Opinion Column

Reform Whiplash

This column is a collaboration between KHN and The New Republic.

Will health care reform reduce spending on health care too little? Or too much? Over the last several days, one respected authority made a version of the former argument while another made a version of the latter–offering a reminder of why reform is so complicated and why the new law, for all its imperfections, is still an important step forward.

The first argument about spending came from Douglas Elmendorf.  Elmendorf is director of the Congressional Budget Office, making him Washington’s official accountant and among the most influential voices on all matters relating the federal budget. During a conference presentation, he announced that the Patient Protection and Affordable Care Act won’t significantly reduce what the government spends on Medicare and Medicaid.

This wasn’t exactly news. Elmendorf and his staff had produced official cost estimates for the new health overhaul bill in the spring, just before the final debate and vote. Those projections showed that the initiative would reduce net government spending by only a modest amount.

Of course, the fact that reform would reduce net government spending at all represents a major achievement. The new health law includes expansions of Medicaid, additional drug assistance for seniors on Medicare and new subsidies for poor and middle-class people that buy private health insurance-that’s how it makes sure all Americans (or most of them, anyway) can actually afford their own medical care. But those efforts require the federal government to spend large sums of new money. Only by coming up with an even larger set of cuts to existing programs, along with new revenues, could the law result in actual savings.

And yet Elmendorf was right about the long-term picture: The projected reduction in health care spending is small relative to what the government is likely to spend over the next few decades, given the aging population and the development of expensive new medical technologies. Or, to put it more simply, even with the reform law’s projected reductions in government spending, Washington remains on the hook for spending more on Medicare and Medicaid than it is currently prepared to take in.

So the government needs to find even more savings. And there are savings to be had, Elmendorf suggested, since the best available evidence suggest a lot of what the government spends on Medicare and Medicaid doesn’t actually leave beneficiaries better off.

That evidence includes, first and foremost, a famous series of studies that researchers at Dartmouth have produced over the last 30 years. Their research shows that spending on medical care varies wildly from community to community-with no apparent effect on the quality of care people receive. Seniors in Miami, for example, get way more treatment than seniors in Minneapolis. But they don’t seem to end up healthier afterward.

To say that reformers have read and been influenced by the Dartmouth research is an understatement. President Barack Obama and his supporters cited it repeatedly over the last year. But a front-page story in the New York Times-the type of story that, by design, gets Washington’s attention-suggested the Dartmouth research is full of ambiguity. One implication of the story was that overly severe cuts in medical spending would deprive people of necessary and appropriate medical treatments.

Sources for the Times story, including one of the Dartmouth researchers, claim (persuasively, from what I can tell) that the Times reporters either took quotes out of context or made errors. But the idea that cutting health care spending too crudely or severely will harm patients is credible.

The question isn’t so much whether the waste exists. The question, rather, is whether reform can pinpoint and excise that waste-whether it can cut out the bad medical care without removing the good.
Go back to that Miami versus Minneapolis contrast: To what extent are the Miami seniors getting too much care and the Minneapolis ones getting too little? To what extent does the disparity reflect other factors for which the Dartmouth studies and other related research may not fully account?

Different people will give you different answers to those questions. My own view is that over-treatment (i.e., too much care in Miami) is more of a problem than under-treatment (too little care in Minneapolis) and that, in an ideal world, the health overhaul law would have reduced spending more severely. It would have implemented many of the same reforms it does already-like applying scrutiny to new drugs, imposing penalties on hospitals with high rates of infection and so on. But it would have done so more quickly and more severely.

Still, providers and producers of medical care–all of them well represented in Washington–don’t like anything that might reduce their incomes. And, as a recent survey in Health Affairs showed, the public continues to equate more care with better care. The reform law includes as many, or close to as many, cuts as these groups would tolerate. And it enacts reforms that can be strengthened over time, through some combination of administrative rulings, congressional action and intervention from a new advisory board whose sole purpose is to control Medicare spending.

Over time, we can see which cuts reduce spending without harming quality–and which ones don’t. We can then double-down on the former while minimizing or eliminating the latter. It’s not an ideal solution or even an elegant one. But given how health care costs are projected to rise, it’s what we have to work with.