Health Care For America Now

As the administration turns its eye to health care reform, you can expect to see Peter Orszag a lot. The nation's budget-wonk-in-chief will have a lot to say on what seems to me to be the next key question, now that it seems like most are agreed we need a public health insurance option: How do we pay for health reform?

Orszag pointed out the financial imperative of reform on Friday, something he's been talking about for years. But today, he starts to lay out the financing. Orszag differentiates immediately between short term and long term:

Our cost containment falls into two categories: Medicare and Medicaid savings that are key to achieving scoreable savings over the medium term but that by themselves would be unlikely to generate substantial long-term efficiency improvements in the health system, and "game-changers" that are unlikely to generate significant scoreable savings in the medium term but that are crucial to moving toward a health system that addresses the issues discussed in Atul Gawande’s compelling New Yorker article.

The problem here is immediately apparent, because the administration and Congress have said health reform has to be budget neutral. Because most of the savings we need to fix the system and to fix the economy won't be scored by the CBO, this means we'll have to rely on the short-term stuff Orszag is highlighting, plus new sources of revenue, to meet this goal. This is actually a good thing, Orszag argues:

This belt-and-suspenders approach means we are not just banking on the long-term impact from the game changers to protect the budget. We also are demanding quantifiable cuts, efficiencies, and revenue-raisers so that the budget is not adversely impacted in the medium-term. That is to say, if the long-term savings from the game-changers materialize as expected, we wind up with a more efficient health care system and a better fiscal position. If they don’t, then at worst, we have a deficit-neutral plan that will not worsen our fiscal situation.

This isn’t the "voodoo economics" of supply-side tax cuts – not only because of the weak empirical basis for the claims behind such tax cuts, but also because proponents of supply-side economics were not willing to offset the cost of tax cuts through hard, verifiable offsets in the medium-term. Our approach, by contrast, not only attempts to address the key forces behind inefficiencies and rising costs in our health care system, but is also backstopped by hard-headed budget accounting and clear-eyed fiscal discipline.

He has a point. Paying for health reform now ensures there is no downside, budget-wise, even if efficiencies don't materialize as expected. Still, there will be a huge fight about the price of health reform, and we still haven't answered the basic question of where exactly that revenue comes from.

Congress hasn't started laying out these options yet, but I'm hoping Orszag keeps speaking up about our options for that revenue in the future, to bring his knowledge to bear on the complicated subject.