Former Health and Human Services Sec. Mike Leavitt last Tuesday told National Journal that he advised the nation’s governors at their Washington meeting last week to look to Argentina as an example of how increased spending during a recession could be hazardous. Click “read more” to watch video of Leavitt’s remarks, and look for the entire discussion and video highlights Friday.

In a week chock full of health care and budget news, some of the slower moving stories may have been missed. An opening speaker at President Obama’s summit on fiscal responsibility, Bob Greenstein, Executive Director of the Center on Budget and Policy Priorities, laid out a critically important framework for health care reform by making two key points:

"First, if we want to slow the rate of growth in healthcare costs system wide, then Medicare needs to help lead that effort. To institute payment and delivery system reforms that the private sector then picks up. And second, because healthcare costs are rising mostly due to advances in medical technology, many of which do improve health and prolong life, we almost certainly won't be able to slow health care cost growth so much that it rises no faster than the economy, and that means we also need to make other significant changes in budget and tax policy to avoid a debt explosion."

In other words, government is part of the problem, and reform should not threaten private sector innovation.

I can’t imagine a clearer invitation to bipartisan policy making. For decades, prices controls and government-set spending limits have been the stock answer to the cost problem for many on the political left. Conservatives rejected that view. The ensuing gridlock help bring down reform in 1994 and has hampered progress ever since.

President Obama’s comments to the Joint Session of Congress on Tuesday night went over well. If you noticed, both sides of the aisle stood and applauded his call for immediate action to reform the nation’s health care system. That’s a good sign there is a political will to act immediately.

The President’s budget calls for a 10-year program that creates a $634 billion “reserve fund” designed to modernize our health care system. I’ve long said we can’t let cost be a barrier to reform, but rather it should be a driver to create a more efficient health care system that focuses on quality outcomes for patients.

President Obama's proposals to look at prevention; reduce hospital readmissions; improve patient safety, quality of care and program integrity; look at private sector ideas to ensure appropriate use of technologies like imaging; and encourage implementation and use of health information technology make a lot of sense. By making healthy patients the goal of any reform efforts, we create less of a financial burden on our health care system that is already 17-percent of the nation’s GDP.

We’re getting this commitment to reform on top of the investment the President made to update our nation’s health information technology when he signed into law the stimulus package earlier this month. The use of modern technology will make the delivery of health care more efficient, and ultimately, more affordable. For instance, we as physicians will be able to begin using the most up-to-date technology to treat our patients. Electronic prescriptions will greatly reduce the 1.5 million annual medical errors, not to mention makes our health system more efficient. It will also save money. According to a Harvard Medical School Study, for every 100,000 prescriptions that are filled electronically, $845,000 can be saved.

This all boils down to one word: quality.

President Obama said it himself when he told Congress that health care reform should be a “down-payment on the principle that we must have quality, affordable health care for every American.”

Through the ACC’s Quality First campaign, we’ve been advocating that physicians can “transform health care from the inside out.” Ideally, as patient partners first, physicians should focus on improving care and empowering our patients.

We stand ready to help Mr. President!

We can no longer wait to reform our healthcare system. Thoughtful efforts to enact comprehensive healthcare reform are already underway and key stakeholders including the Blue Cross and Blue Shield Association and representatives of physician, hospital, business, consumer and other groups have been meeting regularly for the last several months.

These discussions, organized by Sen. Kennedy’s office and through the Health Reform Dialogue, are an important step toward building the consensus that’s needed to address many of the challenges in improving the healthcare system and avoiding obstacles to past reform efforts.

While setting the stage for health reform legislation, these discussions also helped create support for expanding SCHIP, expanded COBRA benefits, and critical investments in health information technology that were included in the economic recovery bill.

It will take the consistent efforts of many, including the Administration, Congress and key stakeholders, to identify solutions that will rein-in costs, improve healthcare quality and expand health insurance coverage to more people.

