David Nexxon correctly points out (albeit by accident) that the House bill, like the Senate HELP bill, focuses on what sponsors believe are "moral imperatives." They pay precious little heed to what outside observers like the U.S. Chamber and the CBO think of as "economic realities."

(By the way, the CBO is nonpartisan and highly respected, and headed by a Democrat, despite the attacks you see being levied on Elmendorf now that he has failed to play along with the wink-and-smile "this is an investment, costs of inaction" game.)

The private sector and public programs are buckling under the skyrocketing costs of health care. Pushing the tens of millions of uninsured into the current system, without instituting serious cost-controls, would be a disaster. Not that we have enough providers to care for them right now anyway. The Chamber continues to contend that the disastrous ideological proposals that have come out of the House, and to a (slightly) lesser extent Senate HELP, should be scrapped. Congress should go back to the drawing board and come up with a bill that does three simple things:

1) Control costs. Costs, costs, costs. (Delivery system, payment reform, all-of-the-above strategy)

2) Market reform. (Include Medicaid floor, subsidies, individual mandate)

3) National Exchange/Gateway/Connector, whatever you want to call it.

This will cost nowhere near $1-2 trillion. It will cover millions of uninsured Americans. It will help control costs and improve quality. It will equalize the playing field, give us more choices and competition. How could anyone disagree with these things? So why are we getting bogged down in these ideological bills that do nothing to control costs, will indebt our children to China, and cost us millions of jobs, new taxes, and possibly a government takeover of health care? The Healthy Americans Act is closer to reasonable than the current bills, but it also destroys the current system - we need to build on the current system, capitalize on the parts that work best, focus on fixing the rest.

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"I am surprised that you are surprised. I have been writing for more than a year that going for a large bill is a mistake for a whole host of reasons. Those pieces have appeared (twice) in the New Republic On Line, in op-eds, and on the Brookings web site. You can check them out at http://www.brookings.edu/experts/aaronh.aspx . Of course, it is vain and silly, to boot, to assume that everyone has read what one has written -- people have more and better things to do!! -- but I have been arguing for a couple of years, against what has seemed to me to be a flood of mistaken optimism that it is hubris and doomed to try to reform an entity the size of France in one bill. I have also said that I pray that I am wrong--and I still do. But I also pray that those who are fighting for a large-scale reform have been and are thinking about what elements of the more comprehensive proposals can been passed to begin a process that will take a generation to complete. Armies need withdrawal strategies; so do elected officials."

I think Mr. Elmendorf's comments provide us a new opportunity to improve the legislation. To make the costs of coverage sustainable over time, we need to find sustained approaches for slowing the growth in health care spending. The congressional proposals have elements of cost controls in them, but they are largely pilot projects and too small to make the major changes in payment and our delivery system to really matter. Congress now needs to be bold in three areas--expedited use of bundling payments, real delivery system reforms using community health teams and other approaches to care coordination and streamling the costs of administering our system. We should have as a goal the use of care management and prevention available in Medicare within three years--based on proven approaches and models. Through standardizing claims, reporting, credentialing and use of electronic fund remittance we could reduce administrative costs by $20 to $30 Billion per year nationally. The augmentations do not have to dely the current legislation--but we should add these bold changes in the current legislation and as a result provide both universal coverage and the means for sustained reductions in health care spending. Both can be accomplished this year.

Two comments. First, it is a mistake to confuse the moral imperative of universal coverage with the need to bend the cost curve. The uninsured did not create the cost problem; providing them the coverage they deserve will cause a small, one-time bump in health spending, not a fundamental change in the underlying velocity of cost increases. Universal coverage would increase national health spending by about 3%--less than one year's inflation. The impact on Federal health spending would be greater, but still equivalent to only about a 10% increase in expenditures.

On the issue of bending the cost curve, Director Elmendorf's response was far too harsh. All the bills include significant steps to reorient incentives in the health system toward quality and efficiency and provide for an increased investment in health promotion and disease prevention. Evidence of savings from any particular measure in these area may not robust enough for formal CBO scoring, but that doesn't mean they won't have a profound impact as they are expanded over time.

First, I am flattered to be blogging with the likes of you.

Second, I am surprised to read that Henry Aaron may be willing to settle for incremental reform. Appropriately, he suggests that we start with exchanges. I hope that Henry’s pessimism is unwarranted, but we all know how hard comprehensive reform is to pass.

Uwe Reinhart seems to be acknowledging what CBO is saying when all the committee bills so far fail to achieve universal coverage, even with their gigantic price tags. It would be sad to miss this opportunity for universal coverage just because we could not find enough savings from the estimated annual $700 billion in health system waste (Orszag, McKinsey, and Dartmouth). But Uwe is right, as usual, to point out the fundamental equation in health care: $2.4 trillion in spending = $2.4 trillion in vested interests, none of whom will admit that they are wasting a single penny.

