A recent Ìýcalled attention to the risks of allowing a single-minded focus on deficit reduction — a goal critical to the nation’s economic future — to obscure spending needs that are equally critical in the too-slowly-recovering economic present.

Medicaid is a prime example of this danger.

This is a program where long-term savings and short-term spending come together to make fiscal and humanitarian sense. Clearly, Medicaid spending will have to grow more slowly in the future. But, for now, federal support for it is key not only to states’ ability to meet the health and long-term care needs of tens of millions of Americans, but also to help prevent state economies from further deterioration.

Here’s a solution: Congress can simply extend these expiring supplements to federal Medicaid payments —Ìýand require states to pay the money back later, when the economy’s recovered.

And here’s why the approach makes sense.

States face a twofold problem when economic recession hits: the demand for Medicaid services goes up, as people lose job-based health insurance; and states’ ability to match federal funds to support those services goes down because their revenues decline. To mitigate those human and economic hits, the stimulus package established an enhanced federal match rate for state Medicaid spending — increasing the minimum federal contribution from 50 percent to 56.2 percent and targeting additional support to states based on increases in unemployment. In 2010, that “enhanced match,” initially committed through December 2010, was extended, on a declining basis, through June 2011. In the first quarter of 2011, actual matching rates ranged from just less than 62 percent of total costs in wealthier, less-hard-hit states, to just less than 85 percent in states facing greater burdens.

What did states do with that money? Over a period when millions of Americans lost work-based health insurance, Medicaid was able to pick up the slack. Ìýfor both adults and children, particularly the latter. Ìý

Extra federal support not only protected people in need of services, it also provided a much-needed boost to flagging state economies. Although hard-pressed states reduced the revenues they committed to Medicaid, the enhanced matching rate substantially increased the bang for each buck they did invest, and total spending increased. According to the Council on State Governments, enhanced matching increased the total spending from every dollar a state invested by 40 percent — from $1.61 to $2.68. The amount varied by state, with more support for the poorer, harder-hit.

The enhanced match had an indirect or multiplier effect — as the dollars spent on services supported incomes that supported purchases that expanded economic activity.

In short, the enhanced match worked. But at the end of June, it came to an end. Meanwhile, with unemployment still at record levels, demand for Medicaid remains high. Although the Affordable Care Act prohibits states from restricting Medicaid eligibility, states are resisting this “maintenance of effort” requirement, and will clearly have less federal support to sustain it. Without the federal cushion the enhanced match created, the prospect of major Medicaid cuts looms large. Not only will many people lose coverage, the economies they live in will struggle even more to recover.

This should not happen. Extending the enhanced match can support weak state economies and support vulnerable populations — and can buy the time we need to reform Medicaid to become more efficient. And, as the economy improves, the time will then come when states can repay the federal government for the help they get now, say with somewhat smaller federal matching funds in the future. That’s fiscally responsible. But right now, at time of continuing economic and human vulnerability — it’s fiscally and morally responsible to continue federal support to sustain Medicaid, for the people and the economy that depend on it.

Judy Feder is an Urban Institute fellow and professor, and former dean of theÌýGeorgetown Public Policy Institute.ÌýJohn Holahan is the director of the Urban Institute’s Health Policy Center.

This <a target="_blank" href="/medicaid/063011federholahan/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

We know too much to be distracted by calls to “start over” or “go small.”

For one thing, small steps will fail to bring the cost and coverage reforms we need. And from a political standpoint, they’re hardly any easier to achieve than full-scale reform. The choice is clear: either we move forward to enact the Senate bill with modifications or we quit-knowing we won’t be returning to meaningful reform any time soon. Anyone serious about health reform, regardless of party affiliation, should recognize that the legislation simply has too much to offer to believe for a minute that doing nothing is the better choice.