The problems in health care do not rise to the level of emergency that would justify further mortgaging our children’s future with yet more deficit spending. Good reform proposals exist that would cover all Americans without increasing what we spend on health care. In the meantime, there is plenty of meaningful cost containment we can pursued now without another orgy of deficit spending.

We agree that there is an urgent need for action on health system reform. There is broad recognition that we cannot let this opportunity slip by. We applaud President Obama for heralding his commitment to making health system reform a reality this year.

I was honored to be included in Monday’s White House economic summit, and the AMA pledges to work constructively with President Obama and Congress to improve the health care system for all Americans. Health care reform can play a role in jumpstarting our economy by making private health care affordable and providing coverage to all, regardless of employment.

I released the following statement following the President’s Address on Tuesday:

President Obama struck a lot of right notes tonight. He tackled the issues that weigh on our country and threaten the livelihoods of millions of American families. His aggressive stance on economic reforms, his focus on energy independence and education, and particularly his insistence on health care reform this year are all reasons that Americans can feel more hopeful tonight.

As Chairman of the Finance Committee, I’ve been working closely together with President Obama and with all of my colleagues to make America’s economy strong again, and now it’s time for all of us to take the next important step. I was pleased to hear the President acknowledge that a comprehensive overhaul of our health care system must be part and parcel of America’s economic recovery, and pleased to hear him promise a real investment toward that goal. Left unchecked, growing health care costs will undo any economic stability that we are able to regain in the short term. That’s why the President is right to recognize that we must make health care accessible and affordable for every American, and find smart ways to keep costs in check while ensuring the highest quality care. That’s why I look forward to the significant commitment to real health care reform that we will see in the President’s budget this week.

The President’s clear commitment to health care is one of the reasons I’ve said that the stars are aligned for health care reform. I will continue to work closely with Senator Kennedy, Senator Grassley, and others to move comprehensive reform legislation forward this year. Working together, we can remake America’s health system, rebuild America’s economy, and restore Americans’ confidence in our country’s future.

The Pharmaceutical Research and Manufacturers of America (PhRMA) applauds President Obama for making clear that comprehensive health care reform is a top priority for his administration. We must not miss this extraordinary opportunity in our history to build on the strengths of our health care system and address its weaknesses.

Reforming our system will provide high-quality insurance coverage to millions of Americans and help strengthen our struggling national economy. In addition, the President's call for a new focus on disease prevention will transform our current 'sick-care system' into a modern 21st Century health care system that does a better job of stopping disease before it starts.

PhRMA also firmly supports President Obama's commitment to seeking a 'cure for cancer in our time.' And we are proud of the crucial role we play in our nation's ongoing War on Cancer. America's pharmaceutical research and biotechnology companies -- the world's most innovative new medicine developers -- are today developing a record 750 medications and vaccines, including 122 for leukemia, 110 for lung cancer, 90 for breast cancer, 88 for prostate cancer and 64 for colorectal cancer. Clearly, progress has been made -- cancer increasingly can be managed and even defeated.

The President's call for disease prevention is crucial because too often, we intervene after a disease has already done most of its damage. We must focus reform efforts on disease prevention -- and management -- to improve quality of care for patients and help lower America's health care costs. Providing health insurance coverage is important because millions of Americans lack insurance or have excessive co-pays that cause them to avoid needed medical treatments. In the end, patients suffer, as do job stability and economic growth.

Pharmaceutical research and biotechnology companies have partnered with a diverse group that represents both business and organized labor to help promote health reform efforts. And last year, PhRMA unveiled its own health care reform platform -- one that recommends not only disease prevention and management, but also private health insurance expansions and leveraging such public health insurance programs as the recently reauthorized and improved State Children's Health Insurance Program (SCHIP).

Now, PhRMA is committed to working with President Obama and lawmakers from both parties in Congress as we seek to expand health insurance coverage to all Americans and strengthen our economy. We will also continue to support policies that encourage and strengthen the cutting-edge pharmaceutical innovation of our companies, while improving patient access to medicines.

