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Conrad: No Reform Without Cost Savings

While debate continues over various health care reform proposals, there can be no debate that reform is needed. The status quo on health care is simply not an option.

The cost of health care has been rising year after year, posing a growing threat to families and small businesses across our nation. Estimates show the cost of health insurance is increasing three times faster than wages. This means family budgets are increasingly overwhelmed by health costs and American businesses are struggling to compete globally.

And skyrocketing health costs are threatening our national economy and budget as well. Rising health costs represent the single largest factor contributing to the country’s long-term fiscal imbalance. The United States will spend approximately $2.5 trillion on health care this year alone. That is about one-sixth of the total U.S. economy. If we continue on this course, it is estimated that one-third of our national economy will be tied up in the health system. This is an unsustainable course.

The United States is spending more than any other industrialized country on health care, but we are not getting better results. For example, the U.S. ranks last among 19 industrialized countries in preventable deaths. And we have more than 46 million uninsured who get their care primarily through the emergency room, which increases costs on everyone else.

A well-known Dartmouth study found that as much as 30 percent of health spending in the U.S. does not contribute to better outcomes. So with the right reform, it is clear that health care costs can be reduced without harming the quality of care.

Given our nation’s dire fiscal outlook, the worst thing Congress could do would be to pass health care reform that bends the cost curve in the wrong direction. As President Barack Obama has said, we need health care reform that is paid for over the next 10 years and that brings down health costs over the long term.

The Congressional Budget Office has identified two powerful levers for bringing down those long-term health costs. First, we need to change Medicare payment rules to incentivize quality over quantity of care provided. Medicare is big enough that changes in the program can transform the overall practice of medicine. Second, we need to reduce the use of high-cost or “gold-plated— insurance plans, which are encouraging an over-consumption of health care that is further pushing up overall health costs. We can achieve this goal by implementing an excise tax on insurance companies that offer these “gold-plated— plans, or by other means, while ensuring that blue-collar workers are not unfairly affected.

The CBO also cautioned against using non-health-related offsets to pay for health care reform over the next 10 years. To the extent possible, we need to focus on offsets within the health system that will grow over time to compensate for the rising long-term cost of health care. Some of the non-health-related offsets that have been suggested have merit, but they should be used to bring down the near-term deficit or considered as part of a broader effort that includes tax reform, Social Security reform and other measures.

Health care reform is an incredibly complex and difficult undertaking. And it will not be a pain-free exercise. But I believe that working together in a bipartisan fashion, we can reform our health care system in a way that expands coverage, improves care and reduces costs. Doing nothing is not an option. Our nation’s fiscal future is on the line.

Sen. Kent Conrad (D-N.D.) is chairman of the Senate Budget Committee.

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