Government

Trimming health spending will be difficult, budget chief tells Congress

Left unchanged, the existing health system would lead to 8 million more uninsured people by 2019, according to the Congressional Budget Office.

By Doug Trapp — Posted Feb. 27, 2009

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Although "a substantial share" of the nation's health spending does not significantly improve health outcomes, trimming it without also cutting spending that improves health will be difficult, said Congressional Budget Office Director Douglas W. Elmendorf, PhD.

"There are very few medical procedures that are good for nobody," Elmendorf testified during a Feb. 10 Senate Budget Committee hearing on future federal health care spending.

Patients and health professionals need stronger cost-control incentives and better data about health care quality and value, Elmendorf said. Annual per-person health expenditures would increase from $8,300 this year to about $13,000 by 2019 under the existing health system. Annual Medicare and Medicaid spending would grow from $720 billion to $1.4 trillion in the same period, he said.

"The challenge is there's much less consensus among analysts about precisely which programmatic changes can move us most effectively in the direction of enhancing incentives and improving information."

The existing health system, if left unchanged, would lead to 54 million uninsured people by 2019 -- an increase of 8 million, Elmendorf said. But CBO suggests reform proposals could achieve near-universal coverage by adopting three features:

  • Broader risk pooling, possibly by "strengthening the employment-based system; modifying the market for individually purchased insurance; or creating a new mechanism such as insurance exchanges."
  • Subsidies, although subsidies for public health insurance tend to encourage people to drop private coverage.
  • Mandates or new processes for increasing enrollment. An enforceable mandate would be more effective in increasing coverage, but it could pose a burden for many if enacted without meaningful public subsidies.

Elmendorf highlighted Medicare payment as a key health reform issue. Moving away from the current fee-for-service physician payment system and toward a medical home model has the potential to improve health outcomes and reduce costs, he said.

Elmendorf also said taxing spending on individual health insurance while not taxing spending on employer-sponsored coverage provides uneven subsidies. The tax exclusion for employer-sponsored insurance is worth about $250 billion a year. Shifting it toward helping lower-income workers afford health coverage and away from subsidizing higher-income workers likely will raise the number of insured, he said.

The Feb. 10 Senate Budget hearing can be viewed online (link).

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