We come down in the middle on this one. On the one hand, we agree that CBO scoring mechanisms are not equipped to properly estimate the savings that can be achieved through health care changes, largely because the savings are often more apparent beyond the 10-year window CBO is confined to, and because CBO does not use epidemiological prjection models. Therefore, adhering to strict pay-go rules would not make sense for health reform.

On the other hand, we oppose wasteful spending.We oppose lying to the public and calling all spending "investments" that therefore will not bankrupt our grandchildren. And we oppose alarmism about "the costs of inaction" that some are trying to use to shove through reform before a balanced, reasonable, collaborative solution is developed.

We have seen very short-sighted health care funding this year already, when Congress made children's health insurance dependent upon adult smokers.What Congress needs to pass is a limited, targeted, well-developed reform bill that will give some people on this blog some heartburn. Not everyone can get everything they want. If Congress waives pay-go rules in order to pass meaningful reform that lays the groundwork for restructuring the health care system to focus on value, while being responsible stewards of America's fiscal future, we will support them.

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It's pretty clear that Stuart Butler wasn't really listening when he was at the White House Fiscal Responsibility Summit. I'm sure I heard both President Obama and Peter Orszag say that entitlement reform means health care reform, and I was only watching the event on television. It is the height of irresponsibility not to acknowledge the pressure rising health care costs put on our federal budget and on our GDP, just as it is the height of irresponsibility to demand we obey short-sited year-by-year PAYGO rules in the face of a crisis of this magnitude. If the only way to get health care costs down in the long term is to invest up front, then we need to invest. I'm glad to see Uwe Reinhardt smacking down this short-sighted thinking, and proving that bending the curve through investment is indeed possible.

And that brings me to John Goodman.

Is it surprising to anyone that Goodman's main talking point these days is, "There is no health care crisis?" For those of you who have forgotten, John Goodman is the guy who nearly got himself kicked off of John McCain's campaign for claiming that everybody is, in fact, insured, because we can all just walk into the emergency room. Check out his solution to the health care crisis:

"So I have a solution. And it will cost not one thin dime," Mr. Goodman said. "The next president of the United States should sign an executive order requiring the Census Bureau to cease and desist from describing any American – even illegal aliens – as uninsured. Instead, the bureau should categorize people according to the likely source of payment should they need care.

"So, there you have it. Voila! Problem solved."

And if that wasn't enough to convince you John Goodman's ideas are pretty radical, here's how he explains variations in life expectancy among various ethnic groups:

"Here is the variation in life expectancy among ethnic and racial groups in the United States and as you can see, it's all over the map. [...] but doctors just don't control our over eating, over smoking, and shoot outs in the hood."

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There is no question that health reform will be an expensive proposition. Making the best use of available funds will be critical to its success. However, a public program option for coverage will require an expensive new bureaucracy that will be unnecessary to improve access in light of the industry proposed market reforms. Regardless of the funding source, it will be important to use funds where they are most needed and not use them for structures and services which duplicate existing components. A better use of funds would be to support the subsidies that that will be needed to help low-income individuals purchase private coverage.

Brazen as it may be for me, the immigrant, to lecture John Goodman, the thoroughbred American, on English usage, let me point out to him that there is a difference between “error” and “disagreement.” Defining as an “error” a disagreement with John strikes me as novel English usage – probably even in Texas.

In his first paragraph John asserts that that universal coverage (or even 50% of universal coverage) can be achieved “without an increase in government outlays.” Ira Magaziner used to come up with these free lunches during the Clinton years and I laughed at them then. I simply have a hard time buying free lunches and would not consider that an “error.” It may even be sagacity.

In the second paragraph, John asserts that “over the last two decades we have spent an enormous amount of money inducing millions of people to leave private coverage for public coverage -- leaving them with less access to care and leaving the uninsurance rate virtually untouched in the process. Surely, no one thinks that was a good thing to do.” That is an assertion paraded as a fact. I would very much doubt, for example, that as careful researcher as is John Holohan of the Urban Institute or the researchers of the Kaiser Commission on Medicaid and the Uninsured would agree with the implication of John’s statement, namely, that if SCHIP and Medicaid had not been expanded in the past two decades, the number of uninsured today would be the same as it actually is. Unless we do define disagreement with John as an error, I would style this as a disagreement over the proper interpretation of facts as well.

Finally, in the third paragraph John asserts that “almost all the right of center think tanks signed onto a Coburn/McCain type reform about a decade and a half ago and 43 Republican senators actually voted for such a plan in 1994. The obstacles to insuring the uninsured are not on the right. They are all on the left.” Here, too, one can debate whether the Coburn/McCain reforms would have constituted universal coverage, especially if it involved, as John claims in the first paragraph, no increase in government outlays.

We may ask what John mean by insurance? The

Here’s a deal I offer you, John: Give up your current health insurance, and buy a policy from me for $1. This is really affordable insurance.

So please send me the dollar, plus a notarized statement that you have given up your current health insurance, and I will send you my notarized $1 health insurance policy, along with a notarized certificate stating that you are “insured.”

