House Democrats introduced the first complete draft of President Obama’s health plan on June 19.

Since then, Congress has spent 158 days considering the Obama health plan without ever laying eyes on a complete cost estimate.

The Senate has called up its version for floor consideration without one. (Shouldn’t these eight Democratic-caucusing senators be upset about that?) And the House even passed its version without one.

(Cross-posted at Cato@Liberty.)

The new Senate health bill marks a major step toward comprehensive, fiscally responsible health reform. It would extend health insurance coverage to 31 million Americans who lack it, reduce the budget deficit, and put long-term downward pressure on health care costs.

The bill would reduce deficits by an estimated $130 billion over the 2010-2019 period and by about one-quarter of one percent of GDP in the decade thereafter, according to the Congressional Budget Office (CBO). This amounts to about $55 billion in 2020 and several hundred billion dollars over the 2020-2029 period. The bill also would likely slow the growth of health care costs over time by, for instance, imposing an excise tax on high-cost health insurance plans, reducing overpayments that private insurers receive through Medicare Advantage, and reducing the cost of prescription drugs in Medicaid.

Moreover, while the bill extends health coverage to 31 million more Americans, it keeps the total federal cost for all health care spending and tax subsidies in the decade after 2019 essentially where it would be under current law, according to CBO. That’s because the bill finances its expanded health coverage by redirecting existing spending and tax subsidies from less productive uses elsewhere in the health sector.

All of this represents a stark and welcome change from the treatment of major tax and spending initiatives for nearly a decade. Congress enacted, for instance, the 2001 and 2003 tax cuts and the Medicare prescription drug benefit without offsetting costs that totaled in the trillions of dollars. By contrast, the Senate health reform bill would expand coverage while reducing deficits over both the short and long term. (For more on the fiscal implications of the Senate bill, see here)

Affordability

The bill strengthens affordability by improving the premium subsidies in the Senate Finance Committee bill for the millions of households with incomes between 154 percent and 400 percent of the poverty line — that is, between $28,200 and $73,240 for a family of three. Unfortunately, the new bill reduces the subsidies in the Finance Committee bill for near-poor households at the bottom of the subsidy range, which already were less than adequate. A family of three with income of $27,465 (150 percent of the poverty line) would have to pay $1,250 for premiums, or over $400 more than under the House bill. Many families with incomes this low already struggle to pay the rent and utilities and put food on the table and could have difficulty paying this much for health coverage. (For more on affordability, please see here)

Employer Responsibility Requirement

The new bill significantly reduces the disincentives that the Finance Committee bill would have created for employers to hire workers from low- and moderate-income families, an important improvement. For some employers, some disincentives to hire or retain such workers would remain, however. Like the Finance Committee bill, the new bill would also create some incentives for employers to convert some full-time positions into positions of just under 30 hours per week. (For more on this point, please see here)

Fortunately, the House-passed bill is strong in both the affordability and employer responsibility areas, so Congress can address these problems in a House-Senate conference committee when it irons out a final version of the bill, if not before then.

The Senate should now move without delay to consider this landmark legislation, which would represent a dramatic improvement over the current health insurance system.

Sen. Max Baucus, chairman of the Senate Finance Committee, released this statement after the Sen. Reid unveiled the Senate Democratic bill:

The CBO score we received today illustrates the Senate health reform legislation is a balanced, fiscally-responsible package that will deliver the real reform that American families, businesses and the economy need. The Senate bill is fully paid for, won’t add a dime to the federal deficit and helps pay down the national debt. It ensures choice for consumers and increases competition in the market, bans insurance company practices that deny and drop coverage for sick Americans and creates new tax credits for working Americans and small businesses to make coverage more affordable. The American people are counting on us to act, so we must continue the hard work and compromise it took to reach this point until we deliver a bill to the President’s desk. Too many parents struggle to pay for health insurance and also try to save for college, too many employers are forced to drop health coverage because they simply can’t afford the premium while remaining competitive in today’s global economy, and for too long, health insurance companies have put profits before patients. This is the moment to change that."