As President Obama made clear last night, he understands that health care reform is central to economic recovery, and I applaud him for making health care reform a legislative centerpiece of 2009. The tone last night was one of hope, and this year our nation has the opportunity for all of us to come together to ensure our children and families are given the chance to lead healthy lives. Action must be taken now to give every person in America the option of a public health insurance plan that will guarantee that everyone—including every child—can get quality, affordable health coverage.

Although, as the President said, the path will not be easy or quick, reforming our health care system this year will result in a healthier, more competitive workforce for our nation and is therefore one of the most fiscally responsible actions we can take. I sincerely applaud President Obama for committing to address our broken health care system this year.

While filling the position of Health and Human Services Secretary is important for leading the health care reform debate in 2009, the absence of an HHS Secretary should not stop the President and Congress from moving forward now. Real health care reform will not happen with one person, but with the collective efforts of Congress, the President and the American people, who will hold these elected officials accountable if they do not move forward. As President Obama so rightly said, "health care reform cannot wait, it must not wait, and it will not wait another year."

President Obama is right: we cannot wait any longer to fix the problems we face in health - they are beyond critical. We waste billions of dollars every day and people die unnecessarily every day at the hands of a broken, fragmented healthcare system.

Where there are challenges, there are also opportunities, and we at the Center for Health Transformation believe that the most important thing we must keep in mind is to ensure that health is the driving focus of the health reform debate. By reforming the delivery system so that every American gets the best health at the lowest cost, we can expand insurance to each and every citizen.

There are four specific priorities. First, we must encourage the adoption of best practices that work. We need to surface what is actually working today to save lives and save money and then design public policy to encourage their widespread adoption. The employer wellness programs that help improve their employees’ health while keeping cost trends close to zero; the hospitals that cut preventable medication errors by 92%. These kinds of real-world solutions should drive policy—not the other way around.

Second, we must focus on health information technology. Modernizing both the clinical and administrative sides of healthcare must be at the top of any agenda to fix our health system. President Obama and the Congress made significant progress by including substantial incentives for providers to adopt and use modern tools in the course of treatment. Putting technology into the hands of providers is one important step, and now we must ensure that there is an infrastructure to truly interconnect everyone in our system.

Third, we must root out and prevent healthcare fraud. The current level of fraud is astonishing – perhaps more than $200 billion a year. This robs honest businesses, steals from government, and compromises the care of every American. If we implement the right electronic systems to monitor claims and procurement in virtually real time, much like the credit card industry does, the savings could more than pay for the investment in health IT, expanding insurance coverage and put Medicare and Medicaid on sound financial footing. Remember, you can never catch a criminal with paper.

Fourth, we must permanently eliminate the broken models of government budgeting and scoring. We need innovative and transparent models, such as new science and technology based investment budgets that can be scored over a generation of returns.

There is a time for Republicans and Democrats to stand their ground when they must; but it is equally as important to have the courage to collaborate when they should. Health reform is one of those moments. With these priorities, the president will find eager and energetic Republican partners if he truly seeks them.

President Obama, in his address to Congress last night, said that health reform should no longer be on hold, and that he will begin discussions next week with interest groups, and both Democrats and Republicans. How far can he get without an HHS secretary, and how should he balance his efforts with the efforts already underway in Congress?

I participated in President Obama’s summit on fiscal responsibility on Monday and found many of my colleagues agree that health care reform is the path to fiscal health in this country. In the last eight years, we’ve seen health spending grow from 12 percent to 17 percent of the U.S. economy, but quality needs to be improved, with Americans receiving recommended care only half of the time. In the next ten years, the cost of providing health care for older and vulnerable Americans through Medicare and Medicaid is projected to increase by 114 percent. Health care reform is not only fiscally wise, it is imperative. America needs to get health care costs under control now.

Last November, I laid out a plan for health care reform that will help to get those costs in check. Addressing cost, quality, and health coverage for the uninsured and underinsured will restore the health of this country’s people and its pocketbook. My plan invests in a high-quality, efficient health care system for all Americans that will provide far greater value for our health care dollars and contain costs in the long run.