Third, how about the alternative bill that meets all of Obama’s eight principles, was introduced on inauguration day, is deficit-neutral even according to CBO, covers everyone, adds no new taxes, and is completely bipartisan? What’s not to like?

Of course, it’s the Healthy Americans Act, or Wyden-Bennett/Eshoo-Emerson. If things melt down as Henry is fearing, why wouldn’t that be the place to turn? Surely it’s far better than incremental reform. Before Henry Simmons gets upset, we could grandfather the Cadillac plans in organized labor because they are statistically insignificant in that national health care accounts.

Why shouldn’t President Obama look favorably on avoiding a partisan bloodbath on the health legislation? There are enough Republicans on HAA to please even John Goodman: Bob Bennett, Lamar Alexander, Judd Gregg, Lindsey Graham, Mike Crapo.

Of course, HAA could be strengthened with the good delivery system reform language that it being developed in the House and Senate, and this would save even more money. I am worried that we will need all we can get due the precarious financing of Medicare and Medicaid.

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My only question is why are people surprised at Elmendorf’s response—but I am grateful that he responded as clearly as he did. The House bills have been struggling with paying for expansions, with little focus on reforming the delivery system. The latter is much harder, more uncertain and will take time. If Members of Congress want to use a combination of payment reductions and payment reforms—plus some new revenue—they will have to slow down how fast they expand coverage. The “spend” is certain; the savings are not. Reforming the delivery system will be hard work, have a lot of uncertainties and will take time.

Doug Elmendorf's comments are narrowly focused on health reform legislation's impact on the deficit. CBO scores do not take into account the full economic benefits of health services such as routine childhood vaccines that save our nation more than $43 billion in medical and indirect costs. Additionally, having health coverage during pregnancy decreases the probability of low birth weight and prematurity. In 2005, preterm births cost the U.S. $26.2 billion. CBO's response is disappointing, but hardly damaging. By continuing to measure the impact of health reform only on the deficit while excluding the economic benefits associated with better health, higher productivity, and longer life expectancy, we greatly underestimate the impact of health reform for children.

Poor health in childhood can cast long shadows over a person's entire life. It can undermine health, educational achievement, and earnings in adulthood. The cost effectiveness of health coverage for all children has been documented by economists. It is a sound financial investment. A critical element of economic stability must be to reform our health system to ensure that all children can get affordable, comprehensive health coverage, and keep it through good times and bad. CBO scores cannot be the only basis for determining what health reform will cost. Without taking into account all of the benefits - both short-term and long-term - our nation will derive by investing in affordable, quality health care for all children, Congress will be making decisions without all the information it needs.

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The Congressional Budget Office has always been the ‘skunk at the garden party’ but Director Doug Elmendorf’s concerns are legitimate. Congress has introduced legislation worthy of consideration that will improve quality, care coordination and efficiency, but the legislation lacks the teeth that will actually reform the system. A reform bill that works is still possible as the legislation goes through the committee process, mark-ups and conference. What’s concerning is beyond the rhetoric, the implementation strategies are not there yet to implement actual reform and after all, isn’t that the point of this whole exercise?

A lot of provisions in House bill, HR 3200, (many inspired by organized labor) are quite alarming and I think Speaker Pelosi, Chairmen Waxman, Miller and Rangel know most won’t survive the Senate’s scrutiny. But there are things in the House bill that we should applaud. For instance, the commitment to provide access to health care to basically all U.S. citizens, and in particular for eliminating the SGR for the next 10 years. We are also encouraged by the Medicare coverage expansion and the investment into prevention and primary care.

But the concern, of course, is the cost curve and this bill’s inability change it or even reduce the trajectory. You can’t have universal access without reducing the cost curve otherwise the system will be even more unsustainable than it is today. Unfortunately, those changes are not addressed in the House version which is made clear by the CBO’s conclusion that the bill is an unsustainably expensive instrument that will destabilize the economy unless modified to reduce costs over time.

Also, there is no tort reform in this House version, and there probably won’t be anything to start with in the Senate health or finance versions either. By not adding some protection for physicians, there is no inducement for care givers to not practice defensive medicine, which drives up cost.

We may agree with CBO that the ‘bending the cost curve’ elements lack teeth in the bill, but Congress must be cautious and prudent with any proposed cuts. Hacking away at health care for the sake of reducing costs will not result in a better health care system no matter what the cost curve is.

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While new federal dollars are required to cover the uninsured, the House health reform bill achieves significant savings for the federal government by incorporating productivity improvement provisions into Medicare. It also calls for rapid-cycle testing of innovative health care provider payment pilots in Medicare, with shared savings for medical homes, hospitals, health systems, physician group practices, and accountable care organizations that successfully slow Medicare spending growth. Using the most successful payment innovations as the basis for payment in the public insurance plan would generate additional savings. All of these provisions would bend both the total cost curve and the Medicare spending cost curve.

