Obama doesn't really care about costs

Obama's program would do little to reduce costs and would increase spending by expanding subsidized insurance. The House legislation would cut the number of uninsured by 37 million by 2018, estimates the Congressional Budget Office. The uninsured get care now; with insurance they'd get more.

"You'd be adding a third medical entitlement on top of Medicare and Medicaid," says James Capretta, a top official at the Office of Management and Budget from 2001 to 2004.

Just imagine what the health-care debate would be like if it truly focused on controlling spending.

For starters, we wouldn't be arguing about how to "pay for" the $1 trillion or so of costs over a decade of Obama's "reform." Congress wouldn't create new benefits until it had disciplined the old. We'd be debating how to trim the $10 trillion, as estimated by the CBO, that Medicare and Medicaid will spend over the next decade, without impairing Americans' health. We'd use Medicare as a vehicle of change. Accounting for more than one-fifth of all health spending, its costs per beneficiary, now about $12,000, rose at an average annual rate of 8.5 percent a year from 1970 to 2007. (True, that's lower than the private insurers' rate of 9.7 percent. But the gap may partly reflect cost-shifting to private payers. When Medicare restrains reimbursement rates, hospitals and doctors raise charges to private insurers.)

Medicare is so big that shifts in its practices spread to the rest of the delivery system. But changing Medicare, and through it one-sixth of the U.S. economy, requires more than a few demonstration projects of "comparative outcomes" research or economic incentives. What's needed is a fundamental restructuring. Fee-for-service medicine -- Medicare's dominant form of payment -- is outmoded. The more doctors and hospitals do, the more they get paid. This promotes fragmentation and the overuse of services.

We should move toward coordinated care networks that take responsibility for their members' medical needs in return for fixed annual payments (called "capitation"). One approach is through vouchers; Medicare recipients would receive a fixed amount and shop for networks with the lowest cost and highest quality. Alternatively, government could shift its reimbursement of hospitals and doctors to "capitation" payments. Limited dollars would, in theory, force improvements in efficiency and effective care.

Of course, the Republicans' record isn't any better.