The keys to containing costs lie in the ways Americans access, receive, and pay for health care. My plan makes affordable health care accessible to all Americans, so they are able to seek preventive treatment and catch health problems before they become significant and costly. That will keep people healthy as they age into Medicare, helping to lower costs in that program. Making sure patients receive care more efficiently will also control costs. My plan strengthens the role of primary care doctors to improve coordination of care and reduce duplicate work among all of a patient’s providers. It also invests in health care technology and research that can keep doctors on the cutting edge of medicine and help deliver the right care at the right time. And my plan reforms the way Medicare and Medicaid pay for care. Today, the government pays doctors based on the volume of care provided – regardless of whether it works, but under my plan, payments would be made based on the quality of care delivered and outcomes, refocusing the system on providing the most effective care possible.

Reforming America’s broken health care system is the most fiscally responsible action Congress can take this year and I’m confident we will. I intend to work with my colleagues in Congress and members of the health care community to develop comprehensive, consensus legislation and I look forward to being back at the White House later on this year to watch President Obama sign that bill.

I attended the Summit and the health care breakout session. The good news is that the conversation was cordial and positive, and could presage a serious conversation about what to do.

The bad news is that nobody was willing to talk about tough choices. But unless hard choices are made, it’s impossible to rein in the tsunami of Medicare and other health spending that makes the long-term fiscal picture so dire.

The President should commit to getting out of Washington and holding a bipartisan Fiscal Wake-Up Tour, modeled on the very successful Tour that Heritage, Brookings and the Concord Coalition have been holding across the country. Americans are willing to consider hard choices if the facts and options and presented honestly and in a bipartisan way. If he does not do that the summit will have been nothing more than a photo-op.

As the President and his top advisors made clear at Monday's Fiscal Responsibility Summit, only comprehensive and far-reaching health reform will spark economic recovery, put the nation back on a path to fiscal sustainability, and ensure that all Americans are able to get the care they need and deserve. The single most important and responsible step we can take now to secure the long-term fiscal solvency of our nation and the feasibility of our entitlement programs is to embark on an ambitious program to bend the curve in health care costs, enhance the quality and efficiency of care, and improve access to affordable health coverage.

In opening the summit, Robert Greenstein of the Center on Budget and Policy Priorities and Peter Orszag of the Office of Management and Budget correctly noted that health reform must be far-reaching—reform in the public sector cannot be successful without change in the private sector as well. For example, simply enacting cost control measures in Medicare will encourage providers to stop participating in the program, potentially affecting both access and quality for beneficiaries.

Another important theme emerging from the summit is that health reform must be multifaceted. Methods for reducing spending growth need to move beyond strategies such as higher cost sharing, higher premiums, and reducing benefits, as simply shifting more risks and costs onto patients is ultimately unsustainable. Likewise, enacting cost control measures without extending affordable health coverage to all Americans will encourage providers to reduce charity care as they attempt to maintain fiscal stability. We cannot in good conscience offer policies to reduce spending growth while continuing to ignore the lives that could be saved and the disabilities that could be averted if affordable access to health care was available to all.

To extend cost saving and coverage, we should offer all Americans a national health insurance exchange with a public plan that uses innovative payment methods that reward results and ensures accountability for both outcomes and resource use.

Finally, it is crucial that Medicare continue to be a leader in payment and delivery reform. Medicare led the industry in developing new methods of hospital and physician payment in the 1980s and 1990s; these innovations are now widely used by private insurers. Today, Medicare must rapidly develop, test, and disseminate new forms of bundled payment to further stimulate changes in the health care delivery system. In a report released last week, the Commonwealth Fund Commission on a High Performance Health System estimated that coverage, payment, and delivery system reforms have the potential to slow the growth of health care spending by an estimated $3 trillion through 2020. Although politically challenging, a clear and fiscally solvent path to a high performance health system is emerging.

