President Barack Obama opened his speech to Congress on February 24 calling for our nation to take responsibility for its future once again and finally face our long-term challenges, including our structural fiscal imbalances. He was clear that we will no longer ignore the challenge to reform our struggling health care system, nor will we continue to shirk the responsibility of providing quality, affordable health coverage to every American. The resounding message was simple: We cannot afford to put health reform on hold any longer. I could not agree more.
Rising health care costs are undermining the ability of U.S. businesses to compete globally, stifling entrepreneurship, and crippling American families. Meanwhile, health care cost growth continues to wreak havoc on our state and federal budgets. Therefore, it is no coincidence that despite Senator Tom Daschle’s withdrawal as secretary of health and human services and as health reform czar, health care reform has remained a centerpiece of the president’s domestic agenda.
Even before they assumed office one month ago, the Obama economic team and the president himself made the case that we do not have an “entitlement” crisis, but rather we have a health care cost growth problem. Furthermore, they have been clear that comprehensive health reform is a necessary step toward getting our fiscal house back in order. In many ways, this point represents the nexus of the past week. From the fiscal summit to the president’s speech to the budget, the link between health care and the economy has never been more apparent. Likewise, the consequences of rising health care costs on our nation’s long-run budgetary outlook have never been more clear.
Health care represents 16 percent of our economy. It is also the fastest-growing component of our economy. We cannot secure our long-run economic future without addressing the reality that health care is crowding out other priorities and failing to yield value and health to our population. The single most important thing we can do to improve our long-run fiscal future is reduce the rate of systemwide health care cost growth per capita because Medicare cost growth and systemwide cost growth are linked. This makes perfect sense. Medicare buys the single largest share of services from our health care system as a whole.
The president’s budget reflects this reality by focusing on increasing efficiency and quality in the Medicaid and Medicare programs. Using Medicare to engender increased quality and efficiency in our health system will be central to bending the health care cost curve. Over time, it is possible to deliver savings within our health system. Highly respected analysts estimate that more than 30 percent of what we spend on health care does not add clinical value. Think of it this way: the Centers for Medicare and Medicaid Services (CMS) projects that total health spending in 2016 will be $4 trillion. If we could cut spending that does not add clinical value by just 10 percent per year for ten years, total health spending would be $900 billion lower.
The president’s budget both asks and demands that Congress play the central role in the policy development process. Congressional leaders know they must help build consensus about how to ensure that all Americans can afford health insurance and access high-quality health care, while ensuring our nation can afford our health care system over time. The leadership and enthusiasm displayed by Senators Baucus and Kennedy and others is a very good sign that Congress will address our health care crisis head on.