Based on experience to date, I doubt that many-or any-Republicans will let this simple truth outweigh political concerns. But it saddens me that too many Democrats seem not to grasp the choice before them. Progressives in the House seem preoccupied with the Senate’s unwillingness to exert sufficient public leadership to rein in insurers and make health care truly affordable. Moderates in both bodies seem to fear that government has gone too far. To state the obvious: the Senate bill, even with some improvements from the House, is a political compromise. But for both camps, it’s a compromise worth making.

Progressives are understandably disappointed that this legislation will not deliver universal health insurance coverage. But covering over 30 million people who now lack insurance is a giant step forward, at least on a par with the passage of Medicare and Medicaid 45 years ago. And at least half of the newly insured would be covered by a Medicaid expansion that will include all people with incomes below 133 percent of the federal poverty level-finally ending the distinctions between “deserving” and “undeserving” poor and the unconscionable failure to cover low-wage adults who aren’t disabled or parents of dependent children.

And while progressives worry that the bill provides insufficient subsidies and inadequate coverage, moderates can take heart in the modest coverage the bill actually guarantees and requires most people to buy. Far from promoting “Cadillac” insurance plans, the Senate bill–even with improvements pushed by House progressives-simply assures people the basic protection that even the new Republican senator from Massachusetts believes everyone should have.

Next is insurance reform-curbing the unacceptable insurance practices that discriminate based on preexisting conditions and rescind benefits just when we need them. When it comes to holding insurers accountable for covering us when we’re sick, the Senate bill is hardly the government takeover some critics have claimed. Moderates who favor minimal regulation can take heart in the flexibility this bill allows: industry can offer a variety of benefit packages, (including the high deductible plans favored by Republicans) and operate outside as well as inside exchanges.

Progressives worry that these provisions leave far too much room for “innovative” insurer behavior at consumers’ expense. But progressives should recognize that the bill establishes not only significant limits on insurer behavior but requirements for transparency that are key to stronger oversight and enforcement. The Senate bill–like its House companion–also requires new, higher minimum loss ratios, or the percent of premium dollars insurers spend on medical care, for insurance companies. This measure of a policy’s efficiency will force insurers to trim overhead and profits, assuring better value for our health insurance dollar.

Turning now to cost containment, or the measures to slow the health care cost growth that is killing both affordable coverage and a productive economy. It’s true-the Senate bill has a tax on high cost insurance plans that progressives see as more a threat to benefits than a goad to efficiency. And it does not have a public plan, without which, progressives fear, private insurers will have insufficient pressure to contain costs. In both respects, the bill reflects moderates’ goals-and will do so even with modifications to the tax that mitigate the negative impact progressives fear.

And both moderates and progressives can take credit for the Senate legislation’s provisions requiring Medicare to lead all payers in putting pressure on costs by replacing rewards to volume of services, regardless of their health benefits, with rewards to efficiently provided, coordinated care that promotes health. For progressive and moderate Democrats-and even Republicans-adopting effective accountable payment mechanisms isn’t about being “left” or “right;” it’s about our only option. Either we get our health care costs under control or affordable coverage goes down the drain.

In short, on the big three of coverage, insurance reform and costs, a slightly modified Senate bill, would, after decades of failure, establish a public/private framework to assure all Americans affordable quality health care-and, perhaps most importantly, it would establish federal responsibility to make sure that goal is achieved.

The framework is not simple and we’ll be perfecting it for a long time to come. But after decades of trying and failing, hoping and waiting, can anyone who truly values reform say no to this opportunity to get to work? To me, that would be unconscionable.

This <a target="_blank" href="/news/021110feder/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

There’s no disagreement about the importance of the industry’s proposals, which include better coordination of care, elimination of errors, reductions in unnecessary services, prevention of unnecessary hospital stays and management of chronic illness. And experts agree that these measures can substantially slow cost growth, enhance quality and help restore economic prosperity-as President Barack Obama’s Council of Economic Advisers’ reported.

But affordable health care for everyone is too important for policy makers to sit back and wait for the industry to achieve these goals. The industry needs a push, in the form of a little financial pressure.

