Flow of stimulus funds still only a trickle

I don't understand how $300 million in Medicare savings is going to help finance health care reform for the uninsured. I would have thought that Medicare taxes are only to pay for Medicare, especially since it is going to run out of money in the near future.
— Bill, Atlanta

A lot of members of Congress, among others, are asking the same question.

Unlike previous attempts to tame the relentless rise in health care spending, there’s pretty widespread agreement this time around that something has to be done. There’s not a lot of time left before my generation of boomers hit our peak health care spending years — with every expectation that much of that cost will be picked up by Medicare.

But health care reformers face the same “chicken and egg” problem that has stymied past efforts to heal the system. Expanding the pool of people with health insurance will create a number of important improvements, beyond the obvious benefit of helping care for sick people who can’t afford insurance.

For one thing, many of the 50 million people who are uninsured are young and relatively healthy, so the cost per person probably won’t be as high as the current average. Making sure everyone is covered will help eliminate the problem that people with “pre-existing conditions” face when they can’t switch insurers. Perhaps the biggest benefit could come from providing people with health care early in their lives so they don’t face chronic, costly illnesses when they turn 65 and begin getting government-funded care for the first time.

INTERACTIVE Spending by region Dartmouth's atlas of health care costs demonstrates how Medicare spends vastly different amounts to care for enrollees depending on where they live.

Part of the discussion has focused on research that indicates that paying more for health care may not necessarily result in better care. Researchers looking at big differences in spending in different regions of the country argue that the outcomes in high-spending areas are no better than in low-spending areas. If they can better understand why — and try to encourage big-spending providers to adopt more frugal practices that don’t compromise care — the potential savings could be enormous.

The problem is that those savings many not come for decades. That means the hundreds of billions of dollars required now to expand coverage to millions more people would represent an upfront investment at exactly the moment the government can ill-afford to borrow the money it will need to pay for that investment.

That leaves Congress and the White House with some tough choices. One is to scale back the plan, making smaller changes that may not do much to slow spending. Another is to borrow the money to expand coverage and hope the savings materialize soon enough that health care won’t sink the federal budget. Another would be to expand coverage but simply force cuts on Medicare and other federal health care spending and let providers figure out how to maintain the same level of care with less money.

There are no easy answers to this one. If there were, they would have been implemented a long time ago.

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