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Meaningful health reform will require initial federal investments, and sources of long-term financing, to make the changes needed to increase health system efficiency and achieve maximum savings. President Obama and the Congress have already begun to invest in the health system. The passage of the American Recovery and Reinvestment Act lays the groundwork for the expansion of health information technology and comparative effectiveness research that will contribute to better value and outcomes for patients and their families. The President’s budget framework includes investments that will yield long-run savings, including bundled payments for post-acute care and expansion of the Quality Improvement Program.

Modeling of the Commonwealth Fund Commission's "Path" proposal shows that making payment and system reforms now can lead to savings that will offset upfront costs. Under the Path framework, bundling payment for acute care episodes is estimated to result in $211 billion in savings by 2020 provided that we begin implementation now. Similarly, encouraging the adoption of the medical home model is projected to reduce federal health expenditures by $101 billion over the next decade. In total, the payment reforms included in the Path report are projected to reduce national health expenditures by $1 trillion over the 11-year, 2010-2020 period, with substantial savings accruing to federal and state government, private employers, and households.

Despite the long-run advantages, making these investments and enacting comprehensive reform is difficult, in part, because we often fail to fully appreciate impacts among different payers and stakeholders. Provisions designed to control costs and improve efficiency are typically evaluated in isolation from one another. As Office of Management and Budget Director Peter Orszag noted in recent Congressional testimony, assumptions and rules that contribute to this limited focus should be reconsidered.

When taking a broader view of total national health system costs and savings, it is clear that comprehensive coverage, payment, and delivery system reform will return significant value and positive change within an 11-year investment horizon. It is also clear that we cannot continue on our current course. It is time for Congress and the President to make the necessary investments that will move us down the path to a high performance health system that works for all Americans.

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Uwe Reinhardt is wrong on three points. (In baseball this would be called a strike out.)

First, we do not need a trillion dollars to achieve Obama's goal (insuring half the uninsured) and if we tried to spend that much we would probably make things worse. According to Lewin, both the Coburn plan and the original McCain plan achieve the goal without any increase in government outlays. Ironically, both plans involve considerable redistribution from high-income to low-income families.

Second, crowd out is hugely important. Over the last two decades we have spent an enormous amount of money inducing millions of people to leave private coverage for public coverage -- leaving them with less accesss to care and leaving the uninsurance rate virtually untouched in the process. Surely, no one thinks that was a good thing to do.

Finally, almost all the right of center think tanks signed onto a Coburn/McCain type reform about a decade and a half ago and 43 Republican senators actually voted for such a plan in 1994. The obstacles to insuring the uninsured are not on the right. They are all on the left.

The pay-go rules should not be waived for health reform. This is not a covert (or overt!) way of opposing the extension of coverage to the uninsured--we should cover as many of the uninsured as politically possible, and we should pay the taxes to do it. But it is a way of saying that the nation faces potentially lethal long-term budget problems. Yes, we are in a serious recession that makes increased deficits now not just tolerable, but imperative; but this recession, like all others, will one day end. And when it does, growth of public expenditures as a share of GDP--which, it is now widely recognized, will be driven almost entirely by growing health care spending--will seriously outpace projected revenues, so much so that the gap will threat en America's economic stability.

Saying that we should not waive the pay-go rules is also a way of saying that as a nation we are not likely to gain control over health care spending (and, make no mistake, whether or not reforms are enacted, health care spending will grow) unless the United States establishes the principle that if health care is something we want, we should pay for it. Well-insured people can never be expected to do that when they are sick and using health care. The only way to do that is to link what we spend on health care to the taxes we have to pay to support it. Right now, the pay-go rules are the only instrument we have.

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On occasion of National Minority Health Month, I would like to discuss the subject of racial disparities in terms of children’s health. Minority children in the United States – Black, Latino, Asian, Pacific Islander, American Indian – are more likely to be uninsured than White children. This disproportionate lack of health coverage has consequences for their health, growth and development – from before birth through adolescence and into adulthood.

Lack of access to health coverage helps explain some of the considerable racial and income disparities that can result in different life paths for our children from their earliest years. There are nine million uninsured children in America – that’s 1 out of every 9 children overall. But the disparities are great. One in 13 White children are uninsured, as compared to: 1 in 8 Black children, 1 in 5 American Indian children, and 1 in 5 Latino children. Both Latino and Black children are more than four times as likely as White children to be in only fair or poor health.

Without health coverage, pregnant women are less likely to access or afford prenatal care, and may not get the advice, examinations and screenings that could protect the health of both mothers and babies. Babies born to Black mothers are more than twice as likely to die in the first year of life as White babies.

The Children’s Defense Fund believes the best investment this country can make is to ensure that all children and pregnant women have access to affordable and comprehensive health coverage. This week, CDF is launching a partnership with leading civil rights groups including the Asian American Justice Center (AAJC), the National Association for the Advancement of Colored People (NAACP), the National Congress of American Indians (NCAI), and the National Council of La Raza (NCLR) to call upon Congress to pass legislation in 2009 to cover ALL children. Our coalition is holding a briefing this Friday to discuss the plight of children in the current health care system and to present our shared principals to ensure all children are provided access to health care in 2009.

