Opinion Column

Health Care Reform or Just Expensive Entitlement Expansion?

We desperately need health care reform in America to cover all of our people and to craft a sustainable health care system.

Today we have a health care system that is bankrupting us. It isn’t sustainable. The Centers for Medicare and Medicaid says we spend 17 percent of our gross domestic product on health care now and we are on our way to spending 22 percent of our GDP on health care in 10 years.

But I fear we will not get the health care reform we so desperately need.

I see the Congress getting ready to send the president little more than a health care entitlement expansion that will give us a health care system even more unsustainable then the one we now have. To be sure, finding a way to cover more people is a good thing. But doing it in a way that will be even more unaffordable would be the worst kind of policy.

The Congress has said that any new health care bill has to be paid for-that it cannot add more to our already extraordinary deficits. Good for them.

But the Congress is getting ready to pay for the health care bill in the wrong way.

There are four ways we can pay for a health care bill:

1. We can raise taxes.

2. We can shave a little off the top of what we pay providers-doctors, hospitals, drug and device makers and insurance companies.

3. We can set global budgets like they do in Canada and much of Europe that puts government in control over what we spend.

4. We can change the way health care providers are paid so they have no choice but to get at the massive waste all the experts agree we have in the system and we end up with something we can afford.

The fourth option is real health care reform. It’s also the hardest way to do it because it would force all the special interests making big money off the $2.5 trillion we spend annually on health care today to put quality and affordability at the top of their list.

My observation is that the Congress has all but given up on the fourth option-real reform-because they have not found the political courage to face down these powerful special interests.

I believe the Congress has found a path to a health care bill-pay for half with cuts to the existing system and fund the other half with tax increases.

Shaving a little off the trillions of dollars providers get paid sounds like a good way to pay for health care reform. But it won’t change the way they behave and it won’t do a lot toward real affordability.

Raising taxes to pay for a big part of a health care bill when most experts believe there is as much as 30 percent waste in the system would be the height of irresponsible policy.

Consider this, during the last 10 years worker earnings have grown 34 percent, general inflation was up 29 percent, but health insurance premiums were up 117 percent.

How would you like your taxes tied to health insurance premium increases? That is what could happen if the Congress backs the leading proposal by paying for almost half of a health bill with income tax increases-specifically by capping the longstanding tax exclusion on health care benefits for higher income tax payers.

Advocates for this kind of health care “reform” have said not to worry-the steps being taken to introduce things such as health information technology, comparative effectiveness research, and more emphasis on wellness and preventive care will ultimately bring our system under control.

But the Congressional Budget Office in a December 2008 report signed by then-director Peter Orszag, and currently the president’s budget chief, said “approaches-such as the wider adoption of health information technology or greater use of preventive medical care-could improve peoples’ health but would probably generate either modest reductions in the overall costs of health care or increases in such spending…”

In short, politically easy cost-containment “lite” proposals-which Congress is getting ready to say will bring our health care system under control-will not get the job done.

I expect to see a health care bill emerge with a little cost-containment window dressing, a modest shaving of what providers get paid today, and lots of tax increases which would have nothing to do with changing incentives toward making the system more efficient.

But that will not be health care reform.

We are not on our way to health care reform. Instead, we may be our way to the most expensive expansion of entitlements since 1965, with a big part of it paid for with tax increases.

Robert Laszewski is a longtime health insurance industry executive, consultant and health policy expert.

Related Topics

The Health Law