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Will overhaul slow skyrocketing health costs?

Under Democrats' health plan, costs are expected to first go up, as tens of millions of previously uninsured Americans get coverage. But over time, if the plan works, health care inflation would slow.
/ Source: The Associated Press

Short of rationing, lawmakers have pulled nearly every available cost-control lever in the sweeping health care overhaul President Barack Obama and Democratic congressional leaders are pushing to finish.

Will it work?

It may take 10 years or more to find out. Costs are expected to first go up, as tens of millions of previously uninsured Americans get coverage and start going for checkups, mammograms and MRIs. Over time, if the plan works, health care inflation would slow. With the magic of compounding, shaving even 1 or 2 percentage points a year from rising spending rates would translate into big savings economy-wide.

That's a rosy scenario, skeptics say. Even some supporters of the legislation say cost controls could have been fine-tuned to make them more effective.

"On cost containment, this bill moves the ball to the opponent's 30-yard line, but it doesn't score," said Sen. Mark Warner, D-Va., who has taken a leading role in trying to squeeze more savings. "We didn't move as far as I would have liked."

Taken together, the bills get a C-plus to B-minus on cost control, grading on the curve of what's politically doable.

White House Chief of Staff Rahm Emanuel acknowledged the doubts Monday. "A lot of people said, 'Can you really control costs?'" he noted in an interview with MSNBC. The legislation will deliver lower costs, he asserted, while expanding coverage and providing consumers more rights. Obama wants to finish it by the time of his State of the Union address, not yet scheduled.

The Democratic legislation would, for the first time, require nearly all Americans to get health insurance. Medicaid would be expanded to pick up the near-poor, and middle-class households would get subsidies to help pay premiums.

Despite concerns raised by opponents, rationing was never really on the table. The four big ideas for slowing costs are: discouraging high-priced health insurance by taxing it; paying hospitals and doctors for quality care and coordination instead of sheer volume of procedures; aggressively seeking savings from Medicare; and restructuring the health insurance marketplace to make it more competitive.

Combine that with an ongoing push on prevention, and an unprecedented research effort to identify effective treatments. The goal: changing financial incentives across one-sixth of the economy.

Of the two bills, many experts give the Senate's higher marks for controlling costs, but some find the House version superior at reshaping the insurance market.

Democrats have tossed out one potentially promising idea. Limits on malpractice lawsuits to reduce defensive medicine are nowhere in their legislation.

The uncertain outlook for costs was reflected in a report on the Senate bill issued over the weekend from Medicare economic analysts.

If no bill passes and no attempt is made to check medical inflation, Americans will spend an average of $13,818 on health care for every man, woman and child in 2019, the report indicated.

With the Senate bill, the corresponding figure would be $13,892.

Such a modest increase — about $75 per capita — may actually be a sign of thriftiness, considering that 34 million more people get covered. But it's not the turnaround Obama envisioned on costs when he pledged to save the typical family $2,500 on premiums.

White House experts are still predicting significant savings. Chief economic adviser Christina Romer estimates that premiums for a family policy could be $1,000 lower in 2019. Health care savings could boost the typical family income by $6,800 in 2030, she says.

Highly unlikely, says Republican health economist Gail Wilensky, who once ran Medicare. When it comes to controlling costs, the Democratic legislation "is pretty darn pitiful," she said. Still, Wilensky does not dismiss it.

"It's setting the stage, but that is not enough," she said, arguing for stronger language to quickly translate successful cost control experiments into national policy.