The New Health Dialogue

The Wall Street Journal editorial board calls cost control in current health reform proposals an illusion. Peter Orszag begs to differ. The director of the Office of Management and Budget takes the Journal to task, dispelling their claims on a point-by-point basis:

Claim 1: Health reform costs will ruin the federal budget. This ignores the fact that the Administration and Congress are clearly committed to passing health reform that is deficit neutral. “Unlike supply-siders, we are not waiting for magic savings to appear,” Orszag writes. “Instead, we are relying on hard, scoreable savings -- not the long-term cost-control measures -- to pay for the expansion of health care coverage.” He even gives the Journal board a link to the CBO score of the legislation, just in case they’d like to actually read it.

Claim 2: Even if Congress passes serious cost control measures, it will undo them later. Again, Orszag notes the irony of the Journal’s argument “when its closest allies on Capitol Hill spent the better part of last week opposing hundreds of billions of dollars in Medicare savings.” The Journal’s skepticism amounts to a kind of “fiscal nihilism,” Orszag said, which thankfully is not backed up by historical fact. For proof, Orszag suggests you check out a recent report from the Center on Budget and Policy Priorities, which we blogged on two weeks ago. As CBBP notes “every significant deficit-reduction package in the last 20 years has included Medicare savings, most of which have been implemented as planned.”

Claim 3: Technocracy rarely, if ever, works as intended. This is silly ideological pabulum, and Orszag is having none of it. “Thinking that we could lay out in full detail a perfect system today would show a foolish disregard for the dynamism of the health care sector -- and of the American economy in general,” he writes. “Instead, we are putting in place processes by which what works and what doesn’t can be rigorously tested, and then scaled up over time as they are reflected in the decisions of thousands upon thousands of hospitals, physicians, and other providers.” Equally important, he asks if the Journal has a better idea of how to conduct policymaking in a dynamic world.

Orszag’s case is strengthened by a new report out today from the Council of Economic Advisers. The report is essentially an update of earlier reports looking at the economic case for reform, this time in the context of the Congressional legislation. The findings are similar, and the latest CEA report finds that legislation in Congress would lead to:

• Long-term savings in Medicare and Medicaid, and a slowing of the annual growth rate of federal spending on these programs by 1 percentage point per year and greater amounts in subsequent years
• A slowing of private-sector cost growth of approximately 1.0 percentage point per year
• GDP that is 4 percent higher by 2030.
• Median family income that is $6,800 higher by 2030.
• Federal budget deficit lowered by as much as 2 percent of GDP by 2030
• An unemployment rate that is 0.16 percentage point lower and approximately 320,000 additional jobs