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HEALTH REFORM: Take a Deep Breath and Put It In Perspective

We must admit it's been a tough week for health reform.  In some quarters, people have their own motives for throwing cold water on dreams of reform. Others were legitimately confused and disappointed about incomplete and premature CBO "scores" of bills. The estimated price tags may not have been news to those of us who happen to be health economists, but they did seem to create "sticker shock" for some on Capitol Hill.

Let's all take a deep breath (and a weekend off). And let's put some things in perspective.

I'll get to the bigger picture on the Hill in a second, but let us first look at the numbers—and their context.

Health reform worth the name, wherein we cover everyone and realign incentives to make the delivery system better and sustainable, was always going to cost roughly $1.5 trillion over 10 years. Remember that's a 10 year number.  For one year, it's about $150 billion. Our process for estimating 10-year costs of such legislation is designed to cause sticker shock to make domestic spending difficult.

We're also considering health care in an extraordinary political and economic context filled with other big ticket items.  The stimulus package was $800 billion (most will be spent in two years, not 10). TARP was $400 billion. We're barraged by news about the projected $1.8 trillion federal deficit. We're losing sight that the great bulk of  this spending is because we are trying to save capitalism and our standard of living.  It's not an overstatement to say that in our economic crisis we faced (and still face) an existential threat to our way of life. By the way, during World War II, the deficit reached 25 percent of  GDP, but we managed to spend the money, win a war, keep our schools and hospitals open, and go on to an era of greater prosperity.

Today we spend 16 percent of GDP on health care. At least 16 percent of our people are uninsured (probably more because of the recession).  Covering the uninsured and investing in essential delivery reforms will cost one percent of GDP (about $150 billion). But the Council of Economic Advisers estimated that slowing costs would raise GDP by 2 percent by 2020. We, the Health CEOs for Health Reform, and many others think that slowing costs while enhancing quality is both possible and necessary.   

What do all these numbers mean? That we can absorb the higher cost of coverage in a growing economy if we get incentives and cost containment right.  The CEA also estimates that extending health insurance to the uninsured would increase net economic well-being by roughly $100 billion per year, or 2/3 of a percent of GDP.  We can afford this. Don't let deficit hawks convince you otherwise.

A few other things to keep in mind this week and in the hard weeks to come:

The leaders of the Senate Finance Committee are committed to bipartisan legislation that covers all and is financed sustainably.  For all the reasons we have cited many times before, bipartisan reform is preferable. This does NOT mean we accept whatever can earn consensus. Settling for covering some but not all, or for addressing costs first and coverage later, or for covering all but doing nothing about costs, is not acceptable.  Bipartisan is when both parties' values are reflected in the bill.  For Democrats this means covering all, for Republicans it means preserving choice and market incentives. For leaders in both parties (and President Obama) it means fiscal discipline or PAYGO.

At this critical juncture, a short-term delay was the smartest move chairman Baucus could make.  Bipartisan in any environment is hard, in this toxic hyperpartisan environment it is really hard.  Delay means serious people are willing to take flak and participate in painstaking negotiations to hammer out bipartisan agreement, or at least give it an all—out effort.  We wish them Godspeed.  

The Congressional Budget Office (CBO) has yet to score actual health reform legislation.  To be clear, the CBO preliminary estimates for the Health, Education, Labor, and Pensions (HELP) Committee were based on incomplete legislation that did not include many important cost-saving reforms and coverage provisions. The Senate Finance estimates were designed to give committee members an idea of where they stood in the financing process. The specifics of the legislation are not yet decided. 

The House is poised for action; by all accounts, the major committee chairs are working together well.  We focus more on the Senate since that's where bipartisan activity is easier to generate, but the House has many knowledgeable and committed members and staff who have been working extremely hard. They released their draft bill this afternoon.

The cost of inaction is far higher than the cost of reform.  Health reform will require an upfront investment and shared responsibility. Rising health care costs threaten the stability of families, employers, and governments.  Thousands of Americans die every year simply because they do not have access to the care that insurance would have provided.  Where will we be if we do not act? I submit to you our choices are only going to get harder down the road. Failure is not an option.

 We have learned from history.  The Obama Administration is getting more involved but Congress owns this legislation and that is good.  Compare to 1993-94, they are working together amazingly effectively.  The president has shown exemplary leadership, but Congress is leading specific legislative negotiations. Compared to 1993-94, the committees of jurisdiction feel invested in this process and Democratic leaders are working with the Administration, not against it. This, my friends, is progress.

 Let us not forget that thus far the health reform process has been productive and relatively civilized...at least by Washington standards. It's one of the most challenging domestic issues Congress will ever face. There will be good days and bad days and maybe some really bad days. But a lot of serious leaders have made a commitment to get this done this year, and we shall continue to try to help.