Although Congressional Budget Office Director Doug Elmendorf rightly drew attention last week to the need to control health care costs, he focused only on federal government expenditures, not system-wide health care spending, or the potential for savings for employers, state and local governments, and households. While federal costs are certainly important, they don’t tell the whole story. For example, a policy could increase federal spending by relieving some of the financial burden now borne by low-income households, small businesses, or state government--and not raise national health expenditures.

Congress should ask CBO to estimates savings to all payers—not just the federal government. Congress should also request estimates of potential savings from key provisions in the bills that change the way we pay for and deliver health care or stimulate competition and innovation. Without better answers to these questions, Congress may miss an opportunity to transform the health care system to one that delivers better value for the resources that we invest.

A report by the Commonwealth Fund shows that a comprehensive set of policies that incentivize value rather than volume of services--and encourages more integrated and accountable care delivery systems--has the potential to extend affordable coverage to all and slow the growth in total health care costs from 6.5 percent annually to 5.2 percent. Savings accrue to families, businesses, and state and local governments, and the net federal budget cost is relatively modest. The Lewin Group estimates that total national health system savings under a comprehensive reform framework that includes a public plan option would be $3 trillion over the period from 2010 to 2020.

As we move closer to passage of health reform legislation, we must understand the system-wide impact of budgetary and coverage reforms and the necessity of aggressive policies to control total national health expenditures. In doing so, we can come to realize that comprehensive health reform is an investment in a more efficient health care system as well as an investment in the health and well-being of our businesses, government, and people.

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The issue of cost containment is one of the most complex matters we face in health care reform, and one where there is no shortage of good ideas, particularly with regard to new models of care delivery (e.g., accountable care organizations, medical homes). What’s missing from exchanges such as the one between CBO Director Doug Elmendorf and Senator Kent Conrad (D-ND) at last week’s Senate Budget Committee hearing is knowing how these models work in an environment free of the reimbursement disincentives, regulatory constraints, and other barriers that currently hamper our system.

With Congress on the verge of eliminating one of these barriers—lack of health insurance—the nation has a unique opportunity to close the knowledge gap between conceptualizing these new models and actually creating a well-functioning system. With that in mind, I’d again like to call attention to legislation introduced by Representative Allyson Schwartz (D-PA), H.R. 3134 , which would establish a nationwide demonstration project of “healthcare innovation zones” (HIZs). In these HIZs, academic medical centers—because of their community-centric focus and existing alignment of hospitals and physicians, among other factors—would serve at the nexus of integrated delivery networks that partner locally with others to provide the full spectrum of comprehensive and community care.

At the same time, these regional alliances would further explore and test new models of delivery and the data obtained would better inform Congressional and public debate on cost containment. Absent such information, it is exceptionally challenging to determine when, how, and how much the “curve can be bent.”

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Updated at 9:42 a.m. on July 21.

None of the above.

Congress and the President have made great progress toward achieving comprehensive health care reform but there remains some unfinished business before we cross the finish line with sustainable health system reform. It is unfortunate that so much of the reporting on testimony given by CBO Director Elmendorf has been misleading and taken out of context. Director Elmendorf has served our nation well by “speaking the truth,” but he and the process have been ill-served when preliminary figures intended to inform the legislative process, which do not represent any complete cost estimate by CBO for any specific legislative language are trumpeted by opponents of reform and reported in blaring – but less than fully accurate -- headlines.

With that being said, much remains to be done to overhaul the various health system reform proposals in order to ensure adoption of short-term and long-term cost containment steps powerful enough to deal with the magnitude of the interrelated crises of the economy and rising healthcare costs.

It is time for serious cost-containment strategies to trump special interests in order to provide affordable coverage and quality care to all Americans in a fiscally responsible and sustainable fashion. It is time for systemic and system-wide reform. Given the interdependencies built into the system, the piecemeal approaches some suggest are not adequate.

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The only surprise here is that anyone is really surprised by what Elmendorf had to say.

First, the CBO months ago looked at all the cost control campaign promises of candidate Obama and concluded that none of them significantly control costs.

Second, these bills are going to create a new entitlement (a cap on how much anyone has to pay for insurance as a percent of income) adding to an already unsustainable entitlement burden.

Third, the legislation will inject from $100 billion to $150 billion in new spending into the health care system every year.

If you are surprised that all this will increase health care spending, you should be embarrassed to admit it.

I believe that Elmendorf spoke what he and his researchers believe to be the truth and, indeed, most likely is the best, unbiased assessment of the impact of health reform on future health spending in this country.

Normally one does not view the act of merely telling the truth as a form of heroism; but perhaps in American politics it is. I think he just fulfilled his fiduciary duty.

