Physical Reality Meets Political Reality

Robert Samuelson’s column this morning is on much the same page as my post of this weekend on the subject of healthcare costs under the reform bills making their way through the Congress:

Who’s right? Let’s start with the numbers. Unfortunately, the word “savings” is used misleadingly. It doesn’t mean (as is usual) actual reductions; it signifies smaller future increases. There’s a big difference.

In 2009, national health spending will total an estimated $2.5 trillion, or 17.7 percent of gross domestic product. By 2019, it’s projected to rise to $4.67 trillion under present policies, or 22.1 percent of GDP. With CAP’s “savings,” it rises a little less sharply to $4.49 trillion, or 21.3 percent of GDP, according to Harvard economist David Cutler, the study’s co-author, who provided these figures. Similarly, family health insurance premiums rise from 19 percent of median family income in 2009 to 25 percent in 2019 under present policies and 23 percent with CAP’s “savings.” The point is simple: Even with highly optimistic assumptions, health spending remains out of control. It absorbs more of government, business and family budgets. Higher health spending would put pressure on future budget deficits, already projected to total about $9 trillion over the next decade. If new taxes and Medicare “savings” are real, they could be used exclusively to pay down deficits, not finance new spending.

But many may not be real. Writing in the Wall Street Journal, Dr. Jeffrey Flier, dean of the Harvard Medical School, gave the various health bills a “failing grade” and said they wouldn’t “control the growth of costs or raise the quality of care.” Quoted in Newsweek, Dr. Delos Cosgrove, head of the Cleveland Clinic, said much the same. Richard Foster, the chief actuary of the federal Centers for Medicare & Medicaid Services, doubts the cost-saving provisions touted by CAP would save much money. He’s also skeptical that Congress, facing complaints from hospitals and a squeeze on services, would allow all the Medicare reimbursement cuts to take effect. True, Congress has permitted some reimbursement reductions to occur, but it has repeatedly blocked the Sustainable Growth Rate adjustment for doctors, which most resembles the new proposals.

Health cost increases might spontaneously recede, but history suggests skepticism. The relentless advances reflect an open-ended insurance and delivery system that gives neither patients nor providers any reason to restrain spending. To attack costs first would be politically challenging. It would require admitting that all good things are not possible simultaneously and that the uninsured already receive much medical care. It would require genuine bipartisanship, not just a scramble for a few Republican votes. And it would require stronger measures to dismantle a fee-for-service delivery system that now rewards more, not better, care. That’s a demanding and realistic approach; Obama’s is wishful thinking.

It may well be true that no healthcare reform that actually rather than aspirationally brings healthcare costs under control is politically possible and it has been a recurring theme at this site that political reality matters. However, physical reality has a nasty way of asserting itself. You cannot spend more than you have or more than you are likely ever to have indefinitely. Things that aren’t sustainable won’t be sustained.

And, if we elect to miss this opportunity, I believe that the crisis that will inevitably come will result in consequences far worse either for physicians or for patients than the jerry-rigged solution that will be implemented in a panic. Medicare is already likely to go into the default within the next eight years. That estimate was based on revenue projections it is already clear won’t be met and cost estimates that have already been exceeded. It will happen sooner.