Czar Orszag Remakes American Health Care

by Pejman Yousefzadeh on April 7, 2009

From the moment Tom Daschle eliminated himself from consideration to serve as both Secretary of Health and Human Services and as Director of the White House Office of Health Policy, Washington has experienced a massive power vacuum in the health policy realm. Sure, Kansas Governor Kathleen Sebelius is on her way towards being confirmed as HHS Secretary–despite tax problems of her own–and Nancy-Ann DeParle has taken over as Director of the Office of Health Policy, but neither Sebelius nor DeParle have nearly the amount of Washington experience that Daschle would have brought to the table as the Obama Administration’s point man on health care reform. Despite their appointments, and despite the publicity that surrounds Sebelius especially, the two might find themselves taking a backseat to the person who may really emerge as the White House’s ruler of health care policy.

That person is Peter Orszag, the Director of the Office of Management and Budget.

Orszag certainly brings a great deal of experience to the position of OMB Director. He served previously as the Director of the Congressional Budget Office and having also served as Special Assistant to the President for Economic Policy and as a staff economist and then Senior Advisor and Senior Economist at the President’s Council of Economic Advisers during the Clinton Administration. He knows Washington and how to navigate it; this color bio points out that Orszag “has worked in Washington on and off since he was 17 — he interned under Pete Rouse, now a senior adviser to the president — and he has intensely political instincts and aspirations,” and that “his dinner parties are notable for the meticulously chosen wines and the senators who attend. (Mr. Orszag, a divorced father of two, is so cozy with the Capitol Hill crowd that Senator Ron Wyden and his wife, Nancy Bass Wyden, found him a girlfriend.)” No naif, Orszag–the Budget Director knows his way around the nation’s capital and will be a formidable policy player on any front he chooses to involve himself in.

One of those fronts will surely be health care policy, where Orszag will certainly be significantly more of a policy heavyweight than the less-Washington exposed Sebelius or the less powerful DeParle. The Budget Director has made health care reform a passion of his and has devoted significant amounts of time and political energy to the project, which ranks as one of the highest domestic policy priorities of the Obama Administration. The Times profile of Orszag notes that his “animating passions are far grander [than merely paying attention to fiscal policy] — health care, energy policy and Social Security overhaul, for starters.” Health care policy in particular is listed as the Director’s “central policy obsession.” As a self-professed “deficit hawk,” Orszag has persuaded Cabinet Secretaries to let him help shape their agendas and he will certainly take full advantage of that license when it comes to health care policy, especially given Orszag’s publicly stated belief that controlling health care costs will be key to controlling and eventually cutting the budget deficit in half.

How does Orszag want to control health care costs? Just about every profile of him appears to focus on the same central method. From the Times:

To address the problem, he wants to do no less than change the way medicine is practiced, eliminating unnecessary tests and unproven treatments in favor of what he calls a higher-value approach that he says will actually improve health.

From the Boston Globe:

. . . Offering suggestions on how to cut healthcare costs, Orszag presented bar graphs measuring the relative placebo effects of antidepressants and showing how a Michigan hospital’s introduction of a five-step checklist for doctors catheterizing patients reduced rates of infection.

From liberal blogger and journalist Ezra Klein:

In testimonies, speeches, and blog posts (yes, he kept a blog at the CBO), Orszag has emphatically rejected that premise. He says that comprehensive health reform is the “key to our fiscal future.” He says that Social Security is not the problem and neither are the baby boomers. The impact of aging is only a small slice of the increase in health costs. The real driver is technology: We spend more because we’re buying more expensive stuff. Left unchecked, this trend will eventually consume the federal government, with federal spending alone growing to 37 percent of gross domestic product by 2050. The answer is to reduce health-care costs, but you won’t get there by cutting benefits. The political system isn’t set up for that.

Orszag, however, sees another path. He emphasizes a striking chart from the Dartmouth Atlas Project that shows that spending on Medicare beneficiaries varies by tens of thousands of dollars across the states but that higher spending is not connected to better outcomes. Spend more, get the same. In this, he says, there is a substantial “embedded opportunity” to reduce costs without reducing the quality of care. “There is a huge amount of care that is provided that is unnecessary,” Orszag says. “The Dartmouth folks say as much as 30 percent, others say between 15 percent or 10 percent, and fine, that’s huge. The question is how we get out of that.”

