Hearing of the House Budget Committee - Congressional Budget Office's Long-Term Budget Outlook

Interview

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REP. LLOYD DOGGETT (R-TX): Thank you so much for your testimony. I realize that you're here more in the diagnosis business than the prescription of treatment. But I want to talk a little bit, since you've been discussing health care, beginning there, focusing on what the effect of some policy alternatives would be on the scenario that you've described.

Now, a number of our colleagues for years followed the approach advocated by former Speaker Newt Gingrich that one solution was to let Medicare wither on the vine. If we take that approach and let Medicare and Medicaid, perhaps, wither on the vine, will that solve our health care problems in the country, or will it simply shift the burden greater onto individuals if we significantly limit Medicare and Medicaid?

MR. ORSZAG: Well, again it depends, I suppose, what one means by withering on the vine. CBO has previously noted that, for example, if all you did was try to reduce payment rates in Medicare and then sustain that out over time, that what you would likely wind up doing is creating significant access problems under the programs because hospitals and doctors would be less likely to treat or be willing to treat Medicare and Medicaid patients.

And so ultimately, we need to get at that excess cost factor, the rate at which health care costs are growing, and that will require the types of things that I was mentioning before: additional information and changes in financial incentives both under Medicare and Medicaid and in the rest of the health system.

And I think it's unrealistic to think that you are just going to clamp down on Medicare payments, for example, and then sustain that out over a very long period of time without having the problem crop up somewhere else.

REP. DOGGETT: So we have to focus not just on the whole patient but the whole health care system in looking at the future health and our ability to sustain that system.

MR. ORSZAG: And in particular, one needs to be thinking about the effect of policy changes on Medicare and Medicaid in terms of what their impact is on the rest of the system. So for example, when we move to DRG payments, a fixed payment per inpatient hospitalization in Medicare, the incentive was to then shorten hospital stays for Medicare patients. We wound up shortening hospital stays for all patients because that changed the way hospitals practice medicine. One needs to be thinking about those sort of follow-on effects which are crucial to the sustainability of policy changes.

REP. DOGGETT: And with reference to those changes and our attempts to -- realizing we can't solve all of this problem with just one proposal; there's no panacea. This year, as you know, I serve on the Health Subcommittee on Ways and Means, dealing with the Medicare portion of this. As we've tried to contain costs so that we had what we called our CHAMP bill that you're familiar with and your office would have been involved in scoring, we applied PAYGO, we paid for all of it, and we did that by addressing where we saw some of the most excessive costs, which was in the Medicare Advantage program, and by trying to deal with other particular cost issues such as the way kidney patients are handled, such as the way oxygen is handled.

Every one of those efforts that we've made to contain cost has run into a buzz saw of objection, so it's not as if this Congress, particularly the House, has not already attempted to deal with some of the cost issues.

Let me ask you first: Over the short run and for that matter the long run, do you believe that maintaining our PAYGO rules and ensuring when we're dealing with changes in the Medicare system that we pay as we go and when we make changes in our tax system that we apply PAYGO -- is that important to addressing both the short-term and the long- term concerns that you've raised in your testimony today and last week?

MR. ORSZAG: Again, PAYGO helps to ensure that the problem doesn't get worse, and so it avoids digging the hole deeper.

REP. DOGGETT: And in terms of trying to get out of the hole, what are some of the alternatives we discussed, comparative effectiveness on prescriptions? We looked at that, and more result- oriented medicine for physicians -- are there proposals that you see out there we might begin to implement sooner rather than later, might do -- additional demonstration projects in, to see if we can find a way to contain health care costs without significantly reducing either the quality of service or the access of those services to Medicare recipients?

MR. ORSZAG: Let me say two things. First with regard to demonstration projects, I would urge policymakers to consider whether the design of the demonstration projects that CMS currently does is actually ideal for learning anything about what works and what doesn't. I think a much greater emphasis on designing the demo projects in a way that actually then teaches about what works and what doesn't could prove to be significantly beneficial.

Beyond that, I would also say CBO during 2008 will be spending significant resources internally on developing a health options volume for you so that we will march down all of the things that people talk about -- care coordination, disease management, health information technology and so on -- and provide some insight into our thinking on what dials can be turned in order to generate budgetary effects.

So I don't have a full answer for you right now, but one of the reasons that I'm bulking up our health staff is to be able to provide better answers to you and better options for you next year.

REP. DOGGETT: Just one more, if I may. Yesterday, in the op-ed that you had in The Wall Street Journal, which I would hope to be made a part of our record on this, you commented that "Many analysts believe that significantly constraining the growth of cost for public programs while maintaining broad access to hospitals and doctors under them will be possible only in conjunction with slowing cost in the health sector as a whole," much as what you said in response to my earlier questions.

Could you just elaborate a little more about the possible adverse consequences of trying to constrain growth in the public sector -- health programs like Medicare and Medicaid -- without slowing health care cost economywide?

MR. ORSZAG: Yeah, again, the objective has to be that when you try to slow growth in Medicare and Medicaid you then also achieve slowing of growth in the rest of the health system, and thinking about that sort of follow-on effect. In the absence of that, if you just clamp down on the growth rate for payment rate, for example, in Medicare, and payment rates in the rest of the health system continue to grow unabated, doctors and hospitals will look at the compensation for treating a Medicare patient versus other patients and say I'm not that interested in treating Medicare patients, for example.

REP. DOGGETT: Thank you very much.

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