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Can Congress control costs?

EK0223_entitlements_two.JPG

One of the more sophisticated arguments against health-care reform is that for all the sharp policies and elegant initiatives contained in the bill, none of it will work because Congress will vote to roll back the cost savings. The evidence comes from Medicare's Sustainable Growth Rate formula, which Congress passed in 1997 but has refused to implement.

As Jon Cohn explains, however, SGR is the exception, not the rule. Congress has passed plenty of proposals that cut costs in Medicaid and Medicare, and stuck to most of them. SGR really is an exception: It was a formula passed when GDP growth was unusually high and health-care cost growth was unusually low. When GDP growth slumped and health-care costs shot back up, following the payment rates set out by the SGR came to look draconian. The problem is that rather than fix the bill, Congress just passed temporary delays. Repeal would have been more honest.

But more broadly, this argument is a form of political nihilism. In the coming decades, one of two things will happen: Congress will cut health-care costs, particularly in Medicare, or the country will go bankrupt. Saying Congress can't cut health-care costs is not an argument against this bill so much as it is a prediction of eventual economic collapse. That might be an accurate prediction, but it militates in favor of trying to rationalize the system before the moment of total crisis, not opposing attempts to do so.

Graph credit: Congressional Budget Office

By Ezra Klein  |  November 6, 2009; 5:17 PM ET
Categories:  Congress , Health Economics , Health Reform  
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Comments

The Medical Group Managment Association, a trade group for physician practices, supports the House bill on the - probably safe - assumption that the Dems will repeal the SGR in short order. Here's an excerpt from a recent mailing of theirs:

"The House of Representatives is scheduled to vote as early as Saturday on the America’s Healthy Future Act of 2009 (H.R. 3962), the House's broad healthcare reform bill. The Medical Group Management Association (MGMA) has sent a letter supporting the bill in conjunction with the passage of the Medicare Physician Payment Reform Act (H.R. 3961). These interdependent pieces of legislation reflect MGMA’s principles for healthcare reform. By successfully approving both bills, the House of Representatives will have taken another important step toward reforming the healthcare delivery system.

To ensure that the pending 21.2 percent Medicare physician payment cut is averted and the flawed sustainable growth rate formula is finally repealed, MGMA members should contact their Representatives and urge House passage of H.R. 3961."

Ezra: "In the coming decades, one of two things will happen: Congress will cut health-care costs, particularly in Medicare, or the country will go bankrupt."

Well I don't know, the Medicare program has an unfunded liability of $37 trillion dollars. That's a big scary number. And for decades people have been saying that at some point taxes are going to have to go up and/or benefits cuts made and/or the age of eligibility will have rise. But successive Congresses have just kept kicking the can down the road. Just as successive Congresses have refused to implement the SGR.

I think the Dems should enact their cost saving plans and expand coverage for the near-poor incrementally as savings are achieved. Heck, the government already controls almost half of our nation's health care expenditures. That should be enough to start with. Let's see proof of concepts.

Posted by: tbass1 | November 6, 2009 5:42 PM | Report abuse

You must be incredibly delusional to even consider a positive answer to this question.

Did you really describe the House bill as elegant? Wow.

Posted by: fallsmeadjc | November 6, 2009 5:47 PM | Report abuse

"Did you really describe the House bill as elegant? Wow." Not to mention "all the sharp policies" in the bill. "All"? Like, maybe, 2?

"Saying Congress can't cut health-care costs is not an argument against this bill." Actually, it's one of about 75 against "this bill." "This bill" doesn't make fundamental changes that need to be made, it's full of half (eighth?) measures and dubious assumptions, and its approach to making health care affordable is to pay subsidies to people way over the poverty line.

Posted by: ostap666 | November 6, 2009 5:57 PM | Report abuse

Ezra, it'd be easy enough to shut up us skeptics by having Congress cut costs first, as tbass notes, and then only expand coverage after the costs are cut. I'm a skeptic as to the political will, but I can be easily proven wrong by Congress postponing the coverage expansion until sufficient savings have been realized.

The reason why this is an argument against the bill is that if this entitlement is currently unaffordable (and no one disputes that) then the last thing you want to do is expand it and then hope that Congress later finds the political will to pay for this expansion.

Posted by: jfcarro | November 6, 2009 6:53 PM | Report abuse

jfcarro:

Perhaps not surprisingly there are people, like this fellow, who expect or fear that the bill will be a hugely expensive burden that can never be repealed but support it nonetheless on idealogical grounds:

http://www.newyorker.com/online/blogs/johncassidy/2009/11/some-vaguely-heretical-thoughts-on-health-care-reform.html

Posted by: tbass1 | November 6, 2009 7:39 PM | Report abuse

Right off the bat the SGR fix is going to create problems because Part B premiums are set at ~25% of physician payments. Part B premiums already doubled over the last 8 years. Now we're going to increase premiums more at a time when Social Security payments are expected to remain flat for up to 3 years? HR 3961 already passed the House to cancel next year's Part B Premium increase for those who aren't already exempt. Obama has encouraged the Senate to do the same. This despite the fact that over 2/3rds of the people who would see the increase have family incomes >$170,000. Maybe Congress will take a harder line once health reform passes and the economy improves a bit more--but I wouldn't count on it.

Posted by: bmull | November 6, 2009 7:57 PM | Report abuse

"The problem is that rather than fix the bill, Congress just passed temporary delays. Repeal would have been more honest."

Didn't you just recently have a chart showing payments to doctors in the USA compared to other nations showing USA rates at twice what other countries were paying.

Yet here you say a 21% cut to doctors payments is draconian?

Posted by: cautious | November 7, 2009 1:04 AM | Report abuse

Saying the United States must either reduce Medicare costs or go bankrupt is simplistic indeed. Some pundits and many conservatives probably would not be bothered in the least if millions of older people had to work through their seventies or go homeless to save some money. There are other alternatives, including doubling the Medicare tax, increasing taxes on the very affluent and wealthy, significantly reducing unnecessary military spending.

Posted by: Aprogressiveindependent | November 7, 2009 1:19 AM | Report abuse

Is it costs or expenditures? Get the terminology straight Ezra, before you opine on something.

Posted by: novalfter | November 9, 2009 12:04 PM | Report abuse

"... the country will go bankrupt."

Can someone please explain the mechanism by which the US government can go bankrupt? Thanks.

Posted by: ApeMan1066 | November 9, 2009 2:16 PM | Report abuse

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