For America's families, the key assessment about health insurance
reform will be a personal pocketbook test, namely: Will the legislation
result in needed financial relief for families struggling to pay for
health coverage and care?

The newly announced Senate bill scores high marks on the personal
pocketbook test-making health insurance much more affordable for
hard-working middle-class American families.

Through tax-credit subsidies made available for plans in a newly
created marketplace, the Senate bill limits a family of four with income
under about $88,000 a year from spending more than 9.8 percent of the
family's budget on health insurance premiums. With the average cost of
family health insurance coverage at $13,000 a year, families could see
their insurance costs cut in half or more. This affordability protection
in the new bill is stronger than the previous provisions in the Senate
Finance Committee bill.

As the bill moves forward, we urge that the pocketbook test scores
continue to improve-with special attention to America's lowest-income
families who have little room in their family budgets for spending on
premiums, deductibles, or copayments. We hope that the Senate bill
passes soon and that the strongest affordability protections possible
are established in the Conference Committee bill.

The Senate bill looks very much like the House health care bill. It ends insurance company abuses like denying care for those with pre-existing conditions and it sets benefit standards to make sure the coverage people receive - both on their own and through their employer - actually covers the care they need. It gives people the choice of a public health insurance option like the one in the HELP bill, though states would be able to opt-out of the public option if they passed a law saying so. And it sets up a health insurance "Exchange" that would provide tax credits (subsidies) to make health care affordable, as well as helping business afford health care for their employees.

This bill is not perfect. It can be more affordable for lower-income families, it does not ask employers to pitch in their fair share, and while it is more fairly financed, it still taxes health plans. However, the fact that Majority Leader Harry Reid did the right thing and listened to the American people by including things like a public health insurance option and a tax credit level that goes a long way towards making health care affordable means that this bill deserves a debate and a fair, majority up-or-down vote.

Republicans and the insurance companies will try to block this bill any way they can, even going so far as to recommend the Senate not even talk about this bill, let alone vote on it. These tactics only preserve the status quo. The American people deserve health care reform - reform that delivers affordable coverage, a choice of a public health insurance option, and fair financing - and this bill deserves a fair vote by the full Senate so it can meet the House bill in conference.

The fact that the Senate bill has been completed with a financing mechanism in place, a low CBO score and forecast that it will reduce the deficit even beyond the initial ten year period adds momentum to the prospects for Democratic backed health reform legislation. Since both the Senate and House bills now contain income-related financing measures the outlines of a deal between the two bodies on the all important question of financing health reform may be coming into view.

One prediction I will make is that as the process moves forward there will be a much greater opportunity for the media and the public to focus on details, especially the adequacy of the subsidies and the underlying coverage people in the exchanges will get. I suspect attention will focus in particular on the size of the deductibles people pay, if only because that is an element of health insurance people understand. It's possible that the process may move too fast or these issues will be too technical to come into focus, or that the pressure to keep the price tag down to garner moderate Democratic support will be too great. If affordability does emerge as an issue, with the CBO score for the Senate bill now well under the 900 billion dollar marker the President set down and even further below the one trillion dollar line many seem to regard as an ultimate ceiling, there may be at least a little wiggle room to address these issues.

For close to a century, Presidents and congressional leaders have debated ways to fix our healthcare system. A system that leaves too many hardworking families struggling to get by or facing economic ruin. Each go round, politics, special interests and scare tactics said we can't. "We can't change. We can't make our country better. We just can't." Not this time.

Just eleven days ago, the United States House of Representatives defined leadership by passing the historic Affordable Health Care for America Act. And now, under Senator Reid's strong leadership, the Senate has introduced their own legislation that gets us one step closer to healthcare that works for the American people’s bottom line, instead of insurance company profits. Senator Reid listened to the American people and made sure this bill keeps insurance companies from controlling our healthcare system by guaranteeing choice and accountability through a public health care option.

This is the Senate's opportunity to stand up and say "Enough!" No more scare tactics. No more kowtowing to conservative obstructionism. No more politics as usual. No more hesitation.

