As President Barack Obama and congressional leaders continue discussions to avert the so-called fiscal cliff — the mix of tax increases and spending cuts set to take effect automatically in January — we hear a troubling but familiar refrain in Washington: To fix our deficit, we must cut Medicare benefits. That is flat-out wrong.
The fact is, we have a systemwide health care cost problem in America. Health care expenditures are nearly 18 percent of our gross domestic product. The next least-efficient developed country in the world spends 12 percent of its GDP on health care. Leaders of both parties have acknowledged this dilemma. As Republican vice presidential nominee and House Budget Committee Chairman Paul Ryan has said, “If you want to be honest with the fiscal problem and the debt, it really is a health care problem.”
This problem is not limited to Medicare. Everywhere you look, from private insurers to the Veterans Administration, health care costs are rising. (Actually, within the rising-cost health care system, Medicare and Medicaid are among the most cost-efficient providers.)
The first thing we must do is correctly identify the problem: U.S. health care system costs. The second is to solve it. Here, there is good news: We can reduce costs throughout the system, strengthen Medicare and reduce our deficit without cutting a single benefit for patients, by aggressively pursuing reforms in the way we deliver and pay for care, with a clear goal for cost savings.
The president’s Council of Economic Advisers estimated that more than $700 billion can be saved every year without compromising health outcomes; the Institute of Medicine recently put this number at $750 billion; the New England Healthcare Institute has reported that it is $850 billion annually; and the Lewin Group and former Bush Treasury Secretary Paul O’Neill have estimated the annual savings at $1 trillion.
Whatever the exact number, the potential for savings is huge. The federal government is responsible for 40 percent of America’s health care spending. If the Council of Economic Advisers’ $700 billion savings estimate is correct, we could reduce the deficit by more than $80 billion a year if we achieved only 30 percent of the potential. Over a 10-year budget period, that amounts to $800 billion in federal health care savings — all without taking away any benefits, while likely improving care.
As I chronicled in a report for the Senate Health, Education, Labor, and Pensions Committee earlier this year, the Affordable Care Act contains many of the tools we need to achieve our goals — tools like better coordinating care between primary physicians and specialists, paying for quality of care rather than quantity of care, reducing medical errors and hospital acquired infections, replacing paper health records with electronic records and more.
There’s a catch: These strategies for health care savings can’t be “scored” by our official number crunchers. As Douglas Elmendorf, director of the nonpartisan Congressional Budget Office has said, “Many experts agree on some general directions in which the government’s health care policy should move. Many of the specific changes that might ultimately prove most important cannot be foreseen today and could be developed only over time through experimentation and learning.”
So even though we know there is a vast savings potential — literally hundreds of billions of dollars per year — it’s impossible to know how much of that savings we will achieve until we actually do the hard work of implementing reforms. For that reason, I am sending a letter to President Obama today, asking him to set a firm cost-savings goal for health care delivery system reform rather than agreeing to Medicare cuts as part of the fiscal cliff talks.
Fifty-one years ago, President John F. Kennedy challenged our nation to “the goal, before this decade is out, of landing a man on the moon and returning him safely to the Earth.” He didn’t know how we would achieve that goal, but he believed that his challenge could mobilize our country to meet this challenge and succeed. And he was right.
Today, I believe that President Obama has a similar opportunity in reforming our health care system and strengthening the Medicare program. Let’s put the full force of American innovation and ingenuity into achieving a serious cost-savings goal for our nation’s health care finances. And in the meantime, let’s resist the urge to cut Medicare benefits and put additional strain on middle-class Americans. We owe it to the American people to do this right.
Sen. Sheldon Whitehouse is a Democrat from Rhode Island.
