Last week, we cited former Reason editor Virginia Postrel, who highlighted a report from the Obama economic team claiming that “nearly 30 percent of Medicare?s costs could be saved without adverse health consequences.”

To his credit, Obama Budget Director Peter Orszag not only responded to Postrel, but also launched a blog where he’ll discuss the Obama administration’s views on health-care reform.

Several things from his post stand out. Orszag claims the administration plans to find an extra $900 billion to finance their plans for universal coverage, and the money will come in part from taxing medical benefits from high-income Americans — a proposal candidate Obama scoffed at last fall.?

But most of the money is supposed to come from what Orszag calls

real, scoreable proposals that have been deemed by CBO (which has a good reputation for analytical rigor and a healthy skepticism about such proposals) to save money or raise revenue.

In addition to insisting that reform be deficit neutral based on these CBO-scored proposals, we also embrace a set of initiatives that will help transform health care and mitigate the increase in health care costs ? steps such as health IT, research into what works and what doesn?t, prevention and wellness, and changes in incentives so that Americans get the best care not just more care. These “game-changers” are critical to the sustainability of health care reform; without them, cost growth will eventually creep back up. But they will not pay for health care reform; that is from the Medicare and Medicaid savings and new revenue. Instead, they should help to lower the rate of health care cost growth and sustain reform over time, and thereby help us achieve a more efficient system.

?

Problem is, a December 2008 report by the Congressional Budget Office, which Orszag headed before joining the Obama team, found that any savings from these “game-changers” may be illusory or even non-existent.

From the report (my emphasis):

Serious concerns exist about the efficiency of the health care system, but no simple solutions are available
to reduce the level or control the growth of health care costs. Steps to restructure the insurance market
and to encourage people to purchase less extensive coverage could reduce the use of treatments that provide
minimal benefits, but enrollees would face higher cost sharing or tighter management of their care.

Other approaches ? such as the wider adoption of health information technology or greater use of
preventive medical care ? could improve people?s health but would probably generate either modest
reductions in the overall costs of health care or increases in such spending within a 10-year budgetary
time frame.

Makes sense to me. Putting the medical histories of 300 million Americans in some sort of universal database would require a jaw-dropping investment in software development, hardware purchases, and plain old data entry. The report goes on to note that even after you’ve created the database, there’s no guarantee that overall medical costs will go down or that their growth will slow. The culprit: third-party payment.

As former Bush administration economic adviser Keith Hennessey puts it, “those of us with private health insurance are largely protected from
the costs of the medical care we use because of the general prevalence
of low deductibles and copayments.? Even if we have better information,
we may not care if the benefit of a particular medical treatment is
small, as long as it seems really inexpensive.? The Administration?s
proposals on health information technology, electronic medical records,
and medical outcomes research may improve health, but they will have
little effect on slowing the growth of health care spending for those
with low-deductible, low-copayment private health insurance.”

And I’ve always been suspicious of claims about significant long-term savings from wellness and prevention programs. Businesses and insurers like the programs because they appear to improve the health of employees and reduce medical costs while a worker is covered by an employer’s health plan. But wellness programs may simply delay the inevitable; people with chronic illnesses may not require a lot of care until they reach retirement age, and then they’re on Medicare. Paying for them then becomes a problem for the taxpaying public at large, not their former employers.

Besides, the language about medical “savings” eventually gets very squirelly. Even Orszag says these “game-changers” will merely “help to lower the rate of health care cost growth,” which sounds to me like proclamations that the president’s stimulus program will “save or create” jobs. It’s a proposition you can neither prove nor disprove.