But again, the CBO does not predict that the cuts that the senate says will happen will really happen. The CBO is saying, in effect, “assuming costs will decrease as the Senate thinks they will, here’s the effect on the deficit (in combination with the other factors of the bill such as the excise tax).”

They are not saying “Because the Senate bill reduces health care costs, here’s the effect on the deficit”.

So, the question of whether this bill controls costs (which is a related but different question than whether/how much it lowers the deficit) cannot be answered by appealing the CBO.

It should be noted that the author of this report (Peter Orzsag) is also one of Obama’s closest advisers on this issue. He’s in the Cabinet as Director of the Office of Management and Budget.

You can read that one of two ways. Either Obama bribed him with a fancy title, and is using him as political cover to push through a disastrous agenda, or Obama is using his expertise to help fix the health care problem.

I take the latter position, largely because it gels with my previous positions on the issue. But partly because most non-Conservative wonks think the health proposal will do a lot of what it claims to do.

The $800 billion number is the amount by which the CBO expects the bill to decrease the deficits, not the amount by which health care costs are expected to decrease.

True, but if Medicare cost growth was not cut there’d be no deficit reduction.

It should be noted that the author of this report (Peter Orzsag) is also one of Obama’s closest advisers on this issue. He’s in the Cabinet as Director of the Office of Management and Budget.

You can read that one of two ways. Either Obama bribed him with a fancy title, and is using him as political cover to push through a disastrous agenda, or Obama is using his expertise to help fix the health care problem.

I take the latter position, largely because most non-Conservative wonks think the health proposal will do a lot of what it claims to do.

The $800 billion number is the amount by which the CBO expects the bill to decrease the deficits, not the amount by which health care costs are expected to decrease.

True, but if Medicare cost growth was not cut there’d be no deficit reduction.

The link you provided is interesting though. I’ve read through the first part of it and will continue later. Maybe it will persuade me.

(P.S. Tonight I worked my way through this testimony from the CBO last year, and the reports it refers to. I have been looking for something like this and was very happy that it actually exists. Very interesting stuff if you really want to know what is driving up health care costs: http://www.cbo.gov/ftpdocs/89xx/doc8948/01-31-HealthTestimony.pdf)

I can see your point, but where I disagree is that it doesn’t seem to me that there is that much cost-control in the bill to begin with. I don’t buy that the rising health care costs are just due to waste in the system.

There isn’t much in the House bill.

But the CBO apparently sees quite a bit in the Senate version — nearly $800 Billion over 20 years. And apparently quite a few economists agree:
http://politics.theatlantic.com/2009/11/a_milestone_in_the_health_care_journey.php

I prefer the House Bill’s subsidies, and it’s public option. In fact IMO we’d be best served by replacing the House public option with a stronger version but hey.

It’s true Congress could do a 180 on us, and totally blow up the cost controls. But I doubt they will. It’ll be much harder for them to do so in the future, for one thing. For another everybody’s sensitive to the deficit right now. In economic terms that probably doesn’t make sense. Interest rates are near zero, borrowing now is a no-brainer.

Besides it’s impossible to make a plan that’s Congress-proof. If we truly need one of those we -probably need a whole new Constitution. And I kinda like this one.

I don’t believe we have a shortage of liberal arts PhDs, but we do have a shortage of doctors and (perhaps even more importantly) nurses.

We have a shortage of General Practitioners. And it’s going to get worse as only a tiny fraction (2%, IIRC) of Med students plan on becoming GPs. The problem with specialists is that all the studies indicate that every new specialist you add to an area adds a whole bunch of new surgeries without adding any measurable health benefits.

I’ll agree on nurses.

“The problem with this is people typically define high-skilled labor as expensive labor. But a guy with a PhD in some random Liberal Art has a lot more credentials proving he’s high-skilled than health care pros who make 10 times his salary.”

I mean no offense to to liberal arts PhDs, but honestly I wouldn’t consider them “high skill”. I would consider them “high knowledge” or “highly educated”, and that certainly has a lot of value, but “high skill” implies that they have some rare skill that is in high demand. But it’s just semantics. If you don’t like my definition of “high skill”, my argument still applies. I don’t believe we have a shortage of liberal arts PhDs, but we do have a shortage of doctors and (perhaps even more importantly) nurses.

