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Can Obama Pay For His Health Bill?

President Obama laid out a lot of specifics in his speech to Congress and the nation Wednesday night, but when it came to how he would finance the measure – not so much information.

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All Things Considered

The president did vow that he wouldn’t sign a bill that would add to the federal deficit. “And to prove that I’m serious,” he said, “there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don’t materialize.”

But he was a bit more vague about exactly what those cuts are. Most of the plan, Obama said, “can be paid for by finding savings within the existing health care system – a system that is currently full of waste and abuse.”

Yet in his next breath, Obama promised to protect the benefits that go to Medicare recipients. “Don’t pay attention to those scary stories about how your benefits will be cut,” he counseled seniors in the speech.

Many economists say Obama can’t have it both ways.

“How do you pay for it? You can’t unless you make a lot of people unhappy. Or you have to scale back what you’re trying to attempt,” says Tom Miller, a health economist at the American Enterprise Institute, a conservative think tank.

Miller says there actually are ways to squeeze savings out of the existing health care system – but they’re not easy.

“We’re going to have to find a way to begin to examine what the quality and value of the health care being delivered is, and begin, though not everything’s going to work, to change some of the incentives and experiment with some things which could perhaps get you better outcomes at a lower cost.”

But he says that so far the bills moving in Congress have shied away from taking those steps.

“Because that’s not what sells. What sells is telling people you’ll never have to worry again about losing any benefits. In fact, you’ll get more, and your coverage will stay forever, and someone else is paying for it. Total la-la land.”

But Harvard health economist David Cutler disagrees with Miller that the president’s health bill can’t be financed. Cutler was a top health adviser to Obama when he was a presidential candidate.

There are two ways to save money and pay for the bill, says Cutler. First, reduce what amounts to overpayments being made by government programs like Medicare and Medicaid.

“So, for example, we’re currently paying private Medicare plans that serve Medicare patients about 10 to 15 percent more than the cost of the services. So we should just eliminate that,” he said.

Then, the liberal Cutler basically agrees with the conservative Miller about providing incentives for higher quality care to get more value for the money spent on health care.

“If you look at the studies, the U.S. spends 40 percent more than other countries without getting much for it; and high spending areas of the country will spend twice as much as low spending areas spend, and again, they’re not getting anything for it,” he says.

And, says Cutler, many of the ways to fix things are already fairly well understood. For example, if Medicare stops paying for rehospitalizations for patients with relapses of conditions and instead encourages better and more coordinated care after a patient is discharged the first time, “you spend a little bit there, and you save a lot three weeks down the road.”

Cutler also says new numbers from the Census Bureau on the uninsured should give pause to those who oppose the president’s health overhaul because they fear a government takeover of the health care system.

The new figures show the number of Americans without insurance remains statistically unchanged in 2008, at 46 million. But the makeup of that population changed – more than a million people lost private coverage and more than 4 million gained enrollment in government-run plans like Medicaid and the Children’s Health Insurance Program.

For those who dislike government insurance, Cutler said, “what I think is true is you’ll be really unhappy if we don’t do anything. Because if you just wait long enough, that will be where the bulk of Americans are.”

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Cost and Quality The Health Law