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Why the Senate bill is better than the House bill on cost control

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The Senate Finance Committee's bill, which will be quite close to the merged Senate bill, allows you to tell three credible stories on cost control that the House bill simply doesn't.

The first comes from the excise tax on high-cost health insurance plans. The idea here is simple enough: you're taxing any growth in health-care premiums that's faster than the rate of growth in GDP plus one percentage point, which is going to make people a lot less accepting of premium increases and unchecked growth. This is, in the simplest sense of the term, a cost control. In theory, it controls costs by taxing one of the drivers of cost growth into submission. It is, by far, the policy economists are most united on, and the one that works in the most straightforward and blunt way.

The second comes from the newly formed Medicare Commission, which is a lot stronger than people realize. The idea isn't simply that a panel of experts gets to dream up interesting reforms to try out in Medicare. It's that they are charged with making sure that Medicare hits certain growth targets, and their package of reforms has to achieve that goal. Those reforms are then sent to Congress, where Senate debate is limited to 30 hours, and amendments must be both budget neutral and "germane." This report, in other words, is exempt from the filibuster. So far as anything is ever easy to pass, this is easy to pass. If Congress cannot manage action even within this streamlined process, then it simply cannot cut health-care costs at all, and our federal government will go bankrupt.

The third is the delivery-system reforms. The House bill has these too, though they're a bit weaker. They key alchemy, however, is the interplay of the delivery-system reforms and the MedPAC commission. The Senate builds in a lot of pathways by which an idea that starts in Medicare through the commission and proves successful can be brought to pilot and then brought to scale across the health-care system. Medicare serves as the laboratory, but other institutions created in the bill serve as the factory.

All three of those stories make sense, and any of them, on their own, would represent the most significant effort at cost control in a generation, if not ever.

Photo credit: By Harry Hamburg/Associated Press

By Ezra Klein  |  November 16, 2009; 3:58 PM ET
Categories:  Health Reform  
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Comments

How is it possible to require future senates to limit debate to 30 hours? And if its this easy why don't we make a whole lot of other things filibuster proof?

Posted by: spotatl | November 16, 2009 4:03 PM | Report abuse

oh please. any cost control is going to be as watered down as the public option.

All Congress has succeeded in doing is wasting a full year's calendar while the problem's getting worse.

Posted by: visionbrkr | November 16, 2009 4:09 PM | Report abuse

But things would be so much better if we abolished the Senate and have a unicameral House-like legislature. Right?

Posted by: gherald | November 16, 2009 4:15 PM | Report abuse


re: interplay; I think MedPAC might best go hand in hand with some tort reform (or liability reform, or what have you) or you'll see MedPAC being stingier with the reimbursment for CAT scans, but ER's still ordering them for every adult w/stomach aches to rule out appendicitis (and the lawsuit from missing a perforated appendix), and the physician/hospital will be squeezed in the middle.

Posted by: ThomasEN | November 16, 2009 4:19 PM | Report abuse

"The first comes from the excise tax on high-cost health insurance plans. The idea here is simple enough: you're taxing any growth in health-care premiums that's faster than the rate of growth in GDP plus one percentage point, which is going to make people a lot less accepting of premium increases and unchecked growth"

The idea is simple minded and igornes the underlying problem. Premium increases reflect rising costs of *care*. Lowering premiums doesn't change the total health expediture, it just shifts more of it onto the patient. The result is that we will end up with more families who are covered but still incur medical debt.

Real _cost_ reduction would focus on the actual drivers: phamaceuticals, medical devices, providers, etc. -- all of which have been given a pass in this "reform".

And, as explained in the Congressional Research Service report linked in your navigation pane:

"...legislative proposals that limit certain tax advantages based on premium amounts rather than benefit values, for example, could have a disparate impact on those with coverage in smaller firms, in high-cost areas, and/or with enrollees who are sicker than average."

In other words, it reinforces the inequities that already plague small business and individual policy holders without doing anything about the actual cost of care.

Posted by: Athena_news | November 16, 2009 4:23 PM | Report abuse

As an example, University staff members will be hard-hit by reform legislation. First, some universities now pay 50% of health care premiums and will either have to pay 100%, with corresponding wage cuts, or pay 0%, with a penalty funded by wage cuts. Second, universities generally have numerous participants who are older and more-wanting-of-service, forcing younger employees to buy inordinately expensive policies (either from the employer or individually).

A simple, modest (10% to 20%) tax increase on employees under (for example) age 35 would be more straightforward.

Posted by: rmgregory | November 16, 2009 5:05 PM | Report abuse

We need all these 3 measures to stay as is or stronger in the final bill. Something about reducing 'waste' based on latest report of CMS will strengthen too.

Question is what is the politics of these 3 measures and other good parts of Baucus bill remaining or coming even stronger. That is where things at times do not seem that hopeful. For example, Reid adding taxes on rich, in all probability to dilute excise tax.

I just wonder are we going to get the final Senate bill and the final conference committee bill when Senate has to approve the debt limit for Fed. If these bills hit the floor at that time; pressure to be fiscally conscious will be enormous. Only then we can really throw the House bill where it belongs - dustbin.

Unless all these 3 provisions come as is (or stronger) and House garbage removed completely; we do not have hope. If Congress cannot be trusted even after that, then indeed as Ezra says, all bets are off.

I really wish Progressives, for their longer term success, stand behind this basic disciplinary approach.

And for 'Athena_news' - you are not going to solve problems of this country unless we have tax collection. Just be sane and look for all the Red ink, as far as your eye can see. Never be under the impression that USA cannot default. USA can default, Dollar can go kaput and whatever we have in this country can be lost too. As like Great Depression, there is no WWII looming to get us out of spiraling down Great Recession. There is nothing given about these things. Best is to walk back from the ‘precipice’ Congress with their profligacy have taken us to.

Posted by: umesh409 | November 16, 2009 5:31 PM | Report abuse

"And for 'Athena_news' - you are not going to solve problems of this country unless we have tax collection."

I'm not at all against additional taxes to fund universal health*care*. Personally, I would be happy with abolishing the corporate exemption for health insurance and/or making health benefits taxable with a rational individual exclusion for health premiums. I would also be in favor of a separate payroll tax to fund an all-payer system like France or Germany.

What I am against, is an ill-conceived tax on health benefits which is nothing more than a shell game. It doesn't do squat about addressing the actual cost problems and in the process, discriminates against populations that are already disadvantaged in their efforts to obtain comprehensive coverage.

Posted by: Athena_news | November 17, 2009 1:11 AM | Report abuse

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