We all know the stakes, and we've all seen the statistics. But on the minds of each of the 44,000 Americans losing their health insurance this week lurks the threat of a potential disaster. Each of the 17,000 Americans forced into bankruptcy because of medical debt this week must accept the death of their dreams for their family. And the loss of 400 of our sisters and brothers this week simply because they lacked insurance is nothing short of a national tragedy.

We are at this historic moment because Democratic members of both chambers chose leadership and governance over obstruction and timidity. But there is no such thing as a Republican filibuster. Every American deserves a vote on healthcare. And, every Democratic member must stand shoulder to shoulder with their fellow colleagues and allow the Senate to vote on true health insurance reform.

The American people expect and deserve results. It's up to the Senate to deliver.

Senate Democrats yesterday unveiled their health reform bill, which looked much like the bills already approved by committees of jurisdiction, and which cost $849 billion. The bill is paid for in part through Medicare cuts, according to CongressDaily, including an increase in the Medicare payroll tax for individuals making $200,000 or more, and a tax on high-cost insurance plans. The Medicare payroll tax would bring in $54 billion and the Cadillac tax would raise $149 billion in revenue.

Senate Minority Leader Mitch McConnell , R-Ky., called the bill another “trillion dollar experiment,” and said it was like paying your mortgage three years before moving in.

Here’s how CongressDaily sums up the new bill, which is expected to go to the Senate floor this weekend for procedural votes, with the thought that the Senate will get down to business debating the bill after Thanksgiving.

Reid Releases $849B Bill, Initial Vote Expected Saturday

Senate Majority Leader Reid released an $849 billion healthcare overhaul bill Wednesday that includes a public option and will extend coverage to 31 million uninsured Americans, though a few Democrats are still on the fence over whether they will vote to proceed to the bill.

The bill would extend insurance to 94 percent of eligible Americans.

The measure, which would reduce the deficit $127 billion over a decade, creates an insurance exchange where people can compare and purchase coverage; allows insurance co-ops to be formed; expands Medicaid to those earning 133 percent of the federal poverty level; and offers federal subsidies to help those without employer-sponsored coverage purchase insurance.

The public option would allow states to opt out if they choose. Sen. Christopher Dodd, D-Conn., shepherded a more comprehensive public option through the Health, Education, Labor and Pensions Committee but called the opt-out version a strong public option.

The overhaul also includes an individual mandate with penalties reaching $750 per person for noncompliance by 2016. Employers that do not offer coverage will pay a fine for each of their employees who receive federal subsidies to purchase insurance in the exchange of as much as $750 per employee at the company, a senior Democratic aide said.

The bill is paid for in part through Medicare cuts; an increase in the Medicare payroll tax for individuals making $200,000 or more and couples earning $250,000 or more to 1.95 percent; and a tax on high-cost "Cadillac" insurance plans valued at $8,500 for individuals and $23,000 for families. The Medicare payroll tax will bring in $54 billion and the Cadillac tax raises $149 billion in revenue.

The income thresholds triggering the 0.5 percent increase in the Medicare payroll tax are not indexed for inflation, meaning it will ensnare more people each year. The House bill's "surtax" on the wealthy is not indexed for inflation, and critics will likely note this case can be compared to the alternative minimum tax. Congress has to pass a costly AMT fix almost every year because it was never indexed for inflation.

The medical device tax has been cut in half to $2 billion annually to appease Minnesota, Indiana and Massachusetts senators. A fee on insurers remained at $6 billion a year as well as a fee on drugmakers at $2 billion annually.

The bill includes a new 5 percent excise tax on elective cosmetic surgeries that would raise $5.8 billion. An earlier 10 percent tax floating around during initial Finance Committee talks was written off by senators at the time, who said no one was seriously considering such a tax.

Democratic Sens. Ben Nelson of Nebraska, Mary Landrieu of Louisiana and Blanche Lincoln of Arkansas were undecided on how they would vote on the motion to proceed, but Landrieu sounded more positive than she has to this point.

"I am now neutral because he gave me some assurances that there would be opportunity for amendments and improvements to the bill," Landrieu said after the three met with Reid.

She said she has concerns with the bill's focus on driving down cost and with the public option. "I understand proponents of the public option think it's necessary to keep insurance companies honest," she said. "I want to reform the insurance industry. I do not want to eliminate them."