So while providers of care are improving themselves, we need to pursue short term savings. Those savings will set us on the path to transforming the health care system over the longer run while making it possible to cover everyone in the near term.

Expanded coverage cannot be held hostage to industry pledges. Excess occurs throughout the system, but hospitals, which account for over 40 percent of all spending, offer a good place to start. The Medicare program can provide the necessary prodding-as it has in the past-through its payment policies.

Hospitals respond rapidly to Medicare changes. They have done so in the past and could do so again. In response to payment changes in the early 1980s, hospitals reduced their lengths of stay enormously. More recently, the Balanced Budget Act of 1997 constrained growth rates in hospital payments by reducing the annual payment increases for hospitals. Prices were frozen in 1998 and then constrained in growth for the next four years. These savings were expected to slow hospital spending by about $33 billion or about eight percent of expected spending over five years.

But savings turned out to be even larger. Within three years, the expected insolvency date for the Medicare Part A trust fund, which covers inpatient hospital care, was extended from four to 25 years. While some later adjustments were made to soften the impact, hospitals nevertheless were able to achieve enough productivity increases that Medicare has remained a reasonable payer of bills.

For the last six years, Medicare has applied no such constraints, leaving open the opportunity for achieving short run savings now.

Hospitals will challenge reductions in payment updates with claims that they lose money from Medicare. Medicare payment rates are indeed below those of private payers. But for about two-thirds of all hospitals, Medicare’s payments exceed the cost of care. Moreover, the Medicare Payment Advisory Commission has found that the hospitals that lost money on Medicare are in areas where private insurers aren’t pressuring them to reduce costs. Medicare payments exceed costs where hospitals are pressured to be more efficient. Geographic differences remind us that lower costs are possible and that “good” hospitals can be role models for the rest.

Hospitals have a legitimate objection to facing pressures from Medicare if they still must treat patients who cannot afford to pay. Covering all Americans needs to be part of the changes made.

Careful scrutiny of other aspects of the Medicare program can achieve additional savings. For example, the balanced-budget law reduced overall Medicare spending by about 12% over five years.

Although Medicare is no more inefficient than private insurers, it is the mechanism through which the federal government has leverage to increase the pace of change. Policy makers have no excuse not to use that leverage. Medicare savings of $450 billion-or eight percent over the next 10 years is a reasonable goal.

Judy Feder is professor of public policy, Georgetown University, and senior fellow, Center for American Progress.

Marilyn Moon is Vice President and Director, Health Program,ÌýAmerican Institutes for Research.Ìý

This <a target="_blank" href="/news/061109moonfeder/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

But achieving universal coverage-and the cost containment and improved quality of care that reform will deliver-poses a political paradox and a huge hurdle: If the purpose of health reform is to spend less on health care, how can we possibly spend more to achieve it?

There’s no question that we spend more than we have to on health care, with a third of annual spending, or roughly $700 billion, going toward services not known to improve health. And there’s no question that we have to spend less. Industry leaders confirm Harvard economist’s David Cutler’s proposition that the nation could save $2 trillion over 10 years–if the health care sector managed to rack up the kind of productivity gains achieved by other industries. The federal government would reap $600 billion of those savings.

Health reform legislation, however, cannot simply assume these savings will occur. Congress must include specific policies to ensure that they are realized. These include compelling insurers to compete on efficiency and quality through insurance exchanges and a public plan, and Medicare payment changes that replace fee-for-service, which promotes procedures rather than real service, with a performance approach that rewards services that improve health. These changes, like those in the past, likely would be adopted by private insurers.

Investing in comparative effectiveness research will help identify which services are most beneficial, while health information technology, the infrastructure for payment reform, will hold providers accountable for improving care.

Health care providers and insurers have demonstrated in the past how readily they respond to new incentives. Remember the rapid reduction of hospital lengths-of-stay in the 1980s and the HMO evolution of the 1990s? To get a rapid response, health reform legislation must create both the pressure, through payment reductions, and the tools, through new incentives and infrastructure, to move the system rapidly in a new direction.