Your argument that it would make sense to cut costs first makes some sense. Problem is our government includes an inherently insane actor Congress.

Cost controls are dicey in Congress because they worry lots of people. The optimum outcome for a member when cost control proposal is made is that he fight it (thus saving him from angry seniors), and lose (thus saving the country). The second best outcome is for nothing to happen this year so that next year the suckers in that Congress can do it.

To actually get cost-controls through you need something else Congressman actually want or can be can be bullied into supporting. Ideally something that they believe needs immediate action, or they’ll just pass it off to the next Congress.

Right now universal coverage is pretty much the only thing that fits both bills. This if you want cost-controls this year you need to support universal coverage.

One of the points in that article is something I’ve stressed before: that a major driver in the rising cost of health care is because it is highly dependent on high-skill labor, and the cost of high-skill labor is increasing for reasons completely independent of health care.

The problem with this is people typically define high-skilled labor as expensive labor. But a guy with a PhD in some random Liberal Art has a lot more credentials proving he’s high-skilled than health care pros who make 10 times his salary.

I just skimmed the article itself, and it makes some good points. It ignores key things tho — i. e. the Obama administration hopes the board that recommends cost-savings for Medicare can do things like force hospitals to use nurses when a nurse would do as well as a Doctor for a lot cheaper. The exchange, with it’s clearly marked insurance products and (maybe) public option is supposed to put more pressure on the medical community to do this.

Note that both these solutions are inherently market-based. Rather than the government ordering hospitals to use nurses in those cases it will simply refuse to pay for a Doctor when it thinks a Nurse would do. Ideally the Public Option will force insurers to do the same thing.

If we had a Parliamentary system you’d be perfectly right. If we had a strong Presidential system you’d be right. But we don’t have that. We have Separation of Powers. And the powers were defined by guys who had never heard of the Telegraph, much less regulating what huge broadcasting company owns owns such-and-such a TV channel.

We have a Senate controlled by roughly 1/9th off the American people. The Senate requires a 60% majority for anything important. Most of the Senators think of these as lovable quirks, which are valuable because they ensure nothing gets done unless there’s a broad consensus. Many non-Senators see those features as the reason nothing gets done in DC.

So a President proposes simple cost-saving measures. By cutting costs you worry everyone involved in health care because they all assume one guy will get stuck with the cost-savings and go bankrupt as everyone else merrily keeps increasing prices. So a couple of the hospitals in some tiny state get together, and express their worries to their Senator. If he ignores them they’ll go on TV explaining that Senator X won’t fight a proposal that will drive every hospital in the state out of business. And he’s getting pretty much the same call from the Pharmaceutical companies (“we’ll go out of business and your people all die from lack of Insulin”), family Doctors, and worried Seniors.

So Senator X’s ideal situation is pretty simple: reform passes (saving the country) over his strong objections (saving his ass from angry seniors next election cycle). Which means every single Senator’s smartest move is to filibuster the cost-savings measures and hope 60 other Senators commit political suicide by breaking the filibuster. The second-smartest move is to simply let the bill die and wait another year.

So you ain’t cutting costs unless you bribe 60 Senators with things they want. Things like universal coverage. OTOH pairing cost controls with S. 1776 makes policy sense, but you won’t get it through the Senate.

One of the points in that article is something I’ve stressed before: that a major driver in the rising cost of health care is because it is highly dependent on high-skill labor, and the cost of high-skill labor is increasing for reasons completely independent of health care. The discussion over health care costs needs to be expanded to address not only the system itself, but also the external influences on the system that are contributing to the problem.

“The problem with this argument is simple:
It treats rapid increases in health costs as a given.

If that is actually true none of this matters because in 10 years Medicare goes bankrupt. Meanwhile everyone under the age of 65 has been priced out of the market.”

Again, I think it makes much more sense to address the cost problem now, rather than assume we will address the cost problem, and use the savings from the assumed realization of those cost reductions to fund new programs now. That seems to me to be very irresponsible. Again, from the CBO:

“Whether such a reduction in the growth rate could be achieved through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care is unclear.”