In blog posts I have written for the New York Times I have estimated roughly that full universal health insurance coverage, if attained in 2910, would entail between $1.6 to $1.8 trillion in future federal outlays over the ensuing decade. I based that estimate on a fine paper by Hadley et al at the Urban Institute, published in Health Affairs in 2008.

Whether or not that spending projection would add to the federal deficit would depend, of course, on the manner in which these added outlays would be financed: with added taxes, with cuts in health care spending elsewhere, or by borrowing from other nations that have financed our government deficits hitherto. Just last week China lent the Treasury another $38 billion more, as they have consistently to finance the federal government’s high-spending-low tax policy of the past 8 years.

Health policy researchers – notably those at the Commonwealth Fund – have identified numerous smaller measures that, together, would significantly bend down the future growth path in health spending. But, frankly, I do not believe our nation is yet desperate and mature enough seriously to consider any of these steps. The rhetoric is all to the contrary.

To illustrate, in moments when Conservatives in Congress and the editorialists of the Wall Street Journal and the Washington Times are not bristling at high government spending for health care, they bristle at the idea that America should ever let “cost” enter any clinical decision, with dark allusions to the Nazis. In other words, there is to be absolutely no upper limit to the price American tax- or premium payers would pay for an additional life-year or –month or –day, as long as they are insured.

The Nazi smear alone will intimidate even less radical legislators ever to discuss the idea of rationing health care, other than forcing individual households to deny themselves health care because they are uninsured or face high out-of-pocket spending. Apparently, when individuals deny themselves or their children health care because they cannot afford to pay for it out of pocket is not regarded as “rationing” in America. (In this connection, see Princeton philosopher Peter Singer’s fine piece on rationing health care in last Sunday’s NYT Magazine).

One could, of course, bend the cost curve down without rationing health care simply by eliminating the waste widely suspected to pervade our health system. Alas, that waste represents income to well organized constituencies who are major shareholders of Congress. It will take decades and much more desperation over health spending than the nation now feels to successfully battle these insurgents.

So, given that American politicians are unlikely soon to have the temerity to bend down the growth of health spending – other than through self-rationing by individuals without insurance or high out of pocket spending – Congress faces a simple trade-off between (a) the number of currently uninsured to gain coverage under health reform and (b) the total price tag to the federal budget. If the latter is to be at or below $1 trillion for the next decade, universal insurance coverage is highly unlikely.

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Way, way too much is being made of this remark on substantive grounds. Doug simply put in words the numbers in the CBO and JCT cost estimates of HR 3200. HR 3200 raises spending more than it raises taxes; so, it raises the LEVEL of the curve and deficits over the next ten years. That simply says that more work remains to be done either to cut spending or to raise taxes to make the plan deficit neutral.

Doug's comment says nothing about the impact over the long-haul of HR3200 on the SLOPE of the curve, which depends on reforms in the way health care is financed and delivered. Like many other analysts, I would like to see more specific incentives in the bill for the change in the way health care is delivered. And I would like to see a clear and direct linkage between sources of finance for health care and outlays on health care.

Of course, the political impact of the comment goes way beyond the dry facts. Rather belatedly, it seems, enthusiasts of health reform are discovering that there is a connection between the revenue and expenditure sides of the budget and that vague claims of savings cut no ice (and shouldn't!) with CBO.

It is time to think hard about steps short of the large scale reforms that can be reliably enacted at reasonable cost--the minimum steps that can be taken at a politically digestible cost to begin the process of transforming the U.S. health care system. If it is not possible to 'do it all' in one big bill, what are the essential steps that will begin that process? My candidates, in addition to the major steps already taken this year (SCHIP expansion, health IT, and comparative effectiveness) would be the creation of health exchanges (even if they have limited authority) and modest additional extension of coverage. Let us all pray that the headlong pursuit of full-scale reform does not crowd out consideration of lesser steps that may not be all that we want but that are constructive and allow supporters of reform to claim credibly that 'We Won.'

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Here is the exchange between Elmendorf and Rep. Conrad during a hearing:

Conrad: Do you see a successful effort being mounted to bend the long-term cost curve?

Elmendorf: No… on the contrary, the legislation significantly expands [costs].

Conrad: It’s being bent the wrong way?

Elmendorf: The curve is being raised.

House Republican Leader John Boehner, R-Ohio, jumped on the exchange, claiming that the "CBO confirmation that Dems' government takeover will increase cost of Americans' heatlh care." He said: "Americans are concerned about the rising costs of health care, but instead of alleviating those fears, the Democrats government takeover will drive health care costs even higher. The Director of the Congressional Budget Office today confirmed that the Democrats' government-run plan will make health care more costly than ever, making clear that one of the Democrats' chief talking points is pure fiction. Are Democrats in Congress listening? Is the President listening?"

While President Obama went on the defensive, some members of Congress began questioning whether some serious modifications were called for.