Thursday, May 21, 2009

The Holy Grail of Budgeting: $2 Trillion in Savings From the Obama Health Care Plan?

The Obama Administration announced last week that they were going to expand health care coverage to every single person in the United States. We are going to "pay" for it by finding savings of $2 trillion over the next 10 years in technological advances and administrative processing savings.

If it were that easy to find $2 trillion in administrative savings in health care, don't you think we would have done that already with all the computers we have and the whizkids who can invent Google and Facebook in their sleep?

Do you really believe the promises made by the health industry last week about finding that $2 trillion in potential savings?

This reminds me of all of the legends and movies about the Holy Grail. It was believed to have been used by Christ at the Last Supper. No one in modern history has ever seen it or seems to know what happened to it. Not Indiana Jones, Tom Hanks or Monty Python even.

The same thing with finding $2 trillion in budget savings from health care reform: we 'know' it might be there but we just can't seem to get our hands on it anywhere for certain in the $1.7 trillion medical industrial complex.

To his credit, President Obama seems to be adhering to the so-called PAYGO (pay-as-you-go) principles that worked so well in the 1990s since he wants the new health care plan to be 'paid for' by savings or tax hikes elsewhere. Let's just hope and pray that the 'savings elsewhere' option is real and not just an empty promise.

I had the wonderful opportunity to work with a lot of health care professionals during my years in Congress until I first left public service in 1995. When I returned to Capitol Hill in 2003, 8 years later, many of these same professionals came into the Dole Senate office to discuss the state of health care in America and North Carolina.

The first thing I asked them was if any technological, medical, or management breakthrough had occurred during the interim that would save any appreciable money in the medical field. "Sure", one of them said. "The drug-eluting stent that is inserted into blood vessels to keep them open has significantly reduced the need for expensive open heart surgery!"

Out of thousands upon thousands of medical procedures and medical management techniques, there was only 1 significant development that actually reduced the cost of anything in the field of medicine in close to a decade! Everything else had gone up in cost, most of them by many multiples of cost.

So is it even realistic to think that the Obama Health Plan will wind up saving significant amounts of your taxpayer dollar in the future?

Doubtful, very doubtful unless the following provisions are part of the new legislation:

  1. Very expensive, somewhat elective procedures such as knee and hip replacements are not routinely covered by the new plan except in the case of true life-or-death situations.
  2. The plan is set up to cover only the true catastrophic health care insurance costs that occur when people are struck with life-threatening illnesses such as cancer, heart attack, stroke or brain and other injuries caused by accidents, not every single expense from $5 prescriptions on up.
  3. Eligibility for Medicare is raised to much higher ages and scaled according to qualifications by income and household wealth status.
  4. Significant amounts of money are dedicated to front-end costs such as wellness programs, smoking cessation and 'obesity abatement', also known as "healthy diets".
  5. Risk-based health insurance premiums are placed on all people who choose to engage in unhealthy behaviors.

Have we seen any of the fine print on the Obama Health Plan yet? No, his proposal was just the opening salvo in what will be a tortuous process. He was setting the plate and the parameters for the debate he would like to see this summer and hoping against hope that the health care providers he met with can actually one day deliver on the proposed $2 trillion in savings. I wonder if CBO will even score those promises as savings at all.

But you need to know that out of all the health care advancements that have taken place over the past 20 years or so, nothing has worked to drive down the overall costs of health care like the cost compression we have seen in most other industries such as computers or plasma TVs.

And unless some radically different structural changes are enacted in our nation's health care plans, the $2 trillion in savings will prove to be as elusive to find as the Holy Grail itself.

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