Obama's Health Care Plan

Peter Orzag, Director of the White House Office of Management and Budger, describes the administration's health care plans:

A plan to boost America’s fiscal health, by Peter Orszag , Commentary, Financial Times: As the healthcare debate picks up in the US, there has been much discussion about how to pay for it. Coinciding with this debate are vocal concerns about the country’s underlying fiscal position – which some have suggested as a reason to delay healthcare reform.

What this argument ignores is that healthcare is central to the long-term fiscal and economic prospects of the US. If costs per enrollee in Medicare and Medicaid grow at the same rate over the next four decades as they have over the past four, those two programmes will increase from 5 per cent of gross domestic product today to 20 per cent by 2050. ... Nothing else we do on the fiscal front will matter much if we fail to address rapidly rising healthcare costs.

The US spends almost 50 per cent more per person on healthcare than the next most costly nation, but our health outcomes lag those of most industrialised countries. For families, after adjusting for inflation, health insurance premiums have increased 58 per cent while wages have risen only 3 per cent since 2000. For states, rising healthcare costs are squeezing their budgets...

That is why Barack Obama is committed to undertaking healthcare reform this year. Based on estimates by Dartmouth College and others, the US spends about $700bn a year on healthcare that does nothing to improve Americans’ health outcomes.

Reducing the number of tests, procedures and other medical costs that do not improve health presents an enormous opportunity. ... If we slow the rate of healthcare cost growth by 1.5 percentage points per year, by 2030 we could reduce the federal budget deficit by 2.5 per cent of GDP...

Mr Obama is firmly committed to making healthcare reform deficit neutral over the next decade... with ... Medicare and Medicaid efficiencies (such as reducing Medicare overpayments to private insurers) and ... tax provisions limiting the itemised deduction rate for the wealthiest Americans to what it was when Ronald Reagan was president. On Saturday, Mr Obama also proposed an extra $313bn in Medicare and Medicaid savings proposals... Taken together, these ... total about $950bn over 10 years, an amount that puts us in a good position to fully fund health reform in a deficit neutral way.

We must also address the ... incentives for doctors and hospitals to provide more care, not the best care. A lack of information on what works leads to huge variations in the quality of care and its cost. ... The US must move towards a higher-quality, lower-cost system in which best practices are universal... The administration has therefore put forward initiatives such as health IT, research into what works, prevention and wellness, and changes in provider incentives. ...

This is not the end of our commitment to fiscal responsibility. Once healthcare reform is in place, the US can then focus on other aspects of fiscal sustainability, including Social Security reform. ...

[The line "including Social Security reform" will capture some attention - as it should.]