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Obama: How we'll close fiscal gaps Guest column By FRED HIATT Washington Post WASHINGTON - In a telephone interview with editorial page editor Fred Hiatt Wednesday afternoon, President Obama said he will not accept a health-care reform bill, even one that is deficit-neutral, if it does not also begin to reduce the cost of care. Below are excerpts of the interview:
President Obama: Let's talk health care.
Fred Hiatt: Okay. What in your mind are the most important things Congress could do to bend the (cost) curve in health care?
Obama: We know that if the Mayo Clinic or Geisinger (Health System) are doing things smarter for less money, that there should be ways to incentivize other health systems, applying these models. So that's one set of major reforms. And what we think is the most powerful lever to achieve those reforms is this MedPAC idea that we provided a very detailed proposal to Congress on.
At this point, I am confident that both the House and the Senate bills will contain what we've been calling "MedPAC on steroids," the idea that you continually present new ideas to change incentives, change the delivery system, understanding that because this is such a complex system we're not always going to get it exactly right the first time, and that there have to be a series of modifications over the course of a series of years, and we have to take that out of politics and make sure that an independent board of medical experts and health economists are providing packages that are continually improving the system.
Now, the second idea, which is the one that got more attention, even though Elmendorf has emphasized the benefits of a MedPAC board, as well, was the elimination of the tax exclusion(on employer-provided health insurance). I've been very clear that I think to add additional costs to families right now when they're already seeing their premiums doubled is not the kind of health reform that I'd like to see, but I believe that there may be ways of getting at the same principle.
For example, you could conceivably set up an index of some sort that makes sure that ... the exclusion only accommodates a certain amount of health-care inflation - as opposed to 8 percent or 9 percent, or what have you - without burdening current plans, but over time assuming ... that health-care inflation is going to continue to be a problem.
Hiatt: A kind of cap, but one that doesn't hurt anybody -
Obama: Currently.
Hiatt: - at the current level?
Obama: Exactly. You're also seeing, I think, some interesting discussions in the Senate Finance Committee about a variation that goes after the insurance companies, as opposed to directly taxing the benefits. ...
And you could have a situation in which you cap the exclusion or eliminated the exclusion and, yes, that would drive health-care inflation down, but it also could drive quality of health care down because you're not doing anything to change a perverse system in which we pay for more medical care as opposed to medical care that actually makes us healthier.
Hiatt: Did you consider, or would you consider, phasing in access and increasing access as you see the curve is bending, but slowing the growth in that entitlement if the (cost) curve is not being bent?
Obama: Well, I guess my thinking here is to separate out two questions. One is, are we paying for the health reform package in a deficit-neutral way - which, by the way, would stand in stark contrast to everything that's been done over the last eight years. ... So what I've said is I will not sign a bill that is not deficit-neutral.
Now, ... about two-thirds of the pay-fors come out of reallocating money that's already in the system, that the taxpayers are already spending but aren't getting good value for - the Medicare Advantage Plan, the subsidy to insurance companies, being a prime example.
We would then have to find revenue for the additional third. Now, the issue of making sure this is deficit-neutral is somewhat separate from the issue of bending the cost curve. I mean, conceivably, you could have a system that pays for itself, but doesn't bend the cost curve; it's going to cost you more and more. Or, alternatively, you could bend the cost curve, but not expand coverage. I think that it's important to do both ... to make sure that 46 million people who don't have health insurance get it ... for us to bend the cost curve, separate and apart from coverage issues, because the system we have right now is unsustainable and hugely inefficient and uncompetitive.
Hiatt: But if you got a bill that was universal access paid for but didn't have things you think are key to bending the curve, would you accept it?
Obama: No. Over time, what would happen would be that even if we had paid for it in the first 10 years, in the next 10 years if health-care inflation went up faster than whatever revenue source we had we'd be adding to the deficit then.
Hiatt: Economists say that you can't solve the fiscal problem if you don't solve the health problem. But they also say that a big part of the issue is demographics and aging. As you know, the 10-year budget shows the government raising 18 or 19 percent of (gross domestic product) in 2019, and spending 24 or 25 percent -
Obama: We have a structural gap that has to be closed.
What I think has to happen is if we can show that we have a disciplined health-care reform package that is serious about cost savings and is deficit-neutral, you combine that with the pay-go rules that we have been promoting ... and you are imposing some discipline on the appropriations process then I think we're in a position to be able to, either at the end of this year or early next year, start laying out a broader picture about how we are going to handle entitlements in a serious way.
It may start with Social Security because that's, frankly, the easier one. And I think that it's possible to also look at tax reform and think about are there ways that we can maybe even lower marginal rates but eliminate all the loopholes and have that a net revenue generator. I think there are going to be a bunch of things that we can take a look at, but I think health-care reform combined with pay-go, combined with how we deal with appropriations bills over the next six months will help lay the foundation for us to be able to make some of these broader structural changes.
Hiatt: And you'd be willing to look at a commission beyond Social Security - that sort of puts everything on the table?
Obama: Yes, I think everything is going to have to be on (the) table. But here's my concern. If ... health-care reform fails, there is no way that Congress is going to take up a serious effort to control health-care inflation - there's no way that we're going to pass the kinds of changes we've already talked about in Medicare, for example, in the absence of a more comprehensive reform package. And so what we're going to have is a situation in which ... the problem is just going to keep on getting worse.
Hiatt: One could say you have taken on early a lot of really hard things (but) put entitlement reform in the second tier. Why shouldn't deficit hawks be nervous?
Obama: I think that the perception that we haven't been worried about this is partly subject to circumstances. You had - we had to come out with a stimulus early. That was not what I would have preferred to do. I then had an omnibus because the previous administration and Congress had not been able to sort through their problems. ...
We then had, by law, we had to introduce our budget, and then we had the supplemental, all at a time when government revenues are tanking.
And so I understand why a deficit hawk would be nervous. I'm nervous about this.
But I just have to go back to the issue of health-care reform. If I can't get this done, then I don't know how we're going to make the draconian choices that would then be required to close this gap in a serious way.
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