Healthcare Costs and Reform

The federal budget is on an unsustainable path, primarily because of the rising cost of healthcare. Healthcare reform is a central issue in Congress this year and a top priority of the Obama administration. One major concern as solutions are being debated is the cost of various reform methods. On July 26, 2009 Doug Elmendorf, Director of the Congressional Budget Office (CBO) published Additional Information Regarding the Effects of Specifications in the America’s Affordable Health Choices Act Pertaining to Health Insurance Coverage as a response to Peter R. Orszag, Director of the Whitehouse Office of Management and Budget (OMB) blog post CBO and IMAC in which he stated that CBO (which he headed until Obama named him to OMB Director) seems to have overstepped. I expect a little back and forth between these two blogs as this issue moves forward.

The issue of the cost of reform will be front and center as Congress heads into its August recess. The Whitehouse has said that healthcare reform must be deficit-neutral. It is unlikely that the plans being debated in the House and the Senate will achieve this goal in their current form. A big part of this issue is controlling costs. Getting costs under control will require making some difficult choices about which procedures and medications will be covered under any new plan. There is some hope that preventive care can save money, but a 2008 study published in the New England Journal of Medicine concluded, “Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.”

Medicare is going broke. Trustees of the Medicare program released their 2009 report which shows that the fund that pays for hospital care will be exhausted by 2017. Correcting the fiscal imbalance will require “substantial changes” to funds coming in and going out of the fund, “even in the short-range alone,” according to the trustees. Any successful heathcare reform will need to take the current Medicare fiscl crisis into consideration.

Sen. Charles E. Grassley of Iowa, the top Republican on the Senate Finance Committee, said “Kicking the can down the road isn’t an option any more because we’re at the end of the road. Necessary policy reforms to add efficiency and improve Medicare’s fiscal health without cutting benefits will take time to implement. If Congress waits, the savings from those changes won’t materialize until after the program becomes insolvent. At that point, the only options would be cutting provider payments, reducing benefits, or raising payroll taxes.”

Rep. Pete Stark, D-Calif., chairman of the House Ways and Means Health Subcommittee, said “while opponents will use this as another excuse to arbitrarily slash and burn Medicare, our energies are better focused on how to reform our health system and rein in rising health costs.”

There are no easy answers. Healthcare reform is complicated and will be difficult to accomplish. It must be done in a thoughtful manner and with a measured approach. But is is vital for the financial health and economic stability of our nation that we succeed. As anyone that reads here regularly or follows me on Twitter knows, I am certain the Health IT will play an important vital role in providing innovative ways to control costs and increase quality and clinical outcomes.

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