Improved efficiency won’t come quickly. It will take some time. And it won’t come at all if the rewards for bad behavior persist. Insurance and payment reforms can only be effective if everybody has health insurance.

With millions uninsured, bad behavior will inevitably trump good.

Health insurers will continue to earn more from “cherry picking” healthy enrollees than from promoting efficient delivery of care. Doctors will continue to see patients too late to prevent them from getting really sick, and as a result will end up ordering expensive treatments. And uninsured, chronically ill patients will continue to experience preventable and costly admissions to hospitals-because their conditions won’t be properly managed.

In short, real reform is impossible as long as our health insurance system is more a sieve than a safety net. That’s why investing in universal coverage “up front” is essential to saving down the road.

In a health care system as expensive as ours, we can’t get everybody covered unless we help people whose incomes currently put health insurance out of reach. That means we need to spend on subsidies at the same time we aggressively pursue the payment reforms that will make our system efficient and affordable in the long run. These subsidies are essential to achieving health reform. We can’t contain costs without universal coverage, and we can’t sustain universal coverage unless we contain costs.

Nor can we restore economic prosperity if fear of illness and its costs make people reluctant to change jobs, build small businesses, or invest in their children’s education or other family needs. This is the fiscal case for universal coverage. And it’s almost as strong as the moral case. The costliness of our health care system is not the fault of the 50 million people who today lack health insurance.

The increased cost of subsidizing universal coverage is no greater than the increase in health care spending that comes from inefficiency almost every single year. We can no longer hold the uninsured hostage to our unwillingness to commit ourselves to changing the health care system for all of us. On fiscal and moral grounds, it’s time to do the right thing.

Judy Feder is professor of public policy, Georgetown University, and senior fellow, Center for American Progress.

This <a target="_blank" href="/news/061109feder/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

A recent Ìýcalled attention to the risks of allowing a single-minded focus on deficit reduction — a goal critical to the nation’s economic future — to obscure spending needs that are equally critical in the too-slowly-recovering economic present.

Medicaid is a prime example of this danger.

This is a program where long-term savings and short-term spending come together to make fiscal and humanitarian sense. Clearly, Medicaid spending will have to grow more slowly in the future. But, for now, federal support for it is key not only to states’ ability to meet the health and long-term care needs of tens of millions of Americans, but also to help prevent state economies from further deterioration.

Here’s a solution: Congress can simply extend these expiring supplements to federal Medicaid payments —Ìýand require states to pay the money back later, when the economy’s recovered.

And here’s why the approach makes sense.

States face a twofold problem when economic recession hits: the demand for Medicaid services goes up, as people lose job-based health insurance; and states’ ability to match federal funds to support those services goes down because their revenues decline. To mitigate those human and economic hits, the stimulus package established an enhanced federal match rate for state Medicaid spending — increasing the minimum federal contribution from 50 percent to 56.2 percent and targeting additional support to states based on increases in unemployment. In 2010, that “enhanced match,” initially committed through December 2010, was extended, on a declining basis, through June 2011. In the first quarter of 2011, actual matching rates ranged from just less than 62 percent of total costs in wealthier, less-hard-hit states, to just less than 85 percent in states facing greater burdens.

What did states do with that money? Over a period when millions of Americans lost work-based health insurance, Medicaid was able to pick up the slack. Ìýfor both adults and children, particularly the latter. Ìý

Extra federal support not only protected people in need of services, it also provided a much-needed boost to flagging state economies. Although hard-pressed states reduced the revenues they committed to Medicaid, the enhanced matching rate substantially increased the bang for each buck they did invest, and total spending increased. According to the Council on State Governments, enhanced matching increased the total spending from every dollar a state invested by 40 percent — from $1.61 to $2.68. The amount varied by state, with more support for the poorer, harder-hit.

The enhanced match had an indirect or multiplier effect — as the dollars spent on services supported incomes that supported purchases that expanded economic activity.

