The Glade 4.0

March 11, 2010

Dear Mr. President, Congressmen and Congresswomen,

America has higher per-capita medical spending than any other industrial democracy. Health care spending, now $2.6 trillion, is projected to reach $4.5 trillion by 2019. Without effective reform of the way we pay for health care, growth of health care spending will create unsustainable fiscal burdens, eat into cash compensation, perpetuate waste, and undermine the prospects for universal access to needed care.

The health care reforms passed by the House and Senate – with recent modifications proposed by President Obama – include serious measures that will slow the growth of health care spending. Putting the brakes on health care spending will take multiple measures, and we must start now.
Democratic and Republican experts have proposed many different approaches to “bending the cost curve.” The President's proposal incorporates a long list of measures that will control rising costs and reinforce each other:

• Form insurance exchanges to curb underwriting and inefficient marketing practices that raise costs in the small-group and individual markets.

• Reduce Medicare overpayments, including those to Medicare Advantage plans.

• Move Medicare to value-based payment. Experts across the political spectrum have called for moving away from fee-for-volume payments to fee-for-value payments. The President’s proposal includes virtually every idea offered to do this.

• Tax highly generous insurance plans. Health insurance benefits are excluded from income taxation. Many economists have proposed capping the tax exclusion to reduce over-insurance and to raise revenue. The President's proposal taxes some of the most generous policies, though it has deferred the date by which these taxes take effect.

• Empower an Independent Medicare Advisory Board. Interest-group politics intrudes too deeply within the mechanics of Medicare policy, raising program costs and hindering efforts to improve care. Despite powerful opposition, the President proposes this independent board and a process for fast-tracking such recommendations through Congress.

• Make greater use of comparative effective research. Less than one percent of the $2.6 trillion America now spends on health care is devoted to rigorous research to determine whether this money is being spent efficiently or well. The President's proposal includes major research investments to support quality improvement and cost-control efforts.

• Combat Medicare fraud and abuse. The Administration has started an active task force to combat these problems. Other ideas to reduce fraud and abuse were presented at the recent health care summit, and were incorporated in the President’s proposal.

• Reform malpractice policies. Defensive medicine is a small but real driver of medical spending. The President's proposal encourages states to experiment with alternative mechanisms to reduce malpractice burdens while reducing medical injuries and errors. More could be done, but this represents progress on a contentious issue.

• Implement HIT. Health information technologies can markedly improve the quality and economy of medical care. Last year's stimulus bill provided substantial funds for HIT, and the President's proposal builds on these efforts.

• Improve preventive care. The President's proposal includes significant public health investments. It provides new incentives for physicians to provide preventive and chronic care. It opens Medicare to finding new ways of doing so. It includes improved tertiary prevention efforts such as improved medical management of heart failure patients to prevent costly hospital readmissions. The ability of preventive care to slow overall medical cost
growth remains unproved. The ability of such measures to save lives and improve health is well-established.

Taken together, these measures are a serious, multi-faceted initiative to improve the quality and efficiency of American medical care, rein in the fastest growing portion of government and private budgets and provide a valuable platform for future cost-control efforts. If this nation is
committed to cost containment and deficit reduction we must pass health care reform. If this legislation fails, the chances of reducing the growth of health care spending in the future will be greatly reduced.

ECONOMISTS RESPOND TO WHITE HOUSE LETTER
 
Dear President Obama and Congress:

As early as this week, the House of Representatives will vote on the Senate-passed health care bill as well as a reconciliation package making changes to the bill. While Speaker Pelosi asserts that health care reform will create four million jobs, we disagree. In our view, the health care bill contains a number of provisions that will eliminate jobs, reduce hours and wages, and limit future job creation.

New Taxes. The bill raises taxes by almost $500 billion over ten years. A significant portion of these tax increases will fall on small business owners, reducing capital and limiting economic growth and hiring.

New and Increased Medicare Taxes. An increase in the Medicare payroll tax included in the bill will affect small businesses employing millions of Americans. Over time, higher payroll taxes will decrease wages for these employees. And a new Medicare tax on investment income such
as interest, dividends, and capital gains proposed by President Obama and likely included in the bill will threaten jobs and decrease economic growth.

Employer Mandate. The bill will impose a tax of $2,000 per employee on employers with more than 50 employees that do not provide health insurance. The bill will also tax employers that offer health coverage deemed “unaffordable” by the government. These new taxes on employers
will reduce employment or be passed on to workers in the form of lower wages or reduced hours.

In addition to constricting economic growth and reducing employment, the health care bill will increase spending on health care and will increase the cost of health coverage. The new and higher taxes on America’s small businesses and workers included in the bill are detrimental to job creation and economic growth, especially now given the fragile state of the economy. The Congress should instead enact a health care bill that will reduce spending on health care, reduce the cost of health coverage for every American, and that does not harm the economy or cost jobs.

Sincerely,

So, which group of economists has more credibility?