If we were talking about a smaller bill will less at stake, that might be gamble worth taking. But if the assumed savings are not realized, not only do we have high health care costs but we also have a huge government program that is tied to those costs adding billions to the deficit and/or the tax burden. That’s just too big of a gamble for me, but it’s a judgment call.

You’re confusing two separate programs. The mandatory cuts were a Clinton/Gingrich era cost-control idea. They don’t work because every Congressman loves being able to go on TV every December and explain how he just saved your Mom’s Doctor from bankruptcy. In other words they’re an accounting trick that forces Doctors to spend loads on lobbyists every December. S 1776 was an attempt to fix that.

The House apparently considered including that fix in their bill, but decided against it.

Arguably that approach makes more sense. But you have to keep in mind that the health bill is an intricate piece of work. The individual mandate (and tax penalty) allow insurance companies to end pre-existing conditions clauses without going bankrupt. The various medicare cost controls allow allow expansion of coverage, and without expanding coverage the bill dies in Committee. The Exchange (and it’s public option) makes the whole thing work. What we do with the accounting trick is irrelevant to all that.

I imagine that the reason they opposed S. 1776 is because it was (as the recent bill that passed is) a blatent accounting trick to avoid those costs being part of the health care reform bill.

So they’re saying “We’d rather cut your Doctor’s pay 20%, and protect the old accounting trick, than let the Democrats get away with THEIR accounting trick”?

As for this:

The cost of providing health care services has been rising far faster than the rate of inflation, so I’d say it’s a pretty small if and a big “else”.

The problem with this argument is simple:
It treats rapid increases in health costs as a given.

If that is actually true none of this matters because in 10 years Medicare goes bankrupt. Meanwhile everyone under the age of 65 has been priced out of the market.

OTOH, if you believe (as I do), that there is hope, that we can control costs, this is a good start. It’s not perfect, but the Excise Tax, the Medicare cost controls, and Individual Mandate should control costs. If they don’t at least we’ll have more data on what doesn’t work when we go back to the drawing board. Which will, hopefully, be before Medicare runs out of money in 2019.

I imagine that the reason they opposed S. 1776 is because it was (as the recent bill that passed is) a blatent accounting trick to avoid those costs being part of the health care reform bill.

The cost of providing health care services has been rising far faster than the rate of inflation, so I’d say it’s a pretty small if and a big “else”.

“Congress could chicken out. I doubt they will”

They’ve already started, according to the AP: http://www.google.com/hostednews/ap/article/ALeqM5ip_3G2TO8uvc1WknXFCob6L9VlLgD9C303V00

I’d quote some of the important parts of that article, but the whole thing is important. The medicare cuts are a blatent accounting trick.

And also, this article makes me question what i had thought: that medicare reimbursement rates aren’t being cut, just that the increase is being decreased. According to the article:

Doctors are facing a 21 percent reduction in Medicare reimbursement rates in January unless Congress acts first…

The Obama administration has sought a permanent solution to avoid the uncertainty of one-year payment patches, and House Democrats obliged by including it in their 10-year health overhaul bill.

But before passing the overhaul bill earlier this month they took out the doctor payment measure, in part to keep the cost of the overall bill low enough to meet Obama’s target price tag. Democratic Rep. Pete Stark of California acknowledged as much during Thursday’s debate.

“The reason it was separated, I would have to admit, was purely political,” Stark said. “We had to abide by the president’s request that we not exceed certain costs.”

Maybe I was being too generous before.

If reimbursement rates increase slower than the cost of providing health care services increase, then someone (the provider) is going to get a pay cut.

That’s a big if.

Total spending is allowed to increase at inflation+1%. Which means pay for nurses is supposed to keep pace with inflation. In health care almost all costs come down to wages, most of the rest is technology.

Which means that for your scenario to come true new, more expensive, technologies would have to become available, be under-priced by Medicare, and somehow providers would have to provide those services. Which would be a change from the current system where a provider who doesn’t want to perform CT Scans can simply refuse to purchase a CT machine.

@kk
Some of your scenario is possible. The CBO could be wrong. Congress could chicken out. I doubt they will, because chickening out will take 60 votes and a Presidential signature. And those 60 Senators will be voting to increase the deficit according to the CBO. That’s actually the point of the Commission — Congress can’t easily over-ride it’s recommendations so they probably won’t

The number of people who sign up will only matter if more middle class and lower folks than expected buy in. The rich don’t get subsidized, and the only way the government spends money on any plan in the Exchange is the subsidy. Likewise the number of folks on the public option won’t matter much, because it’s supposed to cost almost the same as the other plans in the Exchange.