In short, the enhanced match worked. But at the end of June, it came to an end. Meanwhile, with unemployment still at record levels, demand for Medicaid remains high. Although the Affordable Care Act prohibits states from restricting Medicaid eligibility, states are resisting this “maintenance of effort” requirement, and will clearly have less federal support to sustain it. Without the federal cushion the enhanced match created, the prospect of major Medicaid cuts looms large. Not only will many people lose coverage, the economies they live in will struggle even more to recover.

This should not happen. Extending the enhanced match can support weak state economies and support vulnerable populations — and can buy the time we need to reform Medicaid to become more efficient. And, as the economy improves, the time will then come when states can repay the federal government for the help they get now, say with somewhat smaller federal matching funds in the future. That’s fiscally responsible. But right now, at time of continuing economic and human vulnerability — it’s fiscally and morally responsible to continue federal support to sustain Medicaid, for the people and the economy that depend on it.

Judy Feder is an Urban Institute fellow and professor, and former dean of theÌýGeorgetown Public Policy Institute.ÌýJohn Holahan is the director of the Urban Institute’s Health Policy Center.

This <a target="_blank" href="/medicaid/063011federholahan/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

We know too much to be distracted by calls to “start over” or “go small.”

For one thing, small steps will fail to bring the cost and coverage reforms we need. And from a political standpoint, they’re hardly any easier to achieve than full-scale reform. The choice is clear: either we move forward to enact the Senate bill with modifications or we quit-knowing we won’t be returning to meaningful reform any time soon. Anyone serious about health reform, regardless of party affiliation, should recognize that the legislation simply has too much to offer to believe for a minute that doing nothing is the better choice.

Based on experience to date, I doubt that many-or any-Republicans will let this simple truth outweigh political concerns. But it saddens me that too many Democrats seem not to grasp the choice before them. Progressives in the House seem preoccupied with the Senate’s unwillingness to exert sufficient public leadership to rein in insurers and make health care truly affordable. Moderates in both bodies seem to fear that government has gone too far. To state the obvious: the Senate bill, even with some improvements from the House, is a political compromise. But for both camps, it’s a compromise worth making.

Progressives are understandably disappointed that this legislation will not deliver universal health insurance coverage. But covering over 30 million people who now lack insurance is a giant step forward, at least on a par with the passage of Medicare and Medicaid 45 years ago. And at least half of the newly insured would be covered by a Medicaid expansion that will include all people with incomes below 133 percent of the federal poverty level-finally ending the distinctions between “deserving” and “undeserving” poor and the unconscionable failure to cover low-wage adults who aren’t disabled or parents of dependent children.

And while progressives worry that the bill provides insufficient subsidies and inadequate coverage, moderates can take heart in the modest coverage the bill actually guarantees and requires most people to buy. Far from promoting “Cadillac” insurance plans, the Senate bill–even with improvements pushed by House progressives-simply assures people the basic protection that even the new Republican senator from Massachusetts believes everyone should have.

Next is insurance reform-curbing the unacceptable insurance practices that discriminate based on preexisting conditions and rescind benefits just when we need them. When it comes to holding insurers accountable for covering us when we’re sick, the Senate bill is hardly the government takeover some critics have claimed. Moderates who favor minimal regulation can take heart in the flexibility this bill allows: industry can offer a variety of benefit packages, (including the high deductible plans favored by Republicans) and operate outside as well as inside exchanges.

Progressives worry that these provisions leave far too much room for “innovative” insurer behavior at consumers’ expense. But progressives should recognize that the bill establishes not only significant limits on insurer behavior but requirements for transparency that are key to stronger oversight and enforcement. The Senate bill–like its House companion–also requires new, higher minimum loss ratios, or the percent of premium dollars insurers spend on medical care, for insurance companies. This measure of a policy’s efficiency will force insurers to trim overhead and profits, assuring better value for our health insurance dollar.

