Costs stymie health-care reform

By Maureen Groppe • TENNESSEAN WASHINGTON BUREAU • July 30, 2009 WASHINGTON — One reason Congress is having so much trouble agreeing on a health-care plan is that lawmakers haven't figured out how to rein in costs. President Barack Obama has said any reform bill he signs must be fully paid for and must slow the growth in health-care spending. That spending is increasing faster than inflation, taking more money away from state and local governments, families and businesses. But early versions hammered out by lawmakers don't go far enough in slowing health-care inflation, according to the Congressional Budget Office. Here's a look at the proposals and the opposition each has encountered: CREATE AN INDEPENDENT COUNCIL TO REIN IN MEDICARE SPENDING Obama backs an independent council that would recommend how much doctors, hospitals and other health providers would get paid for treating senior citizens. The council also would recommend changes for improving quality and cutting costs. Changes made to Medicare, which covers 12 percent of the population, probably would have spillover effects on how the private sector delivers care. There already is a Medicare advisory panel that makes recommendations to Congress. But when the panel has recommended cuts, Congress usually hasn't gone along. Under the proposed change, Congress could block but not alter whatever the independent council recommended. Many lawmakers think that's taking too much authority out of their hands. Health-care providers, who regularly lobby lawmakers for higher payment rates, don't like the idea, either. The Congressional Budget Office has said that, depending on how the new board is structured, it might not result in significant savings. For example, the initial version of the proposed council wouldn't be required to reduce Medicare spending and wouldn't be given reduction targets. TAX HEALTH-CARE BENEFITS Employees aren't taxed on health coverage they get from an employer, which amounts to an average subsidy of about 30 percent. Many experts argue that taxing health benefits in some way — such as taxing more costly plans — would hold down costs by giving workers incentives to seek lower-cost plans. But the idea is strongly opposed by unions, which have bargained for better health-care benefits. In addition, the president is reluctant to violate a campaign pledge by imposing a new tax on middle class Americans. Some lawmakers are exploring going after the most expensive plans by taxing the insurance companies that offer them. Health insurers oppose that idea. PAY FOR QUALITY OF CARE, NOT QUANTITY The House health-care reform bill includes various proposals aimed at restructuring payment incentives. Under those proposals: • Hospitals would get paid less when patients are readmitted because they weren't treated right the first time. • Doctors would be paid for doing the best treatments instead of the most treatments. • More research would be conducted to determine the most cost-effective treatments. Many of the proposals in this area would be tested through pilot programs, not required. And if the government does start using "comparative effectiveness" research to limit or deny coverage for less-cost-effective treatments, providers and consumers might cry "rationing" and complain that the government is interfering in the doctor-patient relationship. CREATE GOVERNMENT-RUN HEALTH INSURANCE OPTION The House bill and one of the Senate proposals would create a government health insurance plan that would compete with private insurers for some customers. Proponents say this would use market forces to slow the increase in insurance premiums, which have risen several times faster than wages. One reason a public plan could charge less is it would reimburse health-care providers at lower rates than private insurers do. But if the rates are too low, doctors and hospitals will fight it. Republicans oppose the idea because they don't want to increase the government's role in health care. SPEED THE APPROVAL PROCESS FOR SOME GENERIC DRUGS While pharmaceuticals made from chemicals face competition from cheaper generic versions, the government doesn't have a similar, streamlined approval process for generic versions of drugs like insulin made from living organisms. Those drugs, often called biologics, are expensive. The annual cost of treatment with the breast cancer drug Herceptin, for example, can reach $48,000, according to the Federal Trade Commission. The House and Senate health-care reform bills would create a pathway for generic competition, but there's disagreement on how many years of exclusivity brand-name makers should get. The Senate bill would grant them 12 years, which would save consumers and the government an estimated $25 billion over 10 years. Obama and some House members are pushing for a shorter time period to save more money. But the brand-name drug industry argues that it needs enough incentive to continue researching and developing new drugs.