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Two Proposals to Reduce Health Care Spending

Posted Nov 26 2010 11:54pm

kate-matosIn the past few weeks, two bipartisan groups have made deficit reduction proposals that address national health care spending.  The nation faces a trillion dollar-plus budget deficit, and health care spending is a large proportion of ongoing spending.

On November 10, the chairmen of the bipartisan National Commission on Fiscal Responsibility and Reform released an initial draft proposal to reduce the deficit.  The panel consists of ten Democrats and eight Republicans, “charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.”

Several commission members have praised the proposal, but will seek changes before endorsing a final version.  The chairmen, Erskine Bowles, former chief-of-staff to then President Clinton, and Alan Simpson, a former GOP senator held a closed-door meeting this past week to discuss modifications before the panel presents its final recommendations on December 1.

Although the drafted proposal addresses a broad array of fiscal problems and objectives, it makes dramatic changes to health care spending.  In the medium term, the chairmen propose the following:

  • Pay doctors and other providers less, improve efficiency, and reward quality by speeding up payment reforms and increasing drug rebates. Specifically:
  • Pay lawyers less and reduce the cost of defensive medicine by adopting comprehensive tort reform.
  • Expand cost-sharing in Medicare to promote informed consumer health choices and spending. Specifically:
  • Expand successful cost containment demonstration.
  • Strengthen the Independent Payment Advisory Board (IPAB).
  • Identify an additional $200 billion savings in federal health spending, for instance:

In the long term, the chairmen propose to set a global target federal health spending after 2020 and limit growth to the gross domestic product (GDP) plus one-percent.

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