The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

CBO to Policy Makers: Focus on Health Care Costs

Posted by Alan on November 19, 2007

Most health care reform rhetoric focuses on health insurance premiums and access to coverage. Too often it fails to address the real danger facing us: ever escalating health care costs.

Earlier this month, the Congressional Budget Office published “The Long-Term Outlook for Health Care Spending.” It’s not a pretty picture. While the report acknowledges that the aging of America’s population impacts health care costs, it warns that the impact of this factor has been greatly overstated — at least over the long term. In the next 75 years, the CBO estimates population aging will increase Medicare and Medicaid spending by roughly two percent as a share of the Gross Domestic Process. Of far greater concern to the CBO is unnecessary medical spending. According to a posting on the Health Affairs Blog, CBO director Peter Orszag estimates that 30 percent of health spending is on “wasteful or low-value services.” Considering this country spends around $2 trillion (that’s with a “t’) on health care, that 30 percent is a $600 billion (with a “b”) savings opportunity.

The CBO is pushing for more evidence based assessments of new technologies and the need to expand research on comparative effectiveness. They key, Mr. Orszag indicated, is to provide new incentives in the system aimed at changing provider and consumer behavior.

None of this will be easy. In January, the Center of Budget and Policy Priorities published a report entitled, The Long-Term Fiscal Outlook is Bleak. It identified health care costs as “the single largest contributor to the long-run budget problem ….” It goes on to say, “… the rate of growth in health care costs is driven largely by medical advances that tend to improve health and lengthen lifespans, but that also increase costs. It is inconceivable that Americans will not want to avail themselves of the medical breakthroughs …. The challenge therefore is to pursue major reforms that eliminate inefficiencies in the health care system and restrain costs in the system to the greatest extent possible without unduly constraining medical progress.” Shouldn’t take more than five, OK, six days. And then on the seventh day we can rest.

Constraining health care costs won’t be easy, but avoiding even the attempt to do something will be disastrous. Or as the Health Affairs Blog reports Mr. Orszag of the CBO putting it, “Don’t expect overnight results. But the time to get started is yesterday.”

There’s an easy place to start in California: look at the cost containment provisions of the various bills introduced in Sacramento. Seize the common ground in these proposals and fashioning a compromise of relative modest costs and pass it quickly.

Will the need for medical cost containment work its way into the rhetoric of the health care reform debate? It already has, but only on the edges. The issue needs, however, to take it’s rightful place — the center of it all.


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