Richard Scott

Last Saturday, with its decision to move ahead with the Patient Protection and Affordable Health Care Act the U.S. Senate brought significant health care reform to a precipice it hasn’t seen in five decades. Following the 60 to 39 Congressional vote, which strictly adhered to party lines, the $848 billion health care overhaul package is now open to debate on the Senate floor—and open to the dialogue between party leaders that will attempt to coax an agreeable version through the representatives of ideologically divergent constituencies.

From Capitol Hill to Nob Hill, the coming weeks will resound with deliberation and debate over sticking points like the public option, government-run entities like Medicare, long-term care protocols, and the perennially incendiary issue of abortion. Perhaps its most relevant aspect, given the times, however, is the bill’s budgetary scope, and in this regard it has received laudatory remarks and projections from diverse entities. The nonpartisan Congressional Budget Office predicted that the bill would decrease federal deficits by $130 billion over the next 10 years, making it the largest cost-savings measure yet proposed. In the following 10 years, from 2019 to 2029, the CBO projects it to induce savings of roughly $650 billion.

Other good news preceded the bill last week. On November 17, a group of 20 leading economists drafted a letter to President Obama that outlined a set of components deemed necessary to curtail the upsurge of health care costs. They included: 1) overall delivery system reforms, 2) a tax on so-called Cadillac health insurance plans, 3) an independent commission to oversee Medicare, and 4) overall deficit neutrality. The CBO report corroborates the reality of the fourth point of address, and the other three components are covered in the bill, according to a statement from the White House.

The authors of the letter represent some of the leading academic and policy institutions in the country, including Harvard University, Stanford University, the Massachusetts Institute of Technology, The Urban Institute and the Brookings Institution. The key provisions they outline “will reduce long-term deficits, improve the quality of care, and put the nation on firm fiscal footing,” they write. “It will help transform the health care system from delivering too much care, to a system that consistently delivers higher-quality, high-value care.”

While some of the overriding policies are similar to the bill passed in the House of Representatives, like the requirement of most individuals to purchase insurance and the eschewal of coverage denial based on preexisting conditions, the financing of the Senate bill would rely partially on a surcharge, or an excise tax, levied on high-price insurance plans. This is seen as a potential boon on several fronts. “Like any tax, the excise tax will raise federal revenues, but it has additional advantages for the health care system that are essential,” reads the letter. “The excise tax will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount. In addition, as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase.”

Also, the bill would raise the Medicare tax by a half percent for those making more than $200,000 per year and, in a novel move, would levy a 5 percent tax on elective cosmetic surgery.

The remaining two areas highlighted by the economic junta—Medicare evaluation and delivery reform—are more difficult, if not more essential, areas to address due to their sheer size and scope. What the group proposes for Medicare is that a “commission of medical experts should be empowered to suggest changes in Medicare to improve the quality and value of services.” Whether it would complement a RAC-type program is uncertain, but a recent study of taxpayer money reveals that roughly $54 billion of improper payments were attributed to Medicare and Medicaid programs in the 2009 fiscal year, and that fraud and waste accounts for approximately 13 percent of the yearly $470 billion Medicare tab.

Overarching delivery reform, meanwhile, holds its own potential for cost-savings, and the proposed realignments would reward documented, coordinated services, in some ways similar to the benefits of comparative effectiveness research. The most prominent aspect here is the reward for incentives. “Studies have shown that hundreds of billions of dollars are spent on care that does nothing to improve health outcomes,” the letter reads. “This is largely a consequence of the distorted incentives associated with paying for volume rather than quality. Health care reform must take steps to change the way providers care for patients, to reward care that is better coordinated and meets the needs of each patient.”

As the full Senate stirs up the first rounds of a debate that may extend a good deal into 2010, certain of these positions are immutable strengths to health care regardless of political leaning.