Obama on the Politics of Cost Control
For all that last night's press conference brought the wonk, it had nothing on Obama's chat with Fred Hiatt. That was like wonk heaven (though wonks, of course, don't believe in heaven, as there's very little empirical evidence of an afterlife). There are a couple of moments from that transcript that I want to highlight today, and the first came when Hiatt asked Obama, "Would you consider phasing in access and increasing access as you see the curve is bending, but slowing the growth in that entitlement if the curve is not being bent?"
I guess my thinking here, Fred, is to separate out two questions. One is, are we paying for the health reform package in a deficit-neutral way -- which, by the way, would stand in stark contrast to everything that's been done over the last eight years; certainly wasn't done with the Medicare prescription drug plan. So what I've said is I will not sign a bill that is not deficit-neutral.[...]
[C]onceivably, you could have a system that pays for itself, but doesn't bend the cost curve; it's going to cost you more and more money. Or, alternatively, you could bend the cost curve, but not expand coverage. I think that it's important to do both. I think it's important for us to make sure that 46 million people who don't have health insurance get it. And I think it's important for us to bend the cost curve, separate and apart from coverage issues, just because the system we have right now is unsustainable and hugely inefficient and uncompetitive.
I guess theoretically, you could just work on bending the cost curve without providing additional coverage. I actually think that you lose some of the benefits of getting universal coverage. For one thing, all the issues of uncompensated care would still be coming up. You potentially would lose the benefits of buy-in from insurance companies and drug companies and hospitals and others who feel that, okay, at least if we have an individual mandate and everybody has bought into the system, then we have more consumers, and we are more willing then to wring out inefficiencies in providing -- inefficiencies per patient, essentially.
So I actually think that not only is it the right thing to do to go ahead and cover people, but I think it becomes easier to build a consensus around making some of the changes that are necessary to bend the cost curve.
That last bit is actually important. I think the policy case for coverage expansions being essential to cost control is speculative at best. But the political case is very strong. Coverage is the easy part. If Congress can't pass that, why does anyone think it can make the hard decisions necessary for cost control? Obama made the point more explicitly a bit later in the chat:
If we are not able to get health care reform -- and, Fred, I just want to be frank with you at this point that this is why I think that if you're a deficit hawk like you, you should actually be -- you should be hard on sort of the product, but you should be encouraging on the process, because the fact of the matter is, is that if health care reform fails, there is no way that Congress is going to take up a serious effort to control health care inflation -- there's no way that we're going to pass the kinds of changes we've already talked about in Medicare, for example, in the absence of a more comprehensive reform package. And so what we're going to have is a situation in which it's just business as usual for, I think, the next four years at minimum, and maybe the next eight -- in which case, the problem is just going to keep on getting worse and worse.
So I think it is important to be jaundiced about the possibility that health care reform in the absence of these game-changers makes things worse, and I think that's entirely fair to talk about. But I think that -- Steve Pearlstein was exactly right in his article today, which is, here's what we know: If we do nothing, this thing is a nightmare, and we will not be able to, I think, just apply pain to the electorate either through mechanisms like simply cutting Medicare benefits at a time when seniors are already feeling very stressed, when we're not also providing the people some additional security.
There is some chance that amid health-care reform, we'll be able to get things like a stronger version of MedPAC and a serious comparative effectiveness review and even, if we're lucky, a beginning to the end of the employer tax exclusion. But absent health-care reform, there's no chance we'll get any of those things, because Ted Kennedy and Henry Waxman and Nancy Pelosi don't want those things. What they want is coverage. And if the deficit hawks decide to take the "pure" stance and oppose this process they'll have missed a significant opportunity to use coverage as a bargaining chip to make real strides on cost.
To put it another way, it's entirely conceivable that health-care reform will end with a tax on the rich, an expansion of coverage for the poor, and nothing on cost. Those things are relatively popular, and a longtime goal of Democrats. It's possible to imagine Blue Dogs and conservative Republicans and Senate centrists cutting a deal so that cost controls coming along with those things. But it's impossible to imagine health-care reform ending with no expansion of coverage to the poor, but an unelected authority making hard decisions about Medicare spending and a new tax regime reducing subsidies for employer-based insurance. Politicians do not fail at popular things and decide to try unpopular things instead.
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