Orszag Rebuts

Via Jon Chait, I see that OMB Director, Peter Orszag, addresses the Hiatt column on health care legislation:

Fred Hiatt in today's Washington Post is the latest of these naysayers, writing in his column that the two biggest steps that can be taken to reduce the rate of health care cost growth -- changes in health care's tax treatment and an independent Medicare commission -- are missing. I agree with Hiatt on the potential substantial benefits in terms of cost containment from these two changes. But a note to readers who have not read their Washington Post the past few weeks: the Senate Finance Committee bill includes both of these measures.

It definitely sounds like Orszag has more of a leg to stand on with regard to the commission element of cost containment. It's there and Hiatt seems to have just gotten that wrong. But as much as I'd love to see Orszag get this right, he's not entirely accurate on the matter of tax treatment. Hiatt, picking up from Martin Feldstein's argument, suggests a pure removal of the exemption, while the bill moving forward has numerous exemptions, both in terms of types of employment (coal miners, for instance) and taxing only those on the high end of the scale. It's by no means an apples-to-apples rebuttal.

By far, the more encouraging part of Orszag's take is his emphasis on the pilot projects to test cost saving measures.

Hiatt writes that "no one knows for sure how to control costs." True, we have never transformed the health sector before, and it is therefore difficult to quantify precisely how these steps will work together to promote quality and reduce cost growth. But it is wrong to conclude that these steps -- even the ones beyond the excise tax on high-cost plans and the Medicare commission -- are merely hypothetical pie in the sky. They represent what independent analysts and bipartisan groups such as the Engelberg Center at the Brookings Institution all say hold the most promise. In addition, recognizing that we need flexibility to adjust measures in a dynamic health care system, many of the bills start programs as pilot projects that can be quickly scaled up as results come in, and a Medicare commission too will be able to respond to changes as the health system evolves.

I think that's one of the better attributes of the bill, but ultimately, there are much broader reforms that we know would make a world of difference in costs. If the bill does come to pass, I wouldn't complain much from seeing some of the better ideas tracked as fast as possible for scaling up. In the meantime, we're still dealing with cost control with a spoon while the cost increases are coming in by the wheelbarrow. Granted, it's a lot of different spoons, but still.

All that really seems to confirm Ezra Klein's point that the net effect of the Baucus bill will be a very incremental amount of reform.