There is no greater threat to our long-run fiscal stability than doing nothing about our struggling health system. Former CBO and current OMB Director, Peter Orszag, has long said that we do not have an “entitlement” problem, but rather we have a health care cost growth problem. I could not agree more. (And I object to the use of the word “entitlement,” but that’s a different argument for another day).

The incentives and dynamics associated with health care cost growth are entrenched in our system. These inefficiencies will be defended intensely by powerful interests who stand to lose from value-based, transparent competition. Yet, the truth is we cannot afford to let them stand in the way of real progress anymore.

The single most important thing we can do to improve our long-run fiscal future is reduce the rate of system-wide health care cost growth per capita because Medicare cost growth and system-wide cost growth are linked. This makes perfect sense. Medicare buys the single largest share of services from our health care system as a whole.

What reform strategies should we pursue? Are they the same strategies the White House and Congressional leaders are talking about?

The answer to the second question is yes, so let’s focus on the first.

Serious health care cost growth reduction within 10 years is the key to fiscal sustainability (I can give you plenty of algebra offline). Most analysts agree that payment reforms, more specifically realigned incentives among providers, patients, and payers (including taxpayers), are the key to sustainable cost growth reduction. The fundamental question for the reform debate in 2009 is can we get from payment reform to realigned incentives to cost growth reduction to fiscal sustainability without serious coverage expansion?

The answer to this question is a resounding no. In many cases the hospital sector (the biggest single source of expenditures in our health system) views coverage expansion as a necessary complement to payment reform. Without a commitment to also fund coverage for the uninsured, hospitals will lobby actively to derail payment reform. Those advocates who would consider serious cost control initiatives before coverage expansion are failing to recognize the intricacies of Washington. Whereas if you expand coverage while transitioning to more efficient payment structures, you are in essence granting hospitals some time to adjust to new treatment modalities and forms of payment. Over time, these payment reforms and increased efficiencies will advance our delivery system, improve the health of our population, and make health care more affordable for taxpayers and governments alike.

As we move forward, Medicare has a huge role to play. Medicare must both learn the best ways to implement payment reforms and teach others the pathway to success. Through more efficient, quality-based payment strategies, we can sustain our Medicare program indefinitely and avoid draconian cuts to Medicare benefits down the road. Yesterday’s summit proves that Peter Orszag and the President understand this. The real question is: will 60 U.S. senators eventually agree? Stay tuned.

We simply can’t afford not to address health care in 2009; investing in our children and families will yield substantial dividends in the future. Reforming our health care system this year to ensure that everyone—especially all children and pregnant women—have access to comprehensive, affordable, quality health coverage will result in a healthier, more competitive workforce for our nation. I find it incredible that just a few months ago, President Bush and Congress sent $700 billion to bail out banks with little hesitation, and now some are questioning whether or not the wealthiest nation on earth can afford to keep its people healthy.

Health care now accounts for a greater portion of the American economy than housing or food. The health insurance market has left millions of people in America uninsured and without access to affordable coverage. This year, the average group coverage premium for a family is $12,680— almost 90 percent of the annual earnings of a minimum wage worker who works full-time, year-round. Since 2001, family premiums have increased almost 80 percent. That’s more than three times as fast as wages and nearly four times the rate of inflation.

Giving every person in America the option of a public health insurance plan will ensure that everyone—including every child—can get quality, affordable health coverage. America can and must take action now. It’s one of the most fiscally responsible things we can do.

Seeing as how the Social Security Task Force portion of President Obama's fiscal responsibility summit has been scrapped, it's safe to assume the President isn't going to believe the long-time conservative canard that Social Security is in "crisis," as perpetuated here by Mr. Goodman and Mr. Weems.

Instead, Obama understands fiscal responsibility means health care reform.

As pointed out by others here and elsewhere, Medicare and Medicaid are in fact set to rise in cost dramatically, and this is indeed a problem. And it's not just Medicare and Medicaid. Our entire health care system is set to rise in cost, a cost that's projected to reach almost 20% of GDP by 2017 if current trends continue. So it's not just the federal government that has a problem. With one out of every five dollars in our economy writ large projected to be spent on health care, every person in this country has a problem.