Landrieu also met with Interior Secretary Salazar Wednesday, where she said they talked mostly about climate issues but also about health reform.

Democratic leaders' arguments for backing the motion to proceed hinge on their plans to move to a shell bill that will be filled in with the actual bill, Senate Majority Whip Durbin said. Durbin said he will argue that Democrats should agree to move to the bill and hash out disagreements through the amendment process.

A senior Democratic aide said they expect to vote on the motion to proceed Saturday. Senate Finance Chairman Max Baucus was absent from the bill unveiling to be in Montana with his ailing mother. That raises questions whether the vote could be held as planned. "His mom is doing better today," Reid said. "We'll get him back here when we need him."

While Landrieu appeared near conceding to Durbin's strategy, Lincoln avoided reporters Wednesday, and Nelson said he could not make a decision based on the information he had, though he did say he believes the real test will come on the vote to end debate after the amendment process.

The bill includes a long-term insurance program known as the CLASS Act that some senators have concerns with, saying its early savings would eventually be eaten up by benefits paid to enrollees. Reid attempted to appease them by not applying the $75 billion in savings from the program to the offsets.

On abortion, the bill attempts to extend current law, prohibiting federal funds from being used for abortions by requiring those funds be segregated by private insurers that offer abortion coverage. The HHS secretary would determine if the public option will cover abortion.

That sets up a conflict with the more restrictive House bill. It also might face challenges via amendments from anti-abortion senators on both sides of the aisle.

Republican attacks began immediately. "The healthcare reform plan revealed ... reaffirms the intentions of the majority party in Congress to grow the size of our government exponentially, explode federal spending, and provide lower quality, government-run health care for all Americans," Senate Budget ranking member Judd Gregg said in a statement. "Though this plan may claim to be deficit-neutral, it uses sleight-of-hand budgetary tricks by assuming unrealistic tax increases and Medicare cuts that members of Congress will not be willing to follow through on."

by Anna Edney, with Dan Friedman and Peter Cohn contributing

Without a doubt, the time has come to reform our healthcare system. But the direction reform proposals have taken over the past 10 months have been alarming. Today, I signed a letter, along with dozens of other national leaders, lawmakers, and former administration officials, calling on President Obama, Speaker Pelosi and Leader Reid to abandon current healthcare legislation and instead seek sound, bipartisan solutions that increase quality, lower costs and don’t break the bank. Read the letter.

Dear President Obama, Speaker Pelosi, and Leader Reid:

There is no doubt that improving healthcare for all Americans is one There is no doubt that improving healthcare for all Americans is one of our country’s top priorities. From the quality of care to how much we pay, from insurance coverage to access, from treatments to technology, healthcare profoundly affects every American, every community, and every business.

We can all agree that we need to work together so that every American has more choices of greater quality at lower cost.

Unfortunately, the last several months have shown yet again that many in Washington are more interested in playing politics than achieving a positive result for the American people. It is not too late. There is still an opportunity to get health reform right. Here are commonsense ways to find the right solutions, the right way.

Slow down. Ramming through a trillion-dollar bill without giving three hundred million Americans the chance to study the legislation raises legitimate questions of why some leaders are trying to avoid a careful review by the American people. In a democracy, a secretive, one-sided process is never the right way to govern.

Open up. A 2,000-page bill written in secret by a handful of politicians and staff is the wrong way. Republicans have offered time and time again to bring constructive ideas to the table, only to be shut out by a cold shoulder and a closed door. We need an honest and open process free of artificial, political deadlines and open to input from everyone. Cooperation, not confrontation, is a better approach.

Don’t break the bank. The director of the Congressional Budget Office said this in July:

“In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for healthcare costs.”

Nothing has changed since then to bend the cost curve down. Why should the American people believe that spending another $1 trillion will somehow reduce healthcare costs? Why should the American people believe that a $1 trillion price tag from Washington won’t put our country further into debt? Why should governors and state officials believe that the largest unfunded mandate in American history will not break their banks when they are on the hook to pay for these reforms? With unemployment at 10 percent and with more than $9 trillion in federal debt on the horizon, why commit to spending another trillion dollars before stopping the waste, fraud, abuse and mismanagement in current government programs (Medicare and Medicaid) first?

