Health reform stands or falls on cost control

President Obama hit most of the right notes in his appeal for health care reform Wednesday. The only thing missing was the melody to pull them all together – serious cost control.

Like his congressional allies, Obama wants universal coverage, coverage for pre-existing conditions, subsidies for those who can’t afford insurance and rules that stop insurers from dropping patients when they get sick. Good – that all falls under the rubric of How Decent Societies Care for the Vulnerable.

His proposal to require individual Americans to carry coverage falls under the heading of Personal Responsibility. As he noted, “If there are affordable options and people still don’t sign up for health insurance, it means we pay for those people’s expensive emergency room visits.”

Breathing without medical insurance is like driving without auto insurance – a way to stick someone else with the bill for your crash.

As for the missing melody, Obama did pay plenty of lip service to controlling costs. He envisions a broad health insurance “exchange” to foster market competition among insurers and proposes to wring hundreds of billions of dollars worth of “waste,” “abuse,” “fraud” and “unwarranted subsidies” out of Medicare.

Over the past year, the president and Congress have also advocated better management of chronic diseases, more preventive care, more focus on the most effective treatments and more technology-driven efficiencies.

All of those are good ideas. The problem is, most of them won’t produce significant savings anytime soon in the real world, according to the Congressional Budget Office. Preventive care, for example, can save lives – which is a very good thing – but most of it actually runs up the bill.

There is plenty of waste to be squeezed out of Medicare – and the rest of American health care, for that matter. Multiple studies have found healthier communities with lower medical bills than sicker communities with higher bills. Some of the differences can be attributed to scans, tests and procedures that collectively don’t yield improved results.

But neither Obama nor Congress is addressing the root of the problem: the fee-for-service system under which Medicare and other plans typically reimburse on the basis of quantity of care, not quality of care. When the financial incentives are geared to visits and procedures, regardless of necessity or outcomes, what you get are more visits and procedures – not necessarily better treatment or health.

This perverse incentive could be tackled in several different ways, but Obama and other political leaders don’t appear to have the stomach for it.

Without fundamental cost control, though, spiraling costs will put everything else in danger.

Any public health plan would ultimately go bust, just as Medicare is today. Employees will continue to see their benefits erode and their premiums rise. The price of health plans will continue to eat into employers’ profit margins. America’s overall health costs will keep on swallowing greater shares of the economy and displacing other state and national budget priorities.

Here’s the big secret: Cost control – real cost control – is the long-term key to universal coverage and nearly every other stated goal of health care reform. If Congress and the president can get that straight, there’s hope for genuine success. If.