@Mike
You got me.

I’m using two slightly different meanings of the term “cut” here. I’m doing it because otherwise some poor senior might read this thread and think Obama wants to cut his Doctors pay. This is not true. Obama wants to cut increases in medicare costs, which means Doctors don’t actually lose any pay.

Salary is a really terrible analogy. Your pay is based on a variety of factors that have no applicability to long-term health care costs.

The idea behind a comprehensive health care reform is that some 40 million people are uninsured. These people can’t get long term, preventative care. When they get sick, they deal with it. And then they get sicker, to the point they can’t deal with it anymore, and then go to the ER for free care. This is an very expensive way to go about caring for people. It’s a well known fact within the Medicare system, that there is a real issue with providing long term, preventative care.

So, if we were able to have comprehensive, preventative, universal health care, less people will be showing up in the ER with heart attacks, hypertension or other chronic issues. Instead, more people will be seeing a doctor once or twice a year about their blood pressure and their weight. Can you see how cheap, easy steps taken on a yearly basis can help avoid $20,000 surgeries with no one to pay for it?

With this bill, Medicare will have a decreasing rate of increasing costs, because more people will be getting preventative care under a universal healthcare plan before they enroll in the Medicare system. Thus, Medicare will be caring for, and pay for overall healthier people. This helps reduce costs.

This is the logic behind universal healthcare. It utilizes the concepts of economies of scale in a very real and efficient way. Any serious discussion of reducing healthcare costs must accept the superior economics of a universal healthcare plan.

If reimbursement rates increase slower than the cost of providing health care services increase, then someone (the provider) is going to get a pay cut.

++++++++++++++++++++++++++++++++++++++++++++++++

Mike has that right. The simple way to confirm this in personal terms is to figure what raises you got in the past 10 years, cut them in half (as the bills would cut increased Medicare reimbursements), adjust your 1999 pay for inflation and see whether your 2009 pay has increased in real terms.

For most people who are not climbing any promotional ladders, the answer would be that you make less today.

If reimbursement rates increase slower than the cost of providing health care services increase, then someone (the provider) is going to get a pay cut.

Partially true and partially not: the cuts to Medicare Advantage, for example, are indeed “cuts”.

But as for the “decrease in the increase”, you are right (as I understand it) that reimbursement rates are not being decreased, it’s just that the increases that would otherwise happen won’t happen. So there are two ways to look at it:

1) Either the “decrease in the increase” is a “cut”, in which case we can count the money saved and use it to offset additional expenses that we are creating in other areas.

2) Or, the “decrease in the increase” is not a “cut”, in which case there is no money “saved”, only money “not lost”, and therefore the money shouldn’t be counted as money saved to offset additional spending.

So which one of those 2 do you prefer? I’m flexible.

And right in the CBO’ report, the CBO is doing the best it can within its constraints. They acknowledge that things are not likely to unfold as Congress is wishing, hoping, and claiming.

I understand how much folks like Justin and Nick want reform to happen. I want to see reform too. But consider how heavily you’ve been leaning on the CBO for justification. If you have any sense of fair-mindedness, you’d admit that the reservations the CBO expresses are about as red a flag as such an agency is allowed to wave in this environment. After all, we KNOW that congresscritters are smart enough to know what they need to do to get a good report out of the CBO, right?

Anyone want to make it interesting? Where can we lay bets that the medicare cuts described won’t come to fruition or that more uninsured folks than predicted will end up enrolling in the public option? Come on now. Congress already has their “this only happened because of unanticipated development x” excuses written.

I think our healthcare system needs reform. Rising costs are choking the lower middle class. If this is the best we can get, I may well support it. But I don’t believe for a second that the deficit will go down as a result of it. I think it will go up, and I think it will also push costs elsewhere in the system so that costs will rise for Americans getting healthcare without a federal subsidy and for the businesses that decreasingly subsidize those costs.

http://www.whitehouse.gov/administration/eop/cea/chair-remarks-06082009/