Reform does not mean replace. The vast majority of Americans are satisfied with their current coverage and doctors, a fact that has been borne out in every public opinion study for years. Improvements must certainly be made to make health insurance more portable, more accessible, and more affordable, but our first priority should be to protect and strengthen what the American people already have and support.

The right reforms. Neither party has a monopoly on sound solutions. Good ideas and sound decision-making, regardless of their origin, are desperately needed. For example, the Congressional Budget Office recently concluded that reforming medical liability laws would save the federal government $54 billion. Despite these important savings and overwhelming support from the American people, medical liability reform has never been part of the discussion because of political reasons. Where money can be saved, it must be. This is particularly true today, given the fragile state of the economy and this year’s record budget deficit.

Real competition and real choice. You talk often about the important principles of “competition and choice.” We enthusiastically agree. But instead of creating one huge government-run insurance plan, let’s break down the existing barriers to greater competition. A better approach is a nationwide marketplace where all 1,300 insurance companies are forced to compete, giving Americans real choices. This will bring down costs and improve quality—just as it does wherever competition is allowed to flourish.

Save Medicare from bankruptcy. The non-partisan Medicare Trustees concluded that Medicare will be broke in eight years. Medicare already has an unfunded liability of at least $37 trillion in benefits that have been promised future generations. The emerging legislation does nothing to save Medicare. Rather than cutting Medicare to pay for new federal subsidies or a government run insurance plan, we should save and strengthen it. The right way would be to root out the fraud, waste, and abuse first that is costing the current program tens of billions every year.

Unleash American innovation. Science, research, and innovation are a vital part of improving healthcare. We should reform the Food and Drug Administration to expedite the movement of drugs, devices, and new technologies to the market. We should invest in new science to cure diseases like Alzheimer’s and cancer. Inexplicably, the Senate Finance Committee goes in the other direction, raising more than $60 billion in new taxes on medical technology and drug research – the people responsible for the medical breakthroughs in America.

These kinds of innovators should be rewarded, not punished.

Health reform or “health insurance reform” should not be a political wedge, pushed to satisfy political allies at the expense of the American people. Healthcare is too important and the stakes are too high. The American people deserve and have demanded better. With an honest process, the right priorities, and the right solutions, we can and will succeed.

Sincerely,

Newt Gingrich, Former Speaker of the House; Founder, Center for Health Transformation
Jeb Bush, Former Governor of Florida
Mike Huckabee, Former Governor of Arkansas
Michael O. Leavitt, Former Governor of Utah; Former Secretary, U.S. Department of
Health and Human Services
Mark Sanford, Governor of South Carolina
Senator Richard Burr of North Carolina
Senator Saxby Chambliss of Georgia
Senator Tom Coburn of Oklahoma
Senator Roger Wicker of Mississippi
Rep. Michele Bachmann of Minnesota
Rep. Roscoe Bartlett of Maryland
Rep. Roy Blunt of Missouri
Rep. Dave Camp of Michigan
Rep. John Campbell of California
Rep. Bill Cassidy of Louisiana
Rep. Charles Dent of Pennsylvania
Rep. Jo Ann Emerson of Missouri
Rep. Randy Forbes of Virginia
Rep. Phil Gingrey of Georgia
Rep. Louie Gohmert of Texas
Rep. Dean Heller of Nevada
Rep. Jeb Hensarling of Texas
Rep. Pete Hoekstra of Michigan
Rep. Darrell Issa of California
Rep. Mark Kirk of Illinois
Rep. John Linder of Georgia
Rep. Kevin McCarthy of California
Rep. Thaddeus McCotter of Michigan
Rep. Cathy McMorris Rodgers of Washington
Rep. Tim Murphy of Pennsylvania
Rep. Sue Myrick of North Carolina
Rep. Devin Nunes of California
Rep. Tom Price of Georgia
Rep. Dave Reichert of Washington
Rep. Paul Ryan of Wisconsin
Rep. Pete Sessions of Texas
Rep. John Shadegg of Arizona
Rep. William “Mac” Thornberry of Texas
Rep. Lynn Westmoreland of Georgia
Rep. Frank Wolf of Virginia
Fmr. Rep. Sue Kelly of New York
Fmr. Rep. David McIntosh of Indiana
Douglas Holtz-Eakin, Former Director, Congressional Budget Office
Benjamin E. Sasse, Former Assistant Secretary, U.S. Department of Health and Human Services
David Brailer, Former National Coordinator for Health Information Technology,U.S. Department of Health and Human Services
James C. Capretta, Former Associate Director for Human Resource Programs, Office of Management and Budget
Andrew von Eschenbach, Former Director, National Cancer Institute; Former Commissioner, U.S. Food and Drug Administration
Tevi Troy, Former Deputy Secretary, U.S. Department of Health and Human Services