Turning now to cost containment, or the measures to slow the health care cost growth that is killing both affordable coverage and a productive economy. It’s true-the Senate bill has a tax on high cost insurance plans that progressives see as more a threat to benefits than a goad to efficiency. And it does not have a public plan, without which, progressives fear, private insurers will have insufficient pressure to contain costs. In both respects, the bill reflects moderates’ goals-and will do so even with modifications to the tax that mitigate the negative impact progressives fear.

And both moderates and progressives can take credit for the Senate legislation’s provisions requiring Medicare to lead all payers in putting pressure on costs by replacing rewards to volume of services, regardless of their health benefits, with rewards to efficiently provided, coordinated care that promotes health. For progressive and moderate Democrats-and even Republicans-adopting effective accountable payment mechanisms isn’t about being “left” or “right;” it’s about our only option. Either we get our health care costs under control or affordable coverage goes down the drain.

In short, on the big three of coverage, insurance reform and costs, a slightly modified Senate bill, would, after decades of failure, establish a public/private framework to assure all Americans affordable quality health care-and, perhaps most importantly, it would establish federal responsibility to make sure that goal is achieved.

The framework is not simple and we’ll be perfecting it for a long time to come. But after decades of trying and failing, hoping and waiting, can anyone who truly values reform say no to this opportunity to get to work? To me, that would be unconscionable.

This <a target="_blank" href="/news/021110feder/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

There’s no disagreement about the importance of the industry’s proposals, which include better coordination of care, elimination of errors, reductions in unnecessary services, prevention of unnecessary hospital stays and management of chronic illness. And experts agree that these measures can substantially slow cost growth, enhance quality and help restore economic prosperity-as President Barack Obama’s Council of Economic Advisers’ reported.

But affordable health care for everyone is too important for policy makers to sit back and wait for the industry to achieve these goals. The industry needs a push, in the form of a little financial pressure.

So while providers of care are improving themselves, we need to pursue short term savings. Those savings will set us on the path to transforming the health care system over the longer run while making it possible to cover everyone in the near term.

Expanded coverage cannot be held hostage to industry pledges. Excess occurs throughout the system, but hospitals, which account for over 40 percent of all spending, offer a good place to start. The Medicare program can provide the necessary prodding-as it has in the past-through its payment policies.

Hospitals respond rapidly to Medicare changes. They have done so in the past and could do so again. In response to payment changes in the early 1980s, hospitals reduced their lengths of stay enormously. More recently, the Balanced Budget Act of 1997 constrained growth rates in hospital payments by reducing the annual payment increases for hospitals. Prices were frozen in 1998 and then constrained in growth for the next four years. These savings were expected to slow hospital spending by about $33 billion or about eight percent of expected spending over five years.

But savings turned out to be even larger. Within three years, the expected insolvency date for the Medicare Part A trust fund, which covers inpatient hospital care, was extended from four to 25 years. While some later adjustments were made to soften the impact, hospitals nevertheless were able to achieve enough productivity increases that Medicare has remained a reasonable payer of bills.

For the last six years, Medicare has applied no such constraints, leaving open the opportunity for achieving short run savings now.

Hospitals will challenge reductions in payment updates with claims that they lose money from Medicare. Medicare payment rates are indeed below those of private payers. But for about two-thirds of all hospitals, Medicare’s payments exceed the cost of care. Moreover, the Medicare Payment Advisory Commission has found that the hospitals that lost money on Medicare are in areas where private insurers aren’t pressuring them to reduce costs. Medicare payments exceed costs where hospitals are pressured to be more efficient. Geographic differences remind us that lower costs are possible and that “good” hospitals can be role models for the rest.

Hospitals have a legitimate objection to facing pressures from Medicare if they still must treat patients who cannot afford to pay. Covering all Americans needs to be part of the changes made.

Careful scrutiny of other aspects of the Medicare program can achieve additional savings. For example, the balanced-budget law reduced overall Medicare spending by about 12% over five years.

Although Medicare is no more inefficient than private insurers, it is the mechanism through which the federal government has leverage to increase the pace of change. Policy makers have no excuse not to use that leverage. Medicare savings of $450 billion-or eight percent over the next 10 years is a reasonable goal.

