Democrats, Republicans Offer Rival Views to Control Health Costs

By | August 2, 2012

Democrats and Republicans agree that the next U.S. president will have to contend with rising healthcare costs that pose a growing, destabilizing burden for families, employers and government budgets.

But two articles published in the New England Journal of Medicine on Wednesday show how far apart each side stands on the question of what to do, ahead of a November election showdown between President Barack Obama and presumptive Republican nominee Mitt Romney.

Twenty-three co-authors led by former Obama health adviser Dr. Ezekiel Emanuel argue for broad changes for the public and private sectors that would limit cost growth by state, reward high-quality care and accelerate the move away from a costly system that compensates doctors and hospitals for the number of services they perform rather than the outcome of their work. Their recommendations build upon more indirect efforts to control costs under the Obama healthcare law, which will take full effect in 2014.

A second plan, from three Republican-aligned authors led by Joseph Antos of the conservative American Enterprise Institute, calls for market-based incentives that would encourage seniors enrolled in the government’s Medicare health program to buy their own insurance and would limit tax breaks on coverage provided through an employer.

The two articles offer a glimpse of the rival approaches that could emerge in 2013, when Congress will again have to tackle a skyrocketing national deficit, tax reform and the future of Medicare and the Medicaid program for the poor.

An Obama administration official said policymakers looked forward to reviewing the articles.

The U.S. healthcare system, which is expected to generate $2.8 trillion in spending this year, is the world’s most expensive. Compared to other countries, however, it delivers only mediocre care, according to the Paris-based Organization for Economic Cooperation and Development — and at a cost of more than $8,400 a year for every man, woman and child.

Growth in healthcare costs has slowed in recent years, mainly as the result of a weak economy. But government forecasters warn that costs will accelerate, reaching $4.8 trillion in 2021.

Within 25 years, healthcare spending in the United States is expected to account for one-quarter of the U.S. economy and 40 percent of total federal spending.

“These trends could squeeze out critical investments in education and infrastructure, contribute to unsustainable debt levels and constrain wage increases for the middle class,” wrote the Emanuel team, which includes former Senator Tom Daschle and Obama’s former budget director Peter Orszag.


The two sides appear to find some common ground on Medicare, the popular healthcare program for the elderly and disabled that is expected to top $590 billion this year.

Both advocate the expanded competitive bidding to rein in costs for medical devices and services in traditional Medicare and a more aggressive push away from fee-for-service programs.

Emanuel also envisions Medicare spending 75 percent of its payments on alternatives to fee-for-service within 10 years.

In the private sector, the plan advocates “tiered” insurance plans that reward consumers who use “high-quality” providers and recommends that new state health insurance exchanges created under Obama’s healthcare law use their leverage power to keep premiums in line.

It also recommends that public and private insurance plans negotiate payment rates for doctors and other providers on a state-by-state basis. The cost per person should be closely aligned with wage growth on a local level.

The plan calls for greater price transparency for medical services, a wider use of non-physician professionals such as nurse practitioners and liability protections for doctors who practice low-cost, high-quality methods of delivering care.

The rival team, including President George H.W. Bush’s former adviser Gail Wilensky and Wharton School health economist Mark Pauly, advocate a politically risky Republican approach that would retain traditional Medicare but offer beneficiaries the option of receiving financial support for the purchase of private insurance.

“This would give seniors an incentive to select lower-cost plans and provide plans with an incentive to provide appropriate services in a cost-effective manner,” the authors say.

The Antos group also would use Medicare to encourage change in the private sector by requiring the country’s largest purchaser of health services to compete with private insurers and offer a bundled payment system to providers that would set a single payment rate for a range of related services.

In the private sector, changes would include ensuring that employer-sponsored health insurance is no longer exempt from taxation. Instead, employees and other individuals would receive tax credits to help pay for private insurance or the exclusion would be capped at a rate calculated to grow more slowly than healthcare costs.

Employer-sponsored insurance currently accounts for 90 percent of all private health insurance for people below retirement age and $250 billion in annual subsidies.

Topics USA Politics

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