Paying for Health Care Reform

The White House
June 13, 2009

Health Care Reserve Fund ($ in billions – over 10 years)

$635 – FY 2010 Budget
$309 – Medicare and Medicaid Savings
$326 – Revenues

$313 – Additional Medicare and Medicaid Savings
$110 – Incorporate productivity adjustments into Medicare payment
$106 – Reduce hospital subsidies for treating the uninsured as coverage increases
$75 – Pay better prices for Medicare Part D drugs
$22 – Other

Total: $948

http://www.whitehouse.gov/MedicareFactSheetFinal/

What does President Obama mean when he says that this is how we’re going to pay for most of his health care reform proposals? Is he referring to savings in the actual costs of health care that would offset the increased spending that would result from expanding coverage? Or is he merely referring to a decrease in government spending that helps with government budgets, but doesn’t really have much impact on our total national health expenditures (NHE)?

Two-thirds of the proposed funding already appears in his FY 2010 budget. He would reduce overpayments to Medicare Advantage plans, reduce Medicare and Medicaid fraud (sure), reduce hospital readmissions (block the entrances?), and reduce Medicare hospital payments by measuring quality (hmmm). In this fact sheet, the only revenue increase mentioned is limiting the value of itemized deductions for families making over a quarter-million dollars a year, a proposal that has proven to be quite controversial.

The new proposals in this fact sheet include a reduction in spending based on improved productivity, extrapolating the improved productivity in the entire U.S. economy and applying it to health care (not exactly noted for assembly lines, displacing health care with information technology systems, etc.). It includes a reduction in payments to Disproportionate Share Hospitals (excess share of uninsured) which would be made possible by providing insurance to those currently uninsured. This is more of an accounting gimmick since it merely moves government spending from the hospitals to the insurance plans. Also proposed is a reduction in drug reimbursement for beneficiaries dually eligible for Medicare and Medicaid, a minute fraction of what could be saved by negotiating fair prices for all of us under a universal national health program.

Merely playing with numbers does not provide us with the comprehensive structural reform that we would need to accomplish our two primary goals: 1) health care for everyone, and 2) slowing health care cost escalation to sustainable levels. As long as the politicians can continue to distract us with cat fights over the public option, or whatever, we will never have what we really need: a new and improved Medicare for all.