New CBO Director Douglas Elmendorf's appearance before the Senate Budget Committee on the budgetary impact of health care reform was another sign of emerging points of consensus on health care reform, including the need to replace the fee-for-service payment structure with a payment system based on value.

Elmendorf made four key points:

1. Near-universal coverage could be achieved through three reforms

a. Risk-pooling

b. Subsidies for those who can't afford insurance

c. Requiring everyone to buy coverage

2. Much health spending adds little clinical value, but we must keep an eye on quality as we strive for efficiency.

3. We need incentives to provide better care rather than more care, and providers need better information to help drive high-quality care.

4. Some valuable reforms may not substantially reduce costs in a 10-year budget window, but may pay dividends in long-term savings.

The fourth point gets to the heart of financing health reform, so it is worth exploring. Elmendorf was careful to caution not to expect a "quick fix." At the same time, he provided insights into why the ultimate success of health reform might not be captured in a ten-year budget window:

• Changes can take years to phase in, so savings may materialize slowly.
• A given reform in isolation may not save money, yet a number of forces acting in concert may be the key to cost savings.
• Innovative delivery system ideas must be linked to incentives in order to achieve cost savings. For example, the medical home model should incorporate incentives to coordinate care, improve value, and control costs.

Sen. Sheldon Whitehouse (D-RI) noted the limitations of CBO health reform estimates. The agency's analysts must evaluate proposals using very specific types of evidence. Unfortunately, there is very little research available on the savings from certain reforms, and even less on savings resulting from the interactions of multiple reforms (which is where many analysts think the bulk of the savings will be found). Elmendorf agreed with Whitehouse that Congress will have to take a "leap of faith"—albeit an educated one—in tackling comprehensive reform.

Lowering costs, rather than shifting them, was the primary concern of Sen. Stabenow (D-MI). In Michigan, the public sector has been left to absorb much of the wreckage of the decline in employer-sponsored health insurance. Sen. Stabenow wants to make the system more sustainable overall to address problems like employer competitiveness rather than shift costs between the public and private sectors. .

Sen. Lamar Alexander (R-TN), the third-ranking Republican in the Senate who has joined the Budget Committee, sees health care reform in the context of entitlement reform: without first reforming our health care system, he said, controlling Medicare and Medicaid costs is impossible. Alexander said he didn't see how Congress could approach entitlement reform without first addressing the underlying flaws driving the health care crisis.

Committee chair Sen. Kent Conrad (D-ND) and Sen. Ron Wyden (D-OR) each used the hearing to reiterate their belief that health reform can be budget-neutral, ie that it is possible without new funds. While some upfront investment may be necessary to cover the nation's uninsured and establish infrastructure, we can certainly achieve savings over time by getting more value for our health care dollar.

Several of the Budget Committee members also serve on Senate Finance, where much of the health reform action will unfold, so we'll be interested in watching these big budget questions translate into legislative health care solutions.