On Wednesday, White House Office of Management and Budget Director Peter Orszag struck back at claims that the health reform legislation won't cut costs because Congress hasn't followed through on cost-cutting in the past and is unlikely to do so in the future. The Center for Budget and Policy Priorities agrees with him, and published a detailed (but readable) compendium of successful Medicare cost-savings provisions going back more than 20 years -- and numerous provisions in the House and Senate health reform legislation that are likely to yield savings in the next 20 years.
The new CBPP report thoroughly rebuts critics who say the health reform bills do little to control costs, and goes into considerable detail on the recent history of cost-savings -- which makes them more confident about the future of cost-savings. Yes, Congress blocked some of the really steep Medicare pay cuts to doctors. But Congress never intended those cuts to be so deep in the first place. The formula was flawed.
CPPB takes on the critics point by point:
The bill contains no cost containment provisions. This is patently false, and the budget group provides a thorough account of the wide range of cost control measures in both bills. They highlight provisions that would make Medicare and Medicaid more efficient, reduce overpayments to Medicare Advantage and address prescription drug costs. They provide a laundry list of system reforms in health care payment and delivery, and emphasize the importance of a Medicare Advisory Board included in the Senate bill.
Even if the bill calls for savings in Medicare, Congress won’t let them take effect. Critics point to the Sustained Growth Rate formula (the Medicare doctor pay) as proof of Congress' inability to make reductions in Medicare spending. As Orszag also pointed out this week, this is a flawed comparison. The CBPP report says:
Congress didn’t intend the SGR to produce large savings. In fact, the SGR represented only 3 percent of the total ten-year Medicare savings in the 1997 deficit-reduction bill -- only $12 billion of the $394 billion in total Medicare savings over ten years, as CBO estimated at the time.
Because it was badly designed, however, the SGR would actually have cut payments to physicians much more than had been anticipated and well below the level needed to keep pace with doctors’ costs. Congress’ decision to forestall these unintended cuts was therefore justified on policy grounds. But, Congress did not simply cancel the SGR and let physician reimbursement rates grow willy-nilly. In fact, although Congress has since 2002 prevented the full SGR cuts from going into effect, it has cut physician reimbursement rates substantially below what was needed simply to keep pace with inflation. Even if Congress blocks the next scheduled SGR cut and freezes the rate at current levels, the rate next year will be 17 percent below the rate in effect in 2001, adjusted for medical inflation.
In fact, CBPP reports that “every significant deficit-reduction package in the last 20 years has included Medicare savings, most of which have been implemented as planned.” The report details an extensive list of past savings which have been implemented and notes their similarity to the provisions in the House and Senate bills.
Total health care costs will still rise in the near term. Yes, providing coverage to tens of millions of people is expensive. But these coverage expansions are more than paid for, as the CBO has found that both House and Senate bills would reduce the deficit and debt. More importantly, CBPP argues, is that the CBO also finds that the bills would begin to slow growth in health expenditures. “Even a modest slowdown in annual cost growth will more than offset the initial cost increase within a short period of time,” CBPP explains.
In short -- cost-savings measures have worked in the past. New measures -- some of which have already been tested by clinicians and hospitals -- can work in the future.
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