The cost of health care must be brought under control to claim fiscal responsibility, and not just the cost of Medicare and Medicaid but the cost of health care for everyone.

So, how do we control costs?

We control costs first and foremost by getting everyone in America affordable coverage with benefits that meet their needs. We do this by giving people a choice to keep their private health insurance plan or the option to buy into a public health insurance plan, filling in the gaps in private insurance so everyone can have coverage. When people are covered by insurance, they get the care they need, not just catastrophic care at the emergency room when their health problems become dire (which is much more expensive). This prevention lowers cost and improves health outcomes.

As this chart from the Center for Economic and Policy Research shows, if we can get our health care costs in line with other countries (the "Low Health Care Costs line) as opposed to our projected exponential growth, our budget deficit will stabilize.

Fiscal responsibility therefore means controlling all health care costs, not just Medicare and Medicaid. President Obama understands this problem, and though it may require an upfront federal investment, in the long run it's the only way to use taxpayer money wisely.

Our health care system and the consumers who depend on it are facing an unprecedented crisis of rising health care costs that drive up the cost of health insurance. This unsustainable trend demands that policy makers find real solutions that will help Americans have access to high quality affordable health care and health insurance to finance that care.

Some of the public policy components that NAHU feels would help ensure lower health care costs, improve quality, create greater efficiency and provide better access to care include:

• Medical cost and quality transparency. Medical care is perhaps the only service American consumers regularly purchase without having any upfront knowledge about the quality or price. Transparency in this area will result in better care, which results in better outcomes and ultimately lower cost.
• Better information on health care options. More information about types of available care and the effectiveness of various treatments will ensure that patients receive the right care at the right time in the right setting, again, assuring better and more consistent outcomes.
• Promotion of Wellness and Prevention. Strong incentives are needed to provide real motivation for healthy behaviors. Changing behaviors can by some estimates impact 50% of the healthcare we receive, and can prevent or lessen the progression of many diseases.
• Medical Liability Reforms. Sensible changes to our current medical liability laws will ensure that medical malpractice liability laws provide adequate compensation for those who are truly injured while reducing frivolous lawsuits and extraordinary damage awards.

Other policy ideas NAHU is monitoring closely regarding cost containment include:

• Innovative programs to better manage high-dollar claims
• Interoperable electronic medical records to reduce errors, improve the quality of care, and reduce duplicative care.
• Pay for performance initiatives to encourage providers to practice evidence-based medicine and to reduce the number of medical errors.
• Creative health plan options that provide incentives to reduce over-utilization of health care services.

Constraining skyrocketing medical costs is the most critical aspect of health care reform. Rising health care costs are the key driver in rising health insurance premiums. Too many Americans are being priced out of coverage as a result of these increases and it should be our top priority to ensure that Americans can afford the health insurance that is so essential in their ability to access health care.

Think of our health care system as suffering from obesity. The best cure for obesity is a combination of exercise and diet; one without the other is inadequate.

The exercises needed for health reform include all of the improved efficiencies that we hope to gain through new information systems and organizational methods: electronic health records, comparative effectiveness studies, medical homes, and so on. Like gym memberships, these efforts often start off by initially costing money. These are the types of reform to which government officials have given much attention lately.

For the most part, however, all government health programs, but particularly Medicare and the tax subsidies, are open-ended. They are not confronted by any real diet. Again, exercise doesn’t help much if it’s offset by eating more. Reforms aimed at putting growth on a more efficient path inevitably mean putting government health programs on a reasonable diet—into a budget. Without true limits on what can be spent, providers, insurers and intermediaries have limited incentives to support various improvements to be efficient, whatever their source.

Sure, we can sometimes use piecemeal information and engage in particular efforts to contain health care costs. But the incentives to do so are weak and new inefficiencies often spring up elsewhere. That is, providers and intermediaries can simply jack up other prices or make more diagnoses or perform a host of other interventions to offset the savings made possible by select efficiencies.

