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We Write Letters on Health Care Cost Control to Ezekiel Emmanuel...

Ezekiel is doing the Lord's work on health care reform at OMB. His judgment is good. He is worth supporting--joggling his elbow is really not helpful given that he has the point on these sets of issues.

But I feel anxious--I don't think I can quite sign on with a good conscience to the whole thing. So I am signing on with a slightly, slightly bad conscience...

Dear Mr Emmanuel:

Any chance we could get "#1 Deficit Neutrality. Fiscally responsible health reform requires budget neutrality or deficit reduction over the coming years. The Congressional Budget Office (CBO) must project that the bill be at least deficit neutral over the ten-year budget window, and deficit-reducing thereafter..." changed?

As it stands, it seems to me that this point is not true. Deficit neutrality as CBO scores it over the next ten years is not very important from a public policy standpoint. And what is important is that it be likely to actually be deficit-reducing and substantially deficit-reducing after 2030 by putting us on a sensible cost- and spending-control path--rather than that CBO score it as deficit-reducing after 2030.

And a tax on employer-sponsored health plans is only worth doing in the context of universal or near-universal coverage--in the absence of a mandate or near-equivalent, the risks of producing an adverse-selection meltdown make me nervous.

The rest is fine.

If it's too late to negotiate changes, I will, however, sign on anyway...


Brad DeLong

The context is:

Apologies for the mass email, but we are operating on an extremely tight political timeline. Some key cost control measures are under threat and might very well not be included in the Senate’s health reform bill. We are asking the country’s leading economists to sign onto a letter to Sen. Reid endorsing 4 key measures as essential to a fiscally responsible health reform bill....

Deficit neutrality. Fiscally responsible health reform requires budget neutrality or deficit reduction over the coming years. The Congressional Budget Office (CBO) must project that the bill be at least deficit neutral over the 10-year budget window, and deficit reducing thereafter. Of course, covering tens of millions of currently uninsured people will increase spending. But the draft health reform legislation contains offsetting savings sufficient to cover those costs and the seeds of further reforms that will lower the growth of spending. Deficit neutrality over the first decade means that, even during the start-up period, the legislation will not add to our deficits. In the second decade and beyond, the legislation should reduce deficits.

Excise tax on high-cost insurance plans. The Senate Finance Committee’s bill includes an excise tax on high-cost health insurance plans. Like any tax, the excise tax will raise federal revenues, but it has additional advantages that are essential. The excise tax will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount. In addition, as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase. Analysis of the Senate Finance Committee’s proposal suggests that the excise tax on high-cost insurance plans would increase workers’ take-home pay by more than $300 billion over the next decade. This provision offers the most promising approach to reducing private-sector health care costs while also giving a much needed raise to the tens of millions of Americans who receive insurance through their employers.

Medicare Commission. Rising Medicare expenditures pose one of the most difficult fiscal challenges facing the federal government. Medicare is technically complex and the benefits it underwrites are of critical importance to tens of millions of elderly and disabled Americans. We believe that a commission of technical experts should be empowered to suggest changes in Medicare to improve the quality and value of services. In particular, such a commission should be charged with developing and suggesting to Congress plans to extend the solvency of the Medicare program and improve the quality of care delivered to Medicare beneficiaries. Creating such a commission will make sure that reforming the health care system does not end with this legislation, but continues in the future decades with new efforts to improve quality and contain costs.

Delivery system reforms. Successful reform will improve the care that individual patients receive by rewarding health care professionals for providing better care, not just more care. Studies have shown that hundreds of billions of dollars are spent on care that does nothing to improve health outcomes. This is largely a consequence of the distorted incentives associated with paying for volume rather than quality. Health care reform must take steps to change the way providers care for patients, to reward care that is better coordinated and meets the needs of each patient. In particular, the legislation should include additional funding for research into what tests and treatments work and which ones do not. It must also provide incentives for physicians and hospitals to focus on quality, such as bundled payments and accountable care organizations, as well as penalties for unnecessary re-admissions and health-facility acquired infections. Aggressive pilot projects should be rapidly introduced and evaluated, with the best strategies adopted quickly, and throughout the health care system...