There are three issues that worry Americans about health care: Will there be a doctor in the house when I need one? Will I be able to pay the bill? And will the system and its people care for me? While answers to the second question—access to insurance-- are now coming into sharper focus, the issues of whether we will have enough doctors and whether we will achieve the kind of reform that results in well-coordinated, patient-centered systems of integrated care, are still largely unsettled.

While the nation’s medical schools are working hard to meet growing physician demand, these efforts alone will not result in more doctors unless residency training is also expanded. In 2009, enrollment in both new and existing U.S. medical schools rose by 2 percent over 2008 to nearly 18,400 students . Half of that increase came from four new U.S. medical schools which seated their first entering classes (Florida International University Herbert Wertheim College of Medicine, The Commonwealth Medical College, Texas Tech University Health Sciences Center Paul L. Foster School of Medicine, and the University of Central Florida College of Medicine). In addition, 12 existing medical schools expanded their 2009 class size by 7 percent or more, continuing the upward trend of the past few years (and standing in contrast to the lack of growth between 1980 and 2005).

However, these expansion efforts alone will not avert the expected shortage of 124,000 to 159,000 physicians. Concomitantly, we must increase the number of residency training slots. None of the reform bills currently before Congress includes more Medicare funding for graduate medical education positions. Instead, both the House and Senate legislation would redistribute about 1,000 unused residency training slots among a small group of targeted states. The Association of American Medical Colleges strongly supports the "Resident Physician Shortage Reduction Act" (S.973/H.R.2251), which increases the number of Medicare-supported training positions for medical residents by 15 percent (approximately 15,000 slots).

With regard to improving care delivery, we have only started to scratch the surface on this complex issue. Many new and promising patient care models have been suggested—such as the medical home and accountable care organizations—but have not been tested in the real world. What’s needed is a way of closing the gap between theory and practice, which is one of the reasons why legislation proposing health care innovation zones (H.R. 3134) offers tremendous promise.

Updated at 10:07 a.m. on Nov. 17.

Late last week, the Centers for Medicare and Medicaid (CMS) Office of the Actuary (OACT) released a report projecting that total national health expenditures (NHE) would increase by $289 billion under the historic health care reform act recently passed by the U.S. House of Representatives out of the $35 trillion otherwise expected to be spent over the period from 2010-2019. Several commentators have seized on this estimate as evidence that, contrary to the claims of its supporters, the bill will raise costs and allow the United States to continue on its unsustainable trajectory of health spending. Lost in this argument are three key points:

First, both the new CMS/OACT report and the most recent Congressional Budget Office (CBO) estimate of the House bill demonstrate that the act contains many effective Medicare savings provisions, which, in combination with other reforms, will strengthen the program for beneficiaries and bring federal spending growth rate down to more sustainable levels. Medicare outlays are currently projected to grow at a 6.6 percent compounded annual rate from 2010-2019; CMS/OACT anticipates this will slow to 5.4 percent under the House bill, while CBO estimates it will slow to 5.2 percent over the same time period. As a share of GDP, Medicare spending would comprise 3.8 percent under current law in 2019. CBO projects this will fall to 3.3 percent if the House bill were to become law.

