" the iMAC bill, not knowing what the IMAC commissioners would find when they examine competition and pricing.

Earlier this year, the White House decided to base its health care messaging on the concept of cost -- the current system was unsustainable and wasteful. They did not focus their argument on access, which appeals to people without access but doesn't do much for people with insurance, or about quality, which is complex and not intuitively helpful for Democrats.   Maybe the price of doing business with the insurance company was to focus on costs. Maybe they overcorrected from the Clinton model in 1994, which focused on "health security."
 
"We tried access and quality, with a tad of moral imperative, once before and it didn't work out so well. Its difficult no matter how you slice it," a senior Senate aide told me. A White House adviser conceded that "access is killer, no matter how you poll it."

And Obama's current health care advisers, from Orzag to Nancy Ann DeParle to Christina Romer, believe that game-changing tweaks to the health delivery system can control costs and, in the long run, reduce health care's share of aggregate demand.

The basic problem with the cost argument is that it elides over an important point, one that the White House wants to make publicly but cannot: in order to reduce costs in the short term, reform will cost something extra in the near-term. A deeper point they cannot make: it may take MORE money to build a better system. Only when that system produces better outcomes -- this would be years off -- can true cost-savings be realized.

The White House allows for a ten-year window for health care to become deficit neutral. The CBO's fairly static (and bottom-line tough) scoring of health care legislation, a legacy of Orszag's tenure over there, is certainly complicating the argument from cost.  But it's the only major argument that plays well with the voters (and members of Congress) the White House believes are crucial to getting something done.