Rising Health Care Curve Won’t Bend, Even for Obama

A forthcoming report from the Congressional Budget Office shows that more than two dozen demonstrations projects launched by Medicare and Medicaid over the past decade have failed to stop the upward march of health care costs, CBO director Doug Elmendorf said Tuesday. But health care policy experts say the findings paint too gloomy a picture.

The CBO pronouncement will heighten pressure on politicians from both political parties to come up with new health care cost savings beyond those contained in the health care reform bill, whether as part of the current debt ceiling talks or in separate legislation. Federal spending on Medicare and Medicaid totaled $739 billion in 2010, making health care the single largest budget item in the federal budget. Those costs are expected to nearly double in the next decade.

Health care issues on the table in the ongoing debt ceiling talks include raising the Medicare eligibility age to 67, raising senior co-pays and deductibles by limiting Medigap policies, and charging wealthier seniors more for their coverage, which together could save about $250 billion over the next decade. Senior citizen groups are certain to oppose those measures, while public opinion polls show most of the public prefers taxing wealthy people to cutting benefits for seniors. 

President Obama and Democrats in Congress have been counting on recommendations from an independent advisory board to hold down costs should the voluntary demonstration programs in the Affordable Care Act (ACA) come up short. They include better coordinated care through accountable care organizations, bundled payments and other delivery system reforms.

In his April speech at George Washington University where he called for cutting $4 trillion from projected deficits over the next dozen years, the president recognized the health care savings from reform would be far less than what is needed to repair the nation’s fiscal health. He suggested the Independent Payment Advisory Board (IPAB) created by the legislation should make recommendations that would hold the growth in health care spending to a half percent above the growth in the domestic economy – a level far below the pattern of the past three decades.

But Republicans on Capitol Hill, who will likely renew their attacks at a hearing of the House Energy and Commerce Committee on Wednesday, have blasted the IPAB. They claim the still-to-be-appointed panel is a “secretive” board that will impose rationing on the nation’s seniors.

“The only possibility of containing health care costs in Obamacare is the IPAB,” House Majority Leader Eric Cantor, R-Va., told a U.S. Chamber of Commerce health care forum shortly after Elmendorf spoke. “That is a situation where we will see costs skyrocketing and rationing will occur.”

Elmendorf defended CBO’s projections that delivery system reforms like the accountable care organizations allowed under reform would only save a few billion dollars in the coming decade. “The demonstration projects that Medicare has done in this and other areas are often disappointing,” he said. “It turns out to be pretty hard to take ideas that seem to work in certain contexts and proliferate that throughout the health care system. The results are discouraging.”

Robert Berenson, a health analyst at the Urban Institute, admits many of the demonstrations on delivery system reforms have had mixed results. But a careful analysis of the successful elements of those demonstrations could be replicated across the country and lead to significant savings. “There are positive elements in a lot of those demos,” he said. “You could pick and choose the ones that worked.”