Second, while the CMS/OACT report shows the potential for substantial federal savings under the House bill, similar savings are not anticipated in the private sector. This finding underscores the need for a strong public plan in the health insurance exchange, or, in the absence of a public plan, an alternative cost-containment solution from the private insurance industry.

Finally, both the House bill and two Senate bills introduce a range of payment and delivery system changes likely to result in a significant slowing of health care cost growth. Like CBO, the CMS/OACT report attributes very little savings to measures that would reform provider payment, negotiate prescription drug prices, increase competition among plans in an insurance exchange, public reporting, or apply the results of comparative effectiveness research. Yet these measures have been effective in other industrialized countries and are widely supported by health care opinion leaders. In short, the health reform bills passed by the House and under consideration in the Senate lay the foundation for fundamental change in the U.S. health system. We can not afford to continue on our current course with ever increasing numbers of uninsured and rising health care spending without commensurate value. Health reform is essential to put the U.S. health system on the path to high performance.

Costs will be higher. Quality will be lower. Access to care will probably be worse. We will have created new entitlements that we cannot afford.

But bad as all this is, the worst feature of the reforms is more subtle: We will likely make it impossible for entrepreneurs to develop real solutions to our problems without going off shore.

If health reform is enacted this year (or next), one thing is certain. The final bill will do little to change the fundamental economic incentives that drive health spending. This is disappointing but not surprising given the political forces at work. Although politicians argue that we need to bend the cost curve down, reform proposals will increase total health spending—confirmed by CMS actuaries, even assuming Medicare fee cuts that are unlikely to be implemented fully. For the most part, health reform will expand the current inefficient health system, hoping that another layer of regulation will produce better value for our money.

Perhaps the single best idea is to reform the current tax break for insurance purchased through employers. The Senate Finance Committee included a tax on so-called Cadillac health plans, which would spur sales of lower cost insurance that promotes greater cost awareness and more efficient health care delivery. Not the ideal policy—capping the tax exclusion would be more direct and fairer to low-wage workers—but not bad.

It now appears that Senate majority leader Harry Reid is considering scrapping it in favor of a higher Medicare payroll tax imposed on workers making more than $250,000 a year. That replaces a provision that promotes health system efficiency with one that discourages work in the teeth of the recession.

Worse yet, this turns the payroll tax into another source of general tax revenue that can be tapped for any new spending, rather than using the funds to shore up the financially-endangered Medicare program. The reform bills are more than willing to cut Medicare payments to support a new health insurance entitlement for younger people. Raiding the payroll tax is simply the next step in a process that will leave us with enormous fiscal problems in Medicare and in the broader budget without policy tools to solve them.

If we truly wish to create a sustainable health system, we cannot rely on easy-to-score budget cuts that keep intact payment methods and delivery methods that have produced unaffordable health care. The key is promoting smarter purchasing and smarter medical practice, and that means changing the way we do business. There is little in the reform bills to suggest that it won’t be business as usual.

There are several reasons why many of us who for years have supported health reform and coverage expansion are now so concerned about the direction the bills are taking. Here are just a few:

Congress is taking a “big bang” approach rather than reforming in stages. The US health care economy is larger than the entire economy of Britain. Trying to fix something that large in one bill is impossible to get right.

The bills bend total spending up, not down, and America already spends far too much. And since little will be spent in the first three years, the enormous price tag for 10 years is just the tip of the iceberg.

The Medicare program is $37 trillion out of long-term balance and that must be addressed if we are to avoid financial disaster for our kids. Yet the bills would cut Medicare spending to partly finance a new health entitlement, not to move the existing one towards long-term solvency.

But can anyone who has spent time in Washington really believe there will actually be serious future cuts in Medicare – especially if the savings are not ploughed back into Medicare? More likely the bills will lead to a huge new unfunded obligation. We’d better be nice to the Chinese, who hold much of our debt.

The Senate bills seek to hide their cost in new taxes and cash income reductions for all insured Americans. Lawmakers could have built on the long-held bipartisan agreement that we need to limit and reform the tax exclusion, especially for upper-income households. Instead they chose the politically easier route of taxing plans and medical products and shamelessly pretending those taxes will not be passed through to ordinary Americans.

And those are just a few causes for concern.