US health reforms focus on cost control - nterview with budget chief Peter Orszag

US health reforms focus on cost control - nterview with budget chief Peter Orszag
By Krishna Guha and Edward Luce in Washington
Copyright The Financial Times Limited 2009
Published: May 22 2009 00:05 | Last updated: May 22 2009 00:05
http://www.ft.com/cms/s/0/f7c5e714-4639-11de-803f-00144feabdc0.html


Controlling costs is emerging as the Obama administration’s top priority in health as it seeks a reform package that greatly expands coverage of the 47m uninsured Americans.

The White House’s approach is to widen coverage within strict fiscal constraints, rather than increasing coverage at all costs, reflecting the political and economic pressures imposed by record budget deficits, according to healthcare analysts.

Liberal critics are concerned that Mr Obama is preparing to water down his ambitions to expand coverage and could jettison a promise to include a public healthcare plan. But many supporters recognise the need to show fiscal discipline.

In an interview with the Financial Times, Peter Orszag, the White House budget director, said: “We have been very clear that a deficit-increasing healthcare reform is neither practical nor desirable.”

A senior administration official told the FT that health reform would have to be deficit-neutral over 10 years and in the tenth year, and promise substantial savings over the longer term.

Health campaigners fear this could make it difficult to achieve near-universal coverage.

However, Bill Galston, an analyst at Brookings, the public policy group, said: “The fact that the administration appears to be leaning towards making cost reductions a priority is consistent with the larger political reality. Remember, 85 per cent of American people have health insurance and there is genuine public concern about rising fiscal deficits.”

Dean Baker, head of the Centre for Economic Policy Research, added: “The administration is absolutely right to prioritise the fiscal element. Expanding coverage without reducing costs would be a hollow victory because we would not be able to pay for it.”

The Clinton administration’s own effort to reform healthcare in 1993 was sunk in part by fears that it would be too expensive.

Most economists believe that it would cost between $120bn and $140bn in subsidies each year to achieve universal coverage. The Congressional Budget Office may put a smaller price tag closer to $100bn a year on the kind of reform supported by the administration on the grounds that take-up would not be universal.

The administration is not promising to achieve universal coverage in the near term, and instead talks about creating the structures and incentives that could lead over time to full coverage. “The president has said he wants a path to universal coverage,” Mr Orszag said. “There are different ways of putting us on a path to universal coverage.”

The liberal wing of the Democratic party is determined that the White House should not abandon Mr Obama’s campaign promise to include a publicly run healthcare insurance plan to compete with private plans.

A number of centrist Democrats have sided with the insurance companies in arguing that a public plan would tip the playing field against the private sector. Some health economists believe it is dispensable. But proponents argue that the public plan is essential to ensure low cost coverage for all. “This is a way of keeping the insurance companies honest,” said Mr Baker.

Mr Orszag said: “The president has said he favours it. It was in the president’s plan. He has laid out the case as to why it makes sense in particular to promote choice and to provide competition for private insurers. But we have to see the package as a whole.”