That 1.5 Percent
Yeah, so it's a heavy health-care day here on the blog. Big whoop, wanna fight about it?
Didn't think so. In my interview with Christina Romer, I asked about the sudden emergence of the talismanic "1.5 percentage points." In the past few months, this has become the goal of health-care reform: to slow the annual growth rate of spending by 1.5 percentage points. This is what the industry coalition promised to achieve voluntarily. This is the optimistic case that led the Council of Economic Adviser's report. "1.5 would be a tremendous accomplishment," Romer told me. "Though it may sound like a small number, it's very hard."
Slowing annual cost growth by 1.5 percentage points is, increasingly, the definition of success. But it's an odd definition of success. The number that the health-care industry thinks it could achieve voluntarily, without any real hit to profit or any coercive reforms, is quite a bit lower than the number we could, and probably should, achieve with a lightly wielded scalpel and an appropriately jaundiced eye toward the status quo bias of providers.
What you can say about an annual slowdown of 1.5 percentage points is that it would be a magnificent achievement given the political difficulties of health reform, but it's quite a bit lower than could be achieved absent those constraints. The Obama administration deserves credit for being conservative in its estimates. But though it's true that this new definition of success is ambitious given what we're likely to achieve amid a broken political system and a powerful health-care industry, it's probably quite modest given what could be achieved in more straightforward circumstances. And that's worth keeping in mind.
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