A major complication for President Obama and the Congress is that not since about 1997 has any major effort by the federal government involved asking people to diet—that is, to pay for something, either through a slowdown in spending growth or tax increases. It’s been a long time since Congress has been willing, or shall we say politically courageous enough, to tackle the dietary side of any of its major problems—tax, Social Security, or health.

The summit on fiscal responsibility, hopefully, represents a commitment to combining dietary restrictions with new exercise routines. Real health reform will be among the toughest of the issues they face, in part because many on both sides of the aisle oppose budgetary limitations unless they get their idealized reforms. Yet I remain cautiously optimistic about the commitments implied by holding this type of summit: people who make real commitments are often held accountable to fulfill them.

We can begin by recognizing the problem – which too many Democrats (and even some health economists) have been denying for way too long. This may require an “intervention,” and maybe even 12 step rehab. But there is no way we are going to get agreement on a solution, until we get agreement on the problem.

According to the Trustees, the unfunded liability in Social Security and Medicare is more than $100 trillion dollars (that’s trillion, not billion), or about 6 ½ time the size of the entire US economy. That’s the size of our commitments over and above expected premiums and dedicated taxes, measured in current dollars. [link]

Of this amount, Medicare accounts for about $85 trillion. Note that Medicaid is almost as large as Medicare and two thirds of that is a federal obligation. Furthermore, our options are very limited. Even if we decided to close down Social Security and Medicare tomorrow, collecting no more payroll taxes and allowing no more benefit accruals, we still owe about $52 trillion in benefits that have already been earned. [link]

If we stay on the current course, these programs will crowd out every other federal program over time. Social Security and Medicare already have a combined cash flow deficit, which is being covered with general income tax dollars. By 2012, they will require one in every ten income tax dollars. By 2020, one in four. By 2030, one in two. [link]

So step one of our twelve step recovery requires us to ignore Paul Krugman and the editorial page editors of the New York Times and repeat in unison: we have a very, very serious problem.

Step two is to get a copy of my Medicare reform plan and read it. [link]

In 1981 that Senator William Proxmire took to the floor of the Senate to filibuster an increase in the US debt limit. Senator Proxmire spoke for 16 hours and 12 minutes about the economic perils of authorizing a total debt of $1 trillion. In the intervening 28 years, the national debt has grown to ten times that amount, ending fiscal year 2008 at just over $10 trillion.

Now in 2009, total annual deficits exceed the $1 trillion mark. It is in this context that President Obama’s fiscal summit must be viewed. The President should be commended for undertaking the summit, and let us all start with the hope that it is a sincere beginning to bring about a sincere end. I believe that a sincere end will have the elements of reforming taxes, reforming entitlements, and reforming the budget process.

I am not an expert on taxes, but I do know the tax code is too complex and incomprehensible to the average citizen, and apparently to a number of political appointees. The tax code has become the domain of the special interest—the playground of lobbyists. Regardless of one’s views of tax progressivity, the code should be simplified and the special interest wrung from it.

The “silver tsunami” of the baby boom will soon crest on our fiscal shores. The largest three programs, Medicare, Medicaid, and Social Security could quickly be swamped by this wave. Not to trivialize it, but the Social Security problem is essentially a “math problem” of finding an actuarially (and politically) stable point for the FICA tax, retirement age, and benefit. The health programs face an entirely different calculus of cost, quality, volume, and technology in a highly fractured government-private environment. Given the fiscal environment, it seems unlikely that anyone will propose that we can spend our way out of the problem; instead this is a classic choice problem of market reliance versus government intrusion. If the financial market bailout is any predictor, we can expect a greater reliance on government in health, and not just Medicare and Medicaid. It will come in the form of government price-setting, government driven coverage decisions and finer (and less comprehensible) reimbursement rules. This is the path to rationing of care, and, in my view, the wrong path. With the current fiscal and political state of affairs, and the President’s goal of halving the deficit, it seems the most likely path.

