What We'd Like to Hear in the President's Speech Tonight

1. Health reform is first and foremost about controlling costs – There are three major problems people would like to solve through health reform: cost, coverage, and quality. Unfortunately, many of the solutions are in conflict with each other. As demonstrated by the massive fiscal gap the country faces – driven primarily by projected healthcare spending – controlling costs must come first and be the centerpiece of any plan (see our previous analysis on health care cost growth here).

 
Some of the most promising measures for controlling costs include:
 
  • Increasing consumer cost-consciousness by providing patients with a greater financial stake in their health care decisions
  • Bundling payments in Medicare, or paying for multiple individual services at one time
  • Limiting less effective procedures and treatments after studying their “comparative effectiveness”
  • Eliminating (or limiting) the tax exclusion for employer-provided health insurance
  • Outsourcing some of the tough decisions through an outside MedPAC-like body, to make them easier to enact savings
 
2. Any plan needs to be deficit neutral – A new trillion dollar entitlement is hard to justify in this fiscal environment. Ideally coverage expansion would occur only once new savings were in place. If they are implemented simultaneously, the coverage component should be moderate in size. We hope the President will support this moderation.
 
Importantly, the president has committed to fully paying for any plan. We hope he will promise to veto anything that falls short of that promise. There will be pressure to use gimmicks such as timing gimmicks and exaggerated savings claims, which should be resisted.
 
3. But even deficit neutrality is not enough – Even honestly paying for any expansion of coverage does not on its own make a plan fiscally responsible. Not even close. Each offset used for health reform is an offset that then can not be dedicated to deficit reduction. Thus, we hope that tonight the President will promise to 1) include multiple measures to control costs, 2) fully pay for any new health care spending, and 3) introduce a medium-term deficit plan by his next budget, which would include specific plans to reduce the deficit in advance of when the health care savings kick in but once the economy is strong enough to sustain it. This will be harder if funding is dedicated to creating a new health care entitlement, and he will have to recognize that tradeoff to prepare the country for the challenge that lies ahead – even if health care reform is successful in slowing costs.

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