CBO Wants to Play Major Role in Health Care Debate

Congressional Budget Office chief Peter Orszag told a Health Affairs forum yesterday that his office plans to play a major role in next year's health care reform debate. He now has 47 analysts working on a series of major reports that will give Congress a menu of options for holding down rising health care costs in the nation's Medicare and Medicaid programs. They will be released shortly after the fall election.

"It may be that policy makers don't want to deal with cost growth," he said. "but at least we can give them a list of 20 options."

While recognizing that government programs represent only half of health care expenditures, and that private spending is rising just as fast as public spending, Orszag said that rules adopted for Medicare in particular can determine how medicine gets practiced throughout the system. And the cost-savings potential is huge, he said.

"Thirty percent of health care services delivered do not improve health outcomes," he said. "That's $700 billion a year. There is not another area in economics that presents such an opportunity. That's five percent of GDP."

That prompted one questioner to articulate the famous nostrum that one man's waste is another man's paycheck. To which the head of the non-partisan CBO replied, "we need evidence, and we need incentives to drive patients to go for better care, not more care."

Perhaps his most interesting observation involved how to structure reform. Rather than focus on economic incentives like tax breaks that at best drive behavior at the margin, he said reformers should pay close attention to the psychological and social dynamics of how people make their personal health care choices.

For instance, insurance programs should be structured so that people default into the lowest cost option that delivers the best care. Most people, he said, do not choose their health care plans, they default into them. "Inertia is an incredibly powerful force in human behavior and ignoring that is just not an option," he said.

On a down note, he added his voice to the growing conventional wisdom that prevention measures will not generate savings for the health care system. All candidates for president have made prevention promotion a central motif in their health care plans, claiming that it will save the health care system money in the long run by promoting healthier lifestyles and arresting ill-health before it progresses to chronic disease.

In the candidates representatives' panel that followed, Harvard University's David Blumenthal, who is advising Sen. Barack Obama, said the key to determining which prevention steps make sense (those most often cited by prevention advocates are direct interventions to help smokers quit and to help obese people adopt better eating and exercise lifestyles to prevent diabetes) is cost effectiveness research that accurately measures the benefits of such programs.

"We know much secondary prevention is within the range of what makes sense in terms of cost effectiveness," he said.

George Washington University's Jeanne Lambrew, an informal adviser to the Clinton campaign, emphasized the need for the nation to create a "best practices institute," which could encourage physicians and public health agencies to adopt such cost-effective prevention measures.

Former CBO chief Douglas Holtz-Eakin, who is advising Sen. John McCain, signaled the Republicans, if elected, will fight against creation of new agencies to generate cost-effectiveness studies and develop authoritative best practices guidelines. These new agencies will be able to identify not just cost-effective prevention measures, but should help lower costs by highlighting those technologies that are both pricey and less effective and therefore shouldn't be reimbursed by payers.

"We need decentralized information sharing," the Republican presumptive nominee's adviser said. "We need to build a system that seeks out information about profitable prevention measures, one that is decentralized, not government run."

Posted by gooznews at May 14, 2008 08:11 AM