April 17, 2014

Don't make health care reform end game a dead end for cost control

The end game for health care reform may finally have arrived. Some in Congress are suggesting that a decision should be made by the Easter break, which begins on March 26. Time is running short.

If we learned anything from last week’s health care summit, it is that the final end game negotiations will not take place between Democrats and Republicans but among various factions of Democrats.

Republicans now sense big gains coming in the November elections and thus have no motivation to move in Obama’s direction. Any attempt to draw them into a negotiation –- including the “start from scratch” option Republicans themselves are pushing -- will likely fail.

Democrats are split, with some fearing for their jobs if they support an unpopular bill while others believe that passing even a flawed bill will leave them better off in November.

One casualty of the situation may be cost containment. Democrats are mostly united around coverage expansion. That’s the easy part. Their biggest difference is on the more difficult question of aggressive cost containment. The two most promising cost-containment strategies still on the table are the tax on high-cost health care plans and the Independent Payment Advisory Board (IPAB). Both were adopted by the Senate but not by the House, where they remain deeply unpopular.

If the price for securing 218 votes in the House is eliminating or neutering these provisions, the result will be a bill that expands coverage with very little prospect of controlling costs.

Unfortunately, things seem to be headed in that direction. President Obama has already given ground on the high-cost tax. In his latest summary of proposals to bridge the gap between House and Senate Democrats, he proposes that implementation of the tax be delayed until 2018. However, while some phase-in period may be appropriate, the same forces fighting the tax now will not simply melt away over the next eight years. The projected cost savings from this provision are thus looking increasingly speculative.

The assumed cost savings from IPAB may also be in danger. The President proposed this idea last summer as an ongoing method of reviewing Medicare expenditures and proposing ways to keep costs under control. While it has been watered down, the President remains committed to the concept. However, many influential House members view it as an intrusion on their ability to set Medicare payment rates and have opposed it from the outset.

With every possible vote needed to secure passage of a revised health care bill in the House, some IPAB opponents are suggesting that its elimination could be a condition of their support. That would remove the final backstop to runaway cost growth.

The Concord Coalition has warned from the beginning that it would be far easier to expand coverage than to control costs. It is up to the President and others who assert that coverage expansion can be implemented in a fiscally responsible way to ensure that the end game for reform does not become a dead end for cost control. The next few weeks will tell.