You get the point. Orszag wants to get rid of what he thinks are unnecessary medical procedures as a way of controlling health care costs. He himself has written that “[o]ver the long term, health care is the key to our fiscal future,” by way of noting that the Obama Administration’s budget has “a $634 billion reserve fund to begin the process of reducing costs and improving quality.” But as the Times highlights, “no one quite knows how much money such measures would save,” which has led to Republican suspicions that Orszag is seeking to ration health care. Even when Orszag offers numbers, he is uncertain and iffy in his estimates; telling us, as Klein writes, that “as much as 30 percent, others say between 15 percent or 10 percent” can be cut from the costs of health care. Well, which is it? 30 percent? 15 percent? 10 percent? Somewhere between 15 and 10 percent? We don’t know and if Orszag knows, he’s not telling us. Without a more certain estimate, there is no way to gauge the impact on health care that would come from cutting the medical procedures that Orszag deems to be unnecessary and duplicative.

There is a fine line between the intelligent control of health care costs on one hand, and rationing on the other. No one objects in principle to the contention that we ought to refrain from instituting unnecessary procedures that inflate health care costs, but since we have no idea what Orszag and others in the Administration consider to be unnecessary or how much money will be saved in cutting unnecessary procedures, we are flying blind. Going overboard in curbing duplicative procedures can have devastating consequences because essential procedures may be curbed and cut as well. As I have written before, Cato senior fellow Doug Bandow has pointed out that the rationing that is part and parcel of the Canadian health care system may have been responsible for killing actress Natasha Richardson and that if Richardson was in the United States, her chances of survival would have been augmented dramatically thanks to the more extensive procedures that patients like her undergo when treated by the American health care system. Is Orszag generally fond of the health care system they have in Canada? If so, shouldn’t we be worried?

If it is costs that Orszag is trying to cut, his vision of universal coverage may well be the worst vehicle towards attaining that goal. As Michael Cannon writes, Massachusetts, which has a universal coverage system that liberal national health care reform advocates have openly stated serves as a template for their own plans, has seen overall costs on health care reform increase by 42% since 2006, when universal coverage was implemented. Naturally, Massachusetts is now looking to control health care costs and that means “considering one option to ‘exclude coverage of services of low priority/low value.’ Another would ‘limit coverage to services that produce the highest value when considering both clinical effectiveness and cost,’” while a third option would be “a limitation on the total amount of money available for health care services.” All of these phrases are code for “rationing,” which is the easiest way to control the high costs that would likely be imposed on the health care system in the event that universal coverage of the type that Orszag and the Administration like is passed. Of course, since the easiest way to control costs is also the most brutal and destructive way, when taken from the patient standpoint, the Massachusetts experiment hardly serves to give one confidence.

Not that these many roadblocks appear to be slowing down Orszag and the rest of the Administration. Despite the yawning budget deficit and national debt, the Administration continues to make health care reform a priority in its unfounded belief that the policies it seeks to implement will both control costs and improve patient care. And the Administration appears ready to roll out the parliamentary equivalent of a nuclear device to achieve its objectives. In response to concerns that an overflow of amendments and time to debate may slow down the health care reform train in the Senate, Orszag has refused to rule out reconciliation as a means of passing health care reform, or other policy priorities of the Obama Administration, in order to overcome efforts to amend or filibuster any health care reform bill that gets the blessing of the President.

When one-sixth of the economy looks to be fundamentally altered with the passage of any health care reform policy, one would think that the Senate ought to avail itself fully of the opportunity to debate and amend health care reform legislation; this is no middling issue we are dealing with, after all. But the Obama Administration is not interested in debate or in amendments that may be offered by Republican Senators. It is interested in getting a bill before the President’s first year comes to an end and before the honeymoon effect–and the power it gives a new President–fully wears off. Reconciliation is a drastic means by which to achieve legislative ends, but at this point, it would be more surprising if reconciliation were not used to pass health care reform.

To truly understand the mechanics of the health care reform legislation that is likely to come down the legislative pipeline, it would do well for more people to understand that Peter Orszag is going to be the driving Cabinet-rank figure behind health care reform. He has the intellectual energy, the legislative experience and the Washington savvy to do what Tom Daschle was supposed to do; captain the legislative effort all the way to a Presidential signing ceremony. But while no one doubts Orszag’s intellectual and political skills to implement the President’s grand design on health care policy, the Budget Director leaves much to be desired when it comes to giving us information concerning the medical procedures he intends to get rid of and the money he believes he will save in the process. And when it comes to examining the type of health care reform Orszag and the Obama Administration want to see put into place, much is left to be desired by way of salubrious results.

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