Finally, budget reform. Our current budget system does not have national deficit (or surplus) goals, fails to make comprehensive trade-offs between priorities, and makes no distinctions between expenditures and investments. On Thursday, the President will lay out a pathway to halving the deficit. The Congress should adopt that path, or a more aggressive target, and put it in statute along with a mechanism which will ensure the deficit does not exceed the President’s goals in any year. We should re-examine the budgetary fictions of discretionary and automatic spending, along with the Byzantine congressional lines of jurisdiction which work contrary to fiscal responsibility. It has been discussed many times, but the US does not have a capital budget. Building a bridge or buying a weapons system is treated exactly the same way as food stamps—as an expenditure. They are very different things, and our budgetary system should treat them differently. Finally, we should properly account for our long-term liabilities. Our social welfare programs have vast unfunded liabilities which need to be represented in our budget system, and budget decisions made in the context of those liabilities.

The President has taken a good first step by convening the summit and doing so in a spirit of bi-partisanship. However, if it ends without an agenda for action and a will to undertake it, the summit will have the same fiscal effect that Senator Proxmire’s filibuster had nearly 28 years ago.

Health care reform is an opportunity to improve fiscal discipline. In fact, it is a necessity. Without reform that includes cost restraint, the prospects for covering the uninsured will diminish, and the long-term fiscal health of the nation will be at risk.

Fiscal discipline is inextricably linked to health care. The public foots the bill for about 56 percent of the nation’s health care spending. The biggest spenders, Medicare and Medicaid will push up the government’s share even further as the baby boomers retire and as medical inflation continues to exceed general inflation. Another big spender, the tax break for job-based coverage also erodes government funding for other public priorities as health care costs rise.

Despite the impact of health care on the federal budget, Congress has no way to ensure accountability for health care spending. Health care fiscal policy runs on autopilot until Congress decides to take action. Legislators’ toolbox for fixing problems is limited mostly to setting prices for providers’ medical claims.

As part of health care reform, Congress should create a federal health care budget for public spending to ensure that health care reform can pay for itself and to help control long-term entitlement costs. The Progressive Policy Institute recommends the following steps for a health care budget process:

1.) Set a baseline for federal health spending. This would include Medicare, Medicaid, and the federal government's tax subsidy to employers who provide job-based health insurance, which is not currently listed in the federal budget.

2.) Set targets for projected spending based on efficient health-care delivery. For example, health-care spending in areas such as Salt Lake City and Rochester, Minn with large integrated-health operations is dramatically less than the national average, with no adverse effect on the health of either community. The budgetary goal should be that every community should have health care that is as good and economical as that provided by the Mayo Clinic.

3.) Use a regional strategy to ensure accountability for achieving budget goals. A new governance structure modeled after the Federal Reserve and its regional banks would break the country into regions and work with state and local officials, employers, hospitals, and insurers to achieve regional health-spending targets. This new entity would share the savings in the federal health budget with states in the same way that Medicare has recently struck gain-sharing agreements with doctors and hospitals.

4.) Assess patient outcomes along with costs. The U.S. Agency for Healthcare Research and Quality already issues an annual National Healthcare Quality Report, but this should be expanded to include a more comprehensive assessment of health coverage and services. Such data would allow the administration and Congress to set targets for patient outcomes at the same time it sets spending targets.

5.) Keep the health budget in balance. If the projected savings from reform are insufficient to pay for expanding coverage, changes in spending and revenues should be automatically triggered. One option would be to tighten limits on the tax subsidy for job-based coverage.

A federal health care budget upfront would avoid a mindless, blame game down the road if savings from reform failed to materialize. Strict accounting and clear expectations for savings will help ensure that the health care industry knows what it can and must do.

A final advantage is that it avoids the problem of “scorable” savings from the Congressional Budget Office. CBO cannot reliably predict the results from major changes in health care delivery and payment systems. But that shouldn’t stop Congress from pressing for action in promising areas such payment reform. A federal health care budget would allow for savings from reform to help pay for covering the uninsured over a five or ten-year period.