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Fiscally Responsible Health Reform Redux

OMB Director Peter Orszag debunks yet another story hyping the costs of health insurance reform.

Every two weeks or so, there seems to be a story ringing the alarm bells over the fiscal dimension of health reform.

As I've said time and again, the President is committed to signing a health reform bill that is deficit neutral in the first decade – and deficit reducing thereafter.  The legislation under consideration in the Senate and the bill passed Saturday by the House both meet these tests.

But health reform effort must go beyond simply being deficit neutral over the first decade and deficit reducing thereafter; it must also begin the process of transforming the health care system so that it delivers better care, not just more care.   Building the health care system of the future requires information technology; cutting-edge research into what works and what doesn’t; incentives for doctors and hospitals to focus on the quality of care; prevention and wellness; and a process that allows policy to adapt flexibly to changes in the health care marketplace over time.

The House and Senate versions of reform share a variety of measures that will help create this health care system of the future, which will help to contain health care cost growth while also providing Americans with higher quality care.  In addition to historic investments in health information technology, research into what works and what doesn't, and prevention and wellness investments that were included in the Recovery Act, some of the key provisions under consideration in the health reform bills include:

  • Changing the way we pay hospitals, to discourage mistakes and unnecessary readmissions.
  • Creating incentives in the payment system to reward quality of care rather than just the quantity of procedures.
  • Giving physicians incentives to collaborate in the coordination of patient care.
  • Investing in research into what works and what doesn’t in health care.
  • Reducing hospital-acquired infections and other avoidable health-center acquired conditions through rigorous reporting and transparency.
  • Imposing a fee on insurance companies offering high-premium plans — which would create a strong incentive for more efficient plans that would help reduce the growth of premiums.
  • Establishing a Medicare commission — which would develop and submit proposals to Congress aimed at extending the solvency of Medicare, slowing Medicare cost growth, and improving the quality of care delivered to Medicare beneficiaries.

As we approach the final stages of this health reform process, we have on the table a robust set of options that represent some of the most auspicious reforms we can take to transform our health care system and rein in health care cost growth. But don’t take my word for it. A bipartisan group of experts recently wrote that health reform legislation under discussion "offers many promising ideas to improve the overall performance of the U.S. health care system.  In addition to steps that would reduce the number of Americans without insurance coverage, the plan includes ways to slow long-term spending growth while building the high-value health care system our nation urgently needs."  Or read what a group of some of the most prominent health care and budget experts wrote in an open letter (pdf) released last week.

As we go through the rest of the process, the Administration will remain focused on ensuring that reform is fiscally responsible and helps to build the health care system of the future.

Peter Orszag Is Director of the Office of Management and Budget