February 25, 2009 -- Senate Finance Committee Chairman Max Baucus called on the Congressional Budget Office Wednesday "to help us find a way to make health reform work," saying that the agency's assessment of how much overhaul proposals will cost or save "will make or break this enterprise."
CBO Director Douglas W. Elmendorf was the sole witness at the session, where he and Finance members discussed various options to control health care costs and provide health insurance to the 45 million Americans without coverage. As he opened the hearing, Baucus, D-Mont., said that comprehensive change "is no longer simply an option. It's an imperative" and that delays will cause millions more Americans to lose health coverage and drive costs higher for both the federal government and for individuals who have health care insurance.
Elmendorf's predecessor, Peter Orszag, who now heads the Office of Management and Budget, had signaled that investments in areas such as health care information technology or research to compare the effectiveness of drugs and medical procedures could save money over time, a departure from previous CBO scores which estimated no savings from such proposals.
The impact of efforts aimed at reducing health care costs, such as bundling payments for hospital and post-acute care or encouraging better care coordination among health care providers, depend on how they are used, Elmendorf said. CBO has not previously scored some of the concepts under discussion in health care overhaul. "We are in areas we do not have experience with," he said.
When asked about something CBO has previously ruled on — allowing the secretary of Health and Human Services to negotiate prescription drug prices on behalf of Medicare beneficiaries — Elmendorf concurred with the agency's past analysis that such a move would have "little if any effect" on drug prices because private plans are already negotiating discounts with drug makers.
Elmendorf and the panel discussed several options for financing an overhaul of the current health care system, including developing health care pools to help individuals find affordable coverage and providing subsidies to make health insurance less expensive for individuals and families. Subsidies are particularly important, Elmendorf said, if individuals were required to purchase coverage.
Taking steps to make the health care system more efficient, such as linking payment to the quality of care delivered, or broader use of "comparative effectiveness" research could also help reduce health care costs and increase efficiency, Elmendorf said.
One proposal that generated a lot of discussion at the hearing was changing the current tax treatment for employer-sponsored health insurance. Replacing the tax exclusion for those benefits or restructuring it "to encourage workers to join health plans with higher cost-sharing requirements and tighter management of benefits" could help provide billions, Elmendorf said. At a Finance hearing on the issue last July, Massachusetts Institute of Technology professor Jonathan Gruber estimated that there are $250 billion a year in foregone tax revenues from excluding employer expenditures on health insurance from taxation.
Finance member Sen. Ron Wyden, D-Ore., said that giving individuals "a very generous deduction" of $16,000 to $17,000 a year would be more than the $12,000 most families spend for health insurance and would produce new revenue for health care overhaul. Wyden is sponsoring legislation (S 391) that would shift the focus of health insurance away from employers to state-based pools where people choose from a menu of private health insurance plans, with households receiving a $17,000 deduction for family coverage. Individuals and families would be required to carry coverage and would receive subsidies to help pay the costs if they had lower incomes.
But other Finance members urged a "go-slow" approach to adding more money to the health care system as the nation's fiscal situation worsens. The panel's ranking member. Charles E. Grassley of Iowa, said spending more on health care programs like Medicare and Medicaid could add to the deficit. With health care spending now consuming 16 percent of U.S. gross domestic product "it's hard for me to understand why we'd want to put more money into the system," said Sen. Kent Conrad, D-N.D., who also chairs the Senate Budget Committee.
CBO Director Douglas W. Elmendorf was the sole witness at the session, where he and Finance members discussed various options to control health care costs and provide health insurance to the 45 million Americans without coverage. As he opened the hearing, Baucus, D-Mont., said that comprehensive change "is no longer simply an option. It's an imperative" and that delays will cause millions more Americans to lose health coverage and drive costs higher for both the federal government and for individuals who have health care insurance.
Elmendorf's predecessor, Peter Orszag, who now heads the Office of Management and Budget, had signaled that investments in areas such as health care information technology or research to compare the effectiveness of drugs and medical procedures could save money over time, a departure from previous CBO scores which estimated no savings from such proposals.
The impact of efforts aimed at reducing health care costs, such as bundling payments for hospital and post-acute care or encouraging better care coordination among health care providers, depend on how they are used, Elmendorf said. CBO has not previously scored some of the concepts under discussion in health care overhaul. "We are in areas we do not have experience with," he said.
When asked about something CBO has previously ruled on — allowing the secretary of Health and Human Services to negotiate prescription drug prices on behalf of Medicare beneficiaries — Elmendorf concurred with the agency's past analysis that such a move would have "little if any effect" on drug prices because private plans are already negotiating discounts with drug makers.
Elmendorf and the panel discussed several options for financing an overhaul of the current health care system, including developing health care pools to help individuals find affordable coverage and providing subsidies to make health insurance less expensive for individuals and families. Subsidies are particularly important, Elmendorf said, if individuals were required to purchase coverage.
Taking steps to make the health care system more efficient, such as linking payment to the quality of care delivered, or broader use of "comparative effectiveness" research could also help reduce health care costs and increase efficiency, Elmendorf said.
One proposal that generated a lot of discussion at the hearing was changing the current tax treatment for employer-sponsored health insurance. Replacing the tax exclusion for those benefits or restructuring it "to encourage workers to join health plans with higher cost-sharing requirements and tighter management of benefits" could help provide billions, Elmendorf said. At a Finance hearing on the issue last July, Massachusetts Institute of Technology professor Jonathan Gruber estimated that there are $250 billion a year in foregone tax revenues from excluding employer expenditures on health insurance from taxation.
Finance member Sen. Ron Wyden, D-Ore., said that giving individuals "a very generous deduction" of $16,000 to $17,000 a year would be more than the $12,000 most families spend for health insurance and would produce new revenue for health care overhaul. Wyden is sponsoring legislation (S 391) that would shift the focus of health insurance away from employers to state-based pools where people choose from a menu of private health insurance plans, with households receiving a $17,000 deduction for family coverage. Individuals and families would be required to carry coverage and would receive subsidies to help pay the costs if they had lower incomes.
But other Finance members urged a "go-slow" approach to adding more money to the health care system as the nation's fiscal situation worsens. The panel's ranking member. Charles E. Grassley of Iowa, said spending more on health care programs like Medicare and Medicaid could add to the deficit. With health care spending now consuming 16 percent of U.S. gross domestic product "it's hard for me to understand why we'd want to put more money into the system," said Sen. Kent Conrad, D-N.D., who also chairs the Senate Budget Committee.