The New Health Dialogue

Lawrence of Arabia had his seven pillars of wisdom. Peter of OMB has his four pillars of health reform.

OMB director Peter Orszag, fielding questions from health journalists at a Health Affairs sponsored breakfast, made a strong case that the health bill being debated in the Senate does a lot more “curve-bending” than its critics claim. In fact, he said, it bends far into the deficit-trimming future. Perhaps not farther than the eye can see, but definitely farther than the CBO can score.

“We stand on the verge of a dramatic accomplishment,” he said. Health reform meets the moral imperative of covering more than 30 million of the uninsured. It is fiscally responsible. And it will improve quality, shifting the system toward "making people better rather than having more things done.”

He cited the recent statement from 23 economists -- including a pair of Nobel laureates and former Bush administration appointees -- that health reform must have four critical elements, or pillars, to use Orszag’s term. Deficit neutrality (“Check,” said Orszag); An excise tax on high-cost insurance plans (“Check,” he said -- for the Senate bill); An independent Medicare commission (“Check” -- again for the Senate bill); And delivery system reforms. ("Check" -- to varying degrees, in both bills).

Orszag said it would have been easier to "do a blunt savings and coverage expansion bill” than trying to deal with reshaping the whole system at the same time. But that would “perpetuate a system” which gave short shrift to consistent quality. One of the naysayers' themes is that the projected savings won’t come to pass because Congress won’t let them, that when the savings going gets tough, lawmakers get soft.

The oft-cited example, of course, is SGR -- the Medicare doctor payment formula -- in the Balanced Budget Act. Yes, Congress has fixed the fix several times. But as Orszag pointed out, there were lots and lots and lots of other savings measures in BBA. And they by and large did go into effect.

“The history (cited by skeptics) is not right,” he said. And the future is also different. We have pay-go rules now, meaning its hard -- not impossible, but hard -- to scrap savings without coming up with a way to compensate. And the health legislation has other tools to keep the savings wheels spinning, including the Medicare commission. (Weaker than many economists had hoped in the Senate bill, and nonexistent in the House, but as Orszag said, it’s all still being tweaked.)

“This bill has more cost containment and delivery system reform than any bill that has ever been considered on the Senate floor. Period,” he said.

Another interesting point he made, that we hadn’t heard him make this explicitly before, was that there’s a lot of concern that the penalties for not buying insurance under the individual mandate are too low to be effective. Orszag disagreed. Incentives and behavior can’t be estimated only by the dollar amount of a penalty, he argued. He used the interesting analogies of seatbelts and speeding. The penalties are about the same. But we don’t respond the same way to those financial penalties. He didn’t put it quite this way, but we are a nation of seatbelt wearing speeders! In Massachusetts the penalties are only slightly higher than those contemplated in federal legislation. But the takeup rate of insurance is high -- higher than anticipated. Having the Red Sox promote health insurance at Fenway may have had more of a behavioral impact than the purely monetary carrots and sticks. Social norms were changed. People got insured.

We've sometimes written about putting this bill in historical perspective. It's by no means perfect. But it's big, ambitious, and hugely significant. Orszag made a similar point. A year ago, he said, if he had predicted that a bill this sweeping would be on the floor , the response would have been skeptical, to say the least. Now, passage is within reach. Remember the second half of that "Seven Pillars of Wisdom" title? It was "A Triumph."