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Orszag: 'Deficit Neutrality' Key Part Of Overhaul Package

By John Reichard, CQ HealthBeat Editor

June 9, 2009 -- White House Office of Management and Budget Director Peter R. Orszag moved Tuesday to nip budding GOP assertions that a Democratic health overhaul plan will explode the federal budget, insisting that any plan endorsed by President Obama will have to pass muster with "an appropriately skeptical" Congressional Budget Office.

Orszag said in remarks to a Brookings Institution seminar that "there is a moral imperative to expand coverage and reduce the ranks of the uninsured. If we're to finance that expansion of coverage, we will have hard CBO-scored offsets," Orszag declared, referring to estimates by the Congressional Budget Office of the costs of legislation. Many analysts view CBO as being unwilling to project savings from legislation without hard evidence.

Separately, leaders of the Senate Budget Committee are moving to enlist CBO more directly in efforts to write a health overhaul plan that would bend down the long term growth curve in U.S. health spending. "Congress must have the best information available to evaluate whether health care reform proposals will truly bend the cost curve," Chairman Kent Conrad, D-N.D., and ranking Republican Judd Gregg, N.H., said in a June 8 letter to CBO. The letter asked CBO to submit by June 16 a summary of policies that could best put health spending on a more sustainable trajectory.

In its budget proposal earlier this year, the Obama administration proposed various Medicare and Medicaid revisions as well as reduced tax deductions for wealthy Americans as a way to pay about $630 billion throughout 10 years of the cost of financing a health overhaul plan. The administration suggested that the $630 billion would pay about half the costs of an overhaul. Orszag said Tuesday that the White House plans to propose another $200 billion-to-$300 billion in Medicare and Medicaid reductions to help finance expanded coverage and other system improvements.

That would mean total Medicare and Medicaid cuts and other revisions saving some $500 billion-to-$600 billion. The congressional Joint Committee on Taxation on Monday identified another big source of funding for a health overhaul. It estimated that $419 billion over 10 years could be saved by limiting the amount of employer paid health insurance premiums that would be excluded from a worker's taxable income. The estimate assumes taxation above the cost of a "standard option" health plan for federal employees that is indexed annually for per-capita medical cost inflation.

Orszag said there is confusion over how the administration's goal of reducing geographical variation in health spending figures into efforts to keep down the costs of a health overhaul. Reducing those variations intrigues President Obama, Orszag said, noting the president's strong interest in a recent New Yorker magazine article by former Clinton administration official Atul Gawande comparing sharp Medicare spending differences in two otherwise comparable cities in Texas.

"I think many people have confused our efforts to lead to a more efficient health care system and address regional variation with the hard offsets—that is reductions in payments for Medicare Advantage plans, reductions in payments for other types of providers, some changes in Medicare beneficiary cost sharing that we had proposed and additional revenue—with the changes that are necessary to lead to a more efficient health care system," Orszag said. "We need to do both.

"We need to offset the full cost of any changes over the next five or ten years in a deficit neutral way through hard scoreable savings—this is not make-believe, this is not untested proposals—these are proposals that have been scored by an appropriately congressional skeptical budget office. And on that basis the package must be deficit neutral."

Congressional committees are gearing up in coming days to move various health overhaul proposals. On Tuesday the Senate Health, Education, Labor and Pensions Committee announced a markup of many days to begin June 16.

Senate Finance Committee Chairman Max Baucus, D-Mont., who also addressed the Brookings event, told reporters afterward, "I think we'll have a markup roughly the 17th."

Baucus said when asked how long the markup would run, "We can do it in a week."

A Baucus aide later clarified that the Baucus "mark"—the chairman's version of the overhaul—would likely be released around the 17th with the markup several days after that. "The plan is to release the bill the week of the 17th and mark up the following week," the aide said.

The Brookings event dealt with the issue of expanding federal funding of research comparing the effectiveness of medical treatments and procedures. Both Baucus and Orszag urged expansion of the studies, with Orszag calling it a way to help patients and doctors figure out which treatments work best and to reduce unjustified geographical variations in spending. Baucus said he would add to his health overhaul proposal a bill he introduced last year with Conrad to provide stable funding for an expanded federal research program.

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