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Financing healthcare reform: Business as usual won’t get us where we need to be

CU offers suggestions to Senate Finance panel's work on financing healthcare reform

May 26, 2009

The Honorable Max Baucus
The Honorable Charles E. Grassley
Senate Committee on Finance

Dear Senators:

Thank you for the opportunity to comment on the Committee’s excellent Financing Options paper. We deeply appreciate your continuing hard work on this most important consumer issue. Below, we share our comments on the proposals in your paper, and we have also included a number of additional recommendations for savings.

Require Credible Health-care Delivery System Savings by Providers to Minimize Needed Financing

Before offering detailed and specific comments on the options paper, we must first express our basic premise in approaching how to pay for a newly reformed comprehensive healthcare system:

1. Much, much more must be done to ensure savings and improved efficiency and quality in our healthcare system as a condition for asking hard-pressed consumers to pay more in tax increases and in order to reduce the extent of tax increases needed.

–Consumers have already been paying extensively – and continue to pay extensively — through higher premiums, burdensome increases in out-of-pocket costs, reduced benefits, loss of access to any coverage at all and bankruptcy even when they have health insurance.

–The healthcare system today is uniquely supply-driven by highly consolidated, powerful providers that have inadequate incentives to control the ever-soaring costs that are crippling our economy. As your paper indicates, the rate of increase in healthcare costs has exceeded general inflation and the rate of wage increases every year for the past ten years and more. Further, as the Medicare Trustees’ reports make clear, we face this bleak rate of disparity in the inflation of healthcare costs for as far as the eye can see, unless Congress seizes this opportunity to act now.

–The United States spends far more than any other nation on healthcare, has the most uninsured of any industrialized nation, and has substandard healthcare outcomes. It’s estimated that 30 percent of medical services are of no use or even harmful; and regional variations in cost are irrational and staggering, with no correlation to the quality of care.

–US consumers should not be taxed more to fund a highly inefficient and needlessly expensive healthcare system, unless strong measures are taken now to change the system. Only strong change would justify the investment of higher taxes for a period of time. It is unacceptable that the health sector continues to inflate at double or more the general rate of inflation and considers a 1.5 percent reduction in inflation a great sacrifice at a time when the rest of the economy is facing the worst recession since the Great Depression. Consumers should not be asked to feed more money into this inflated, inefficient, and often poor-quality sector of the economy without delivery reforms.

2. Other than the loophole-closing and progressive reforms included in the President’s budget request (Section V of your paper), we suggest that before you consider other taxes, you need to find major and credible savings.

In addition to the savings listed in your Section I, we urge additional savings in such areas as

–include a true public plan option that can achieve major savings;

–enforce the cost-reduction savings pledged by health-care industry leaders at the recent White House meeting through rebates from those who fail to meet the savings targets within a specified timeframe;

–reward the use of comparative effectiveness findings,

–permit free trade in safe pharmaceuticals, enact a system to approve safe bio-generics in a reasonable period of time, increase drug rebates when prescription costs exceed general inflation, prohibit payments that slow the
introduction of generics, etc., and

–adopt the savings proposed in the President’s budget from post-acute care bundling (discussed in the Options paper of April 28th).

3. Only after these kinds of tough reforms have been adopted in a way that is actionable and credible should consumers be asked to invest more money into the current inefficient system (with the investment clearly designed, in part, to dramatically reduce the inefficiencies). The only two exceptions would be:

(1) taxes designed to encourage wellness and reduce obesity, smoking, and other addictions, which should be enacted as soon as possible; and (2) taxes in addition to the President’s proposed reforms needed to fund the
program until longer-range savings (CER, HIT, and the reforms mentioned above) become effective (i.e., taxes necessary to meet CBO scoring requirements for budget neutrality).

4. Finally, implementation of these efficiency and quality measures should be undertaken with the same focus and ambitious timeframes as achieved in other great American efforts, such as the restructuring of the industrial base for World War II or the space program’s landing of an American on the moon.

–We are approaching the 50th anniversary of President Eisenhower’s “military industrial complex” speech. Today, consumers, patients, and well-meaning healthcare providers alike are caught in a “medical industrial complex” that threatens the future of our economy. Business as usual will not get us where we need to be.

DeAnn Friedholm
Director, Campaign for Health Reform
Consumers Union