The current political debate in Washington suffers from a narrowing of the political space that is considered “serious.” The problem extends well beyond the relative importance and urgency of reducing the national debt and addressing the persistently high unemployment rate (with the former all but eclipsing the latter). It also affects the acceptable outlines of a debt ceiling deal—with prominent moderate Senate Budget Chair Kent Conrad ‘s proposal for an equal split between cuts and revenue increases deemed a non-starter.

As we look at the ideas to reduce federal health spending, we see the same phenomenon. First, we see a total failure to look beyond direct federal spending to take into account the important contribution rising private sector health spending growth and the deteriorating underlying health of the U.S. population make to growth of federal health spending. (High unemployment also plays a role, but let’s not even go there.) Second, we see a very constricted range of “acceptable strategies” to reduce federal health spending.

On the Republican side, Congressmen Boehner and Cantor have proposed about $350 billion in health care cuts with over one-third coming in the form of cost-shifting to states and Medicare and Medicaid beneficiaries. In addition to direct cuts to state Medicaid programs, proposed increases in Medicare cost-sharing would also raise costs to states, since Medicaid picks up where Medicare leaves off for low-income seniors and people with disabilities.

What is the Democratic response? Most Congressional Democrats have voiced their opposition to radical proposals to restructure Medicare and Medicaid, but resistance to cost shifting onto states (and indirectly onto Medicaid beneficiaries) seems more muted.

A better way is possible

Meanwhile, alternative health policies that could reduce the deficit by a similar amount without harming beneficiaries have been pushed off the table or, at best, onto the fringes of the debate. We offer here a brief list of progressive health care deficit reduction measures – not so much because these ideas are politically viable at the moment, but to clarify that the damaging and dangerous policies that policymakers are now pursuing in Washington stem from the choices of political leaders.

Better cost containment agenda:

  • Require a drug rebate for low-income Medicare beneficiaries: (somewhat on the table in the talks). When Medicare Part D was created, pharmaceutical companies received a windfall – the elimination of the requirement to pay rebates on drugs prescribed for Medicare beneficiaries who had previously had their drugs covered by Medicaid. Requiring the drug companies to pay the Medicaid rebate for low income Medicare and Medicaid dual eligibles would yield an estimated $112 billion according to CBO.
  • Quality care pricing in Medicare and Medicaid: Although the ACA takes some small steps in this direction, more could be done to reduce low-quality health care in Medicare and Medicaid, such as potentially avoidable hospital readmissions and complications, and to promote efficiency in the system. After reviewing the literature, Community Catalyst has estimated over $100 billion in savings are available over the next 10 years from payment reforms that would target wasteful or harmful spending.
  • Public option: The idea of having a public insurer compete with private insurers in the Health Insurance Exchanges enjoyed public support throughout the ACA debate. It also surfaced in the Bowles-Simpson debt reduction talks. (Though unlike other ideas less objectionable to special interests it has not gained traction in the political debate.) The CBO estimated ten-year savings of nearly $90 billion.
  • Tax on sugar-sweetened beverages: The nation is suffering from an epidemic of childhood obesity, leading to increased rates of Type II diabetes in children (the kind that used to be called “adult onset” diabetes). A penny-per-ounce tax on sugar sweetened beverages would yield $79 billion over five years according to a recent analysis. To be conservative, cut that amount in half over a second five years and you still get deficit reduction of $120 billion over 10 years, while helping to improve the underlying health of the population and reducing future health care costs.
And there you have easily over $350 billion in available federal health care savings that can be achieved by weeding out low-value spending and improving public health without shifting costs onto Medicare and Medicaid beneficiaries or state Medicaid programs. Not only that, but there is no doubt that this agenda would be much more attractive to the American people than the one that is currently being pursued. Yet with few exceptions, these ideas languish on the political margins while federal cost-shifting onto states and harmful and unpopular cuts to Medicare and Medicaid beneficiaries are given serious consideration. Fortunately, people are becoming increasingly vocal in their support for maintaining public health insurance programs.

We can only hope that political leaders will start listening.

— Michael Miller, Policy Director