NYT examines potential for cost savings in Obama's health plan

Jul 24 2008

A promise from presumptive Democratic presidential nominee Sen. Barack Obama (Ill.) that his health care proposal would reduce health insurance premiums for the average family by $2,500 "is one of the most audacious promises in a campaign that has been thick with them," the New York Times reports. In addition, Obama has promised to implement a health plan by the end of his first term as president.

The proposal would provide "generous tax credits to low-income workers," which would cost more than $100 billion, the Times reports. In addition, the proposal would provide $50 billion over five years to accelerate the implementation of electronic health records, $6 billion annually for tax credits for small businesses that offer health insurance to employees and an unspecified amount to help "buffer businesses from high-cost insurance claims," according to the Times.

According to the Times, whether Obama "can deliver" on his health care promises remains a "matter of considerable dispute among health analysts and economists," as the elimination of an adequate amount of waste in the health care system to "save $2,500 per family would require simultaneous and synergistic solutions to a host of problems that have proved intractable for decades." Analysts also "question whether significant savings would materialize in as little as four years, or even in 10," the Times reports.

Cost, Other Concerns

Obama has proposed to finance the proposal with the repeal of tax cuts for residents with annual incomes more than $250,000. However, the repeal of the tax cuts "would cover only about half" of the cost of the proposal, and "additional health care savings would be needed, not only to keep premiums under control but also to help pay for the subsidies," according to the Times. Obama and others have said that "significant sums could be saved through reductions in unneeded procedures and improvements in electronic record-keeping, prevention and chronic disease management," but the amount of savings from such measures that Obama has promised has begun "to attract scrutiny," the Times reports.

Obama has promised to reduce health insurance premiums for the average family of four by $2,500. Three Harvard University professors who serve as unpaid advisers to the Obama campaign -- David Cutler, David Blumenthal and Jeffrey Liebman -- prepared a memorandum that served as the basis for the saving figure. They estimated that a "menu" of health care reforms would result in savings of between $200 billion and $214 billion annually, or about 8% of the estimated $2.5 trillion that the U.S. will spend on health care in 2009.

"What we're trying to do," Cutler said, "is find a way to talk to people in a way they understand." Jason Furman, Obama's economic policy director, said "We think we could get to $2,500 in savings by the end of the first term, or be very close to it." According to the Times, Kenneth Thorpe of Emory University in "an assessment that he initiated in coordination with the campaign," estimated that Obama's proposals could reduce health spending by between $203 billion and $273 billion by 2012.

Comments

Joseph Antos of the American Enterprise Institute said, "There is no easy money because, as the saying goes, one person's fraud and abuse is another person's income," adding, "I wouldn't think that four years or eight years or probably 10 years will be enough to see numbers of that sort."

In December 2007, the Commonwealth Fund published a study that found that 15 large-scale health care reforms would result in savings of 6% after 10 years. Commonwealth Fund President Karen Davis said, "Doing it by the end of a first term is ambitious and would require tough policies."

Jonathan Oberlander, a health policy professor at the University of North Carolina-Chapel Hill, said, "Do they have the potential to generate significant savings in the long run? Yes. Do I believe they will produce substantial savings in the short run that can be used to finance Obama's plan? No" (Sack, New York Times, 7/23).

Broadcast Coverage

Fox News Channel's "Special Report with Brit Hume" on Monday compared the health care proposals of Obama and presumptive Republican presidential nominee Sen. John McCain (Ariz.) (Hume, "Special Report with Brit Hume," Fox News Channel, 7/21).