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As Stuart Butler aptly puts it: it didn't take long. Except that I was thinking of something else than he does.

It didn't take long before one of several howitzers got dug in to shoot at the idea of universal health insurance. The one out now is the familiar "we need to control health care costs in our bloated, inefficient health system first before we can bring yet other Americans under the umbrella of health insurance and into the system." That cannon has served us well for over three decades now. I can imagine its roar already, even before the cannon is fully cocked.

To shoot this cannon, you must have a license, and the requirement for that license is that you must be well insured and, indeed, be one of the folks who have helped bloat the system and made in inefficient. And because we, the well insured bloaters, have come to love that system so, we’ll do everything in our power not to change the status quo, won't we?

The other cannon, still being readied, is the "crowd out" or "crowd in" cannon. It gets deployed whenever someone in Congress or in the White House identifies the year's "objects of compassion" (OCs). For example, the OC's may be uninsured children, or unemployed adults over 50, or whatever. The compassionate originator of the idea to do something for the OCs may calculate that it will take, say, $2,700 per OC to practice compassion upon them. No sooner uttered than the computers at the AEI or NBER or RAND or wherever start to whirr, figuring out how many OC-look-alikes now privately insured will be crowded into the new public program intended mainly for the original OCs. And before you know it, the federal budget cost calculated as (federal cost per original OC plus federal cost per crowded in OC) divided per original OC is staggering. Bullet hits on the mark, OC plan is destroyed. Mission accomplished.

This is how America has always successfully warded off any impending threat of universal coverage. Maybe it'll work again this time.

In my view, the only way we can move to universal coverage by, say, the end of 2010 – or even reduce the number of uninsured by only 50% -- is to add something close to $1 trillion to the deficit over the next 10 years. I think we should now boldly start down that path and then start whittling away at that number by some or all of the cost control measures now being discussed, some of which may be realized, others of which are utopian.

I would start by responding to the challenge of the Wennberg variations in per-capita health spending. Perhaps we should have volume performance standards for Medicare by state or by major region in a state, not national budget cap for Medicare.

Savings from IT, bundling, P4Pm, cost effectiveness analysis will take years to realize, if ever they do come.

Here it must be remembered that those who book health spending as income are major shareholders of the U.S. Congress. To see how easy it will be to dislodge some of the wasteful health spending from their grip, watch the fate of quite another federal program: student loans.

Student loans are now made directly from government to students or through private lenders. As the Congressional Budget Office has shown in several studies, it costs tax payers quite a bit more per $1 lent to students if the funds are channeled through private lenders, who earn handsome profits on the loans at virtually no risk to them, because their loans are government guaranteed up to 97%. According to today’s NYT, the CBO estimates that $94 billion could be saved by funneling the loans to students directly from government to students, which would allow the feds to help more students. There literally seems to be no social value at all generated by going through private lenders.

President Obama has boldly announced that he would like to harvest the $94 billion for students. Let us see how that comes down. K Street is busily greasing its howitzers on this one. We shall soon see if even so obvious and simple a form of savings will be allowed the taxpayer (and needy students) by the people who call this wasteful federal spending on student loans “income.” The most powerful arguments the K-Street brigade seems to be able to bring to the table now is that lending through private lenders “creates jobs,” along with the all-time favored ordnance that “one size does not fit all.”

Says who one size does not fit all? Tell that to McDonalds, the Holiday Inn, the Marriott hotel chain, Star Bucks, our gas stations, our shopping malls and so on in this utterly homogenized country (where one size fits all has been THE economic advantage of franchising we have over smaller countries.)

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It didn’t take long. The story used to be that a) widening coverage now would mean more efficient care and immediate savings, and b) there is so much overspending in the system that we can do much more with less. Now the story is that if we just spend more on X now it will help us save money in the future, so please “bend” PAYGO just for us and you will be happy. Honest. I was at Obama’s “Fiscal Responsibility Summit” where this was the constant refrain around the table of health care providers: just spend more money on the people we represent today and it will mean lower health spending tomorrow – guaranteed. Dessert first for the industry, then spinach. How many times do we have to hear that in health care before we learn?

This reform is being proposed by people who (a) tell us that the primary reason for reform is that we spend twice as much as other developed countries and receive no better health care in return, (b) then propose to solve the problem by spending an extra $150 billion a year for ten years, and (c) now propose to cover up the costs of the reform by cooking the books.

It may be helpful to review the bidding on the so-called "savings." All the proposals that the Obama team claims will save money were meticulously examined by the CBO (when Peter Orszag was in charge) and guess what? They don't save a dime.

Instead of setting aside PAYGO rules why don't we go back to square one and answer the most basic question of all: why exactly are we trying to reform the health care system?