"A bipartisan proposal from Sen. Ron Wyden, D-Ore., to replace the tax exclusion for employer-based health benefits with a standard deduction would do more to contain healthcare spending than Senate Finance Chairman Max Baucus' plan to cap the exclusion, according to a recent assessment by the Joint Committee on Taxation,' Congress Daily reports. 'The revelation is lending a boost to Wyden as he attempts to sell Finance members on the key idea of his signature Healthy Americans Act.' The bill, which the CBO has scored the bill as deficit neutral, "has 13 co-sponsors, including Sens. Debbie Stabenow, D-Mich.; Bill Nelson, D-Fla.; and Mike Crapo, R-Idaho, who all sit on the Finance Committee" (Edney and Cohn, 6/18).The Congress is stuck in the mud on health care reform.
The Congressional Budget Office (CBO) continues to demand real health care reform and not the cost containment “lite” stuff they’ve largely been asked to score so far.
The recent letter from CBO Director Doug Elmendorf to Senate Budget Chair Kent Conrad is a very important document. Really, Elmendorf has laid out a detailed roadmap all but saying—“Here’s how I can give you what you are looking for.”
The message to the Congress is clear—stop playing around the edges and get serious about real health care reform:
In the absence of significant changes in policy, rising costs for health care will cause federal spending to grow much faster than the economy, putting the federal budget on an unsustainable path. This letter responds to your request for information about the features of reform proposals that would affect federal spending on health care over the long term.On the cost containment side, Elmendorf’s letter is very specific in suggesting some things that will work—many of them taking the power out of the Congressional hands and putting it into that of a third party to keep the pressure up over time. No more SGR back peddling.
As you noted, many experts believe that a substantial share of spending on health care contributes little if anything to the overall health of the nation. Therefore, changes in government policy have the potential to yield large reductions in both national health expenditures and federal health care spending without harming health. Moreover, many experts agree on some general directions in which the government’s health policies should move—typically involving changes in the information and incentives that doctors and patients have when making decisions about health care.
However, large reductions in spending will not actually be achieved without fundamental changes in the financing and delivery of health care. The government can spur those changes by transforming payment policies in federal health care programs and by significantly limiting the current tax subsidy for health insurance. Those approaches could directly lower federal spending on health care and indirectly lower private spending on it as well. Yet, many of the specific changes that might ultimately prove most important cannot be foreseen today and could be developed only over time through experimentation and learning. Modest versions of such efforts—which would have the desirable effect of allowing policymakers to gauge their impact—would probably yield only modest results in the short term.
Therefore, one broad long-range approach for reform that has drawn interest recently would combine specific policy actions—to generate near-term savings and provide experience that would lay the groundwork for future savings—with a mechanism or framework to impose ongoing pressure for achieving efficiencies in the delivery of health care. The effectiveness of that path would depend ultimately on the willingness of federal policy to maintain significant and systematic pressure over time and would require tough choices to be made. Without meaningful reforms, the substantial costs of many current proposals to expand federal subsidies for health insurance would be much more likely to worsen the long-run budget outlook than to improve it.
Then there are taxes. Readers of this blog know that I have been critical of using old-fashioned tax increases just to raise cash to pay for health care entitlement expansion. Why would we ever want to chase something--health care--that has been growing almost four times faster than the wage rate with taxes?
But that is different from using tax policy to encourage efficiency in the marketplace. From Elmendorf’s letter:
CBO’s Budget Options volume discusses a number of such changes. One option would replace the current tax exclusion with a refundable but more limited tax credit. Another option would limit the amount of health insurance premiums that could be excluded from income and payroll taxes to specific dollar amounts that represented the 75th percentile of premiums paid by or through employers. These approaches would change workers’ incentives about how much insurance to purchase and how much care to demand, and they would increase federal revenues by several hundred billion dollars over 10 years.The Wyden-Bennett Healthy Americans Act is a health care reform proposal that would creatively used the tax system to change the incentives—in this case replacing the tax exclusion with a tax credit as Elmendorf has suggested.
Some have been critical of Wyden-Bennett because the first version would have ended the employer-based system of health insurance, as we know it. But I was pleased to see Senator Wyden amend the bill to enable employers to continue their benefit plans.
Some have suggested that my enthusiasm for Wyden-Bennett is inconsistent with my being so hawkish on cost containment.
For sure, Wyden-Bennett needs to have its cost containment effort expanded. Don’t be surprised to see some movement on that score.
But right now both of the Senate health care committees are stuck in the mud. They have health plans that are pricing way north of what we can afford—the Finance Committee at $1.6 trillion—and they don’t have much more than $300 billion to $400 billion in scoreable savings to offset that cost.
It’s time to take another look at the bipartisan work Wyden-Bennett has accomplished in order to get the process unstuck. Elmendorf seems to be all but begging Senators to take another look at some of the key elements of the bill.
Since the CBO has already scored the Wyden-Bennett Healthy Americans Act as deficit neutral, let me suggest that should come in handy to Senators who can’t seem to make any progress with the CBO.