Washington Post Editorial: Why the Cheers?

Washington Post Editorial: Why the Cheers? - The House health-care bill that President Obama is celebrating falls short on two out of three crucial issues.
Copyright by The Washington Post
Friday, July 17, 2009
http://www.washingtonpost.com/wp-dyn/content/article/2009/07/16/AR2009071603775.html


IN ASSESSING proposals to overhaul the health-care system, there are three overarching questions: First, would the change make insurance more accessible, affordable and reliable? Second, is it paid for -- not only in a way that makes sense but that is sustainable over time? Third, and related to the second, does the legislation do enough to bend the curve on health-care costs, slowing the trajectory in which the increase in costs greatly outpaces the overall inflation rate? The House bill, which emerged to effusive praise from President Obama this week, falls short on two out of three counts.

-- Expanding coverage. The House measure would require individuals to obtain insurance; it would require employers to offer coverage or, except for the smallest employers (payrolls under $250,000), pay 8 percent of payroll into a government fund. It would set up insurance "exchanges" where those without employer-sponsored coverage could choose from among competing plans, including a public plan that would pay providers at or near Medicare rates. The government would subsidize premiums for individuals earning between 133 percent and 400 percent of the poverty level. The Congressional Budget Office estimates that 30 million people would get coverage through the exchanges, of whom about 10 million would join the public plan; most of these individuals are currently uninsured.

The measure would also greatly expand Medicaid eligibility; whereas now childless poor adults are generally not eligible, the measure would open Medicaid to all individuals up to 133 percent of the poverty level, extending coverage to 11 million otherwise uninsured people by 2019. Overall, the ranks of the uninsured would fall from an estimated 54 million in 2019 to 17 million, many of whom would be illegal immigrants. Insurers would have to cover applicants regardless of preexisting conditions and could not charge different prices based on applicants' health status.

-- Sustainable financing. This is an area of significant concern, and the fact that the CBO has not even completed its full cost analysis as the House committees race to approve the measure this week only adds to the unease. Earlier we recited some arguments against imposing a soak-the-rich income tax surcharge to pay for broad social reform, as this bill would. Here our question is whether the bill is, even with that tax, really paid for.

The measure would cost just over $1 trillion between 2010 and 2019; the income tax surcharge on those earning more than $350,000 a year would bring in $544 billion over 10 years, while cuts to Medicare would take care of the rest. But the program appears to be paid for during the 10-year window only because the Medicaid expansion and insurance subsidies don't begin to kick in until 2013; the tax surcharge would apply beginning in 2011. Meanwhile, the trajectory of rising costs is alarming: The net price tag of expanded coverage would be $202 billion in 2019, up 8 percent over the previous year. The tax surcharge, however, would bring in just $86 billion in 2019, up 5 percent from 2018. So to keep the program adequately financed, Medicare savings would need to be $116 billion -- and growing by some 10 percent annually, an awfully optimistic stretch.

-- Curve-bending. The House measure commendably includes various programs to reduce unnecessary hospital readmissions, to create "accountable care organizations" to coordinate patients' treatment, and to "bundle" payments between hospitals and post-hospital care.

But these efforts, mostly in the form of pilot programs, are not enough. The legislation doesn't give the secretary of health and human services authority to implement the changes on a wider scale; it doesn't boost the power of the Medicare Payment Advisory Commission (MedPAC) to set payment policies. As CBO Director Douglas Elmendorf told the Senate Budget Committee yesterday, "In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount." Given Mr. Obama's repeated exhortations to change that trajectory, his celebration of this legislation is hard to understand.