Judy Feder is professor of public policy, Georgetown University, and senior fellow, Center for American Progress.

Marilyn Moon is Vice President and Director, Health Program,ÌýAmerican Institutes for Research.Ìý

This <a target="_blank" href="/news/061109moonfeder/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">

But achieving universal coverage-and the cost containment and improved quality of care that reform will deliver-poses a political paradox and a huge hurdle: If the purpose of health reform is to spend less on health care, how can we possibly spend more to achieve it?

There’s no question that we spend more than we have to on health care, with a third of annual spending, or roughly $700 billion, going toward services not known to improve health. And there’s no question that we have to spend less. Industry leaders confirm Harvard economist’s David Cutler’s proposition that the nation could save $2 trillion over 10 years–if the health care sector managed to rack up the kind of productivity gains achieved by other industries. The federal government would reap $600 billion of those savings.

Health reform legislation, however, cannot simply assume these savings will occur. Congress must include specific policies to ensure that they are realized. These include compelling insurers to compete on efficiency and quality through insurance exchanges and a public plan, and Medicare payment changes that replace fee-for-service, which promotes procedures rather than real service, with a performance approach that rewards services that improve health. These changes, like those in the past, likely would be adopted by private insurers.

Investing in comparative effectiveness research will help identify which services are most beneficial, while health information technology, the infrastructure for payment reform, will hold providers accountable for improving care.

Health care providers and insurers have demonstrated in the past how readily they respond to new incentives. Remember the rapid reduction of hospital lengths-of-stay in the 1980s and the HMO evolution of the 1990s? To get a rapid response, health reform legislation must create both the pressure, through payment reductions, and the tools, through new incentives and infrastructure, to move the system rapidly in a new direction.

Improved efficiency won’t come quickly. It will take some time. And it won’t come at all if the rewards for bad behavior persist. Insurance and payment reforms can only be effective if everybody has health insurance.

With millions uninsured, bad behavior will inevitably trump good.

Health insurers will continue to earn more from “cherry picking” healthy enrollees than from promoting efficient delivery of care. Doctors will continue to see patients too late to prevent them from getting really sick, and as a result will end up ordering expensive treatments. And uninsured, chronically ill patients will continue to experience preventable and costly admissions to hospitals-because their conditions won’t be properly managed.

In short, real reform is impossible as long as our health insurance system is more a sieve than a safety net. That’s why investing in universal coverage “up front” is essential to saving down the road.

In a health care system as expensive as ours, we can’t get everybody covered unless we help people whose incomes currently put health insurance out of reach. That means we need to spend on subsidies at the same time we aggressively pursue the payment reforms that will make our system efficient and affordable in the long run. These subsidies are essential to achieving health reform. We can’t contain costs without universal coverage, and we can’t sustain universal coverage unless we contain costs.

Nor can we restore economic prosperity if fear of illness and its costs make people reluctant to change jobs, build small businesses, or invest in their children’s education or other family needs. This is the fiscal case for universal coverage. And it’s almost as strong as the moral case. The costliness of our health care system is not the fault of the 50 million people who today lack health insurance.

The increased cost of subsidizing universal coverage is no greater than the increase in health care spending that comes from inefficiency almost every single year. We can no longer hold the uninsured hostage to our unwillingness to commit ourselves to changing the health care system for all of us. On fiscal and moral grounds, it’s time to do the right thing.

Judy Feder is professor of public policy, Georgetown University, and senior fellow, Center for American Progress.

This <a target="_blank" href="/news/061109feder/">article</a&gt; first appeared on <a target="_blank" href="">KFF Health News</a> and is republished here under a <a target="_blank" href=" Commons Attribution-NonCommercial-NoDerivatives 4.0 International License</a>.<img src="/wp-content/uploads/sites/8/2023/04/kffhealthnews-icon.png?w=150&quot; style="width:1em;height:1em;margin-left:10px;">