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The White House Blog: Fiscal Responsibility

  • Bending the Curve in More Ways Than One

    Posted by OMB Director Peter Orszag on October 13, 2009 at 2:57 PM EDT

    Cross-posted from the OMB blog.

    Over the past few days, a number of news articles about health reform have suggested that efforts to control the growth of health care costs are in jeopardy.  Great strides to control long-term health care costs have been made in both the Senate and the House — fulfilling a key goal of the President's health reform effort.

     
    The two provisions that get the most attention are found in the Senate Finance Committee's mark.  The first is an excise tax on insurance companies offering high-premium plans — which would create an incentive for more efficient plans that would help reduce the growth of premiums. The second is a Medicare commission — which would develop and submit proposals to Congress aimed at extending the solvency of Medicare, slowing Medicare cost growth, and improving the quality of care delivered to Medicare beneficiaries. 
     
    These are both crucial facets of a reform plan, but too often other important delivery system reforms are ignored — which is unfortunately the case for those recent news articles.  The result is a failure to recognize how far the entire political system has come in putting us on the verge of passing fiscally responsible health insurance reform.
    Consider these important reforms found in many of the bills:
    • Bundled payments.  Bundled payments, which pay a fixed amount for an entire episode of care rather than piecemeal for each individual treatment or procedure, would help improve patient care by encouraging better and more coordinated care than under a fee-for-service system.  Bills in both the Senate and the House would develop, test, and evaluate bundled payment methods through a national, voluntary pilot program. Once we see what works and what doesn’t, bundled payments can be quickly scaled up across the country.
       
    • Penalties for high readmissions.  Too often, patients are discharged from the hospital without the necessary follow-up care — leading to re-hospitalization, risks to one’s health, and higher costs.  Under the proposals being considered, Medicare would collect data on readmission rates by hospital and would assess penalties on those hospitals with high, preventable readmission rates.
       
    • Accountable care organizations (ACOs).  Under the current system, quality and efficiency are not sufficiently rewarded, and there is little incentive for physicians to collaborate in the coordination of patient care.  Legislation in both houses would encourage and reward ACOs, which are groups of providers that are jointly responsible for the quality and cost of health care services for a population of beneficiaries with chronic conditions.
       
    • Quality incentives for physicians. These proposals would expand quality incentives for physicians and provide more timely feedback on physician performance based on their submitted data.
    These — and other measures — are why a bipartisan group of experts recently wrote that health reform legislation under discussion "offers many promising ideas to improve the overall performance of the U.S. health care system.  In addition to steps that would reduce the number of Americans without insurance coverage, the plan includes ways to slow long-term spending growth while building the high-value health care system our nation urgently needs."  The Administration looks forward to working with the Congress as the legislation proceeds to continue to refine and improve these cost-containing steps.

    Peter Orszag is Director of the Office of Management and Budget

     

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  • Calling all Investors, Consumers and Moms: What Do You Want to Know about Financial Regulatory Reform?

    Posted by Macon Phillips on October 12, 2009 at 4:12 PM EDT

    In an effort to expand our online engagement around financial regulatory reform, the White House is trying something new. 

    The President’s speech on Friday was covered by a number of blogs, including three that will be following up with exclusive White House interviews.  The editors of those websites have been collecting questions from their readers and tomorrow senior White House officials will answer them.

    First is a website self-described as a "multimedia financial-services company dedicated to building the world's greatest investment community", The Motley Fool:

    This is Washington's way of saying that they value the community of investors that gathers here at Fool.com. We've got plenty of questions about the White House's financial reform plans, but as ambassadors of Fool.com, we want your voice to be heard.

    This is your chance to speak to the people who are shaping the policies that will affect our portfolios for years to come. Tell us what issues you want to see addressed. Just use the "comments" section below to tell us what we should ask the White House.

    The second is a popular resource for consumer-driven advice on a wide range of topics, including finance, The Consumerist:

     Watch his video and leave your questions in the comments.... Then, next Tuesday, we'll interview Diana Farrell, Deputy Director of the National Economic Council, get you some answers, and post the video. Deal?

    And finally, given the very active "mommy blogging" community’s unique perspective on financial decisions, we asked The Motherhood to gather questions from concerned parents.

    So learn more about financial regulatory reform, join the conversation happening at these sites and check back tomorrow for the follow-up videos.

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  • Setting the rules of the road

    Posted by Macon Phillips on October 9, 2009 at 6:45 AM EDT

    Outdated rules regulating the financial sector have affected millions of Americans and contributed to the nation's worst financial crisis since the Great Depression.

    This afternoon, the President will talk about changes and protections put forward in proposed financial regulatory reform legislation and urge Congress to act quickly and pass an effective and comprehensive package by the end of the year.  Tune in to WhiteHouse.gov/live at 2pm eastern to watch and discuss the event.

    One of the most significant pieces of this effort is the establishment of the Consumer Financial Protection Agency.  The CFPA will streamline and consolidate regulatory agencies now in place to more effectively promote transparency, fairness and accountability for financial products and services.

    Austan Goolsbee, from the White House's Council of Economic Advisors, goes over the CFPA and the President's approach to financial regulatory reform in this explanatory video:

    Viewing this video requires Adobe Flash Player 8 or higher. Download the free player.
    download .mp4 (45 MB)

    If you find the video helpful to better understanding the issue, please share it far and wide.  And don't forget to catch the East Room event later today.

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  • OMB Director Orszag on Waste in Health Care

    Posted by Jesse Lee on October 5, 2009 at 12:35 PM EDT

    A lot of people might have an intuitive skepticism towards the idea that there is enough waste in our health care system to pay for so much of the initial costs. That's understandable – too often politicians point to the nebulous cutting of "waste and abuse" as an easy out when asked how they intend to pay for something, whether it’s a new program or a tax cut.
    On the other hand, most Americans also know that, as the President has said, "We spend more than any country on Earth, and we're not any healthier for it." 
    Today OMB Director Peter Orszag, a fiscal hawk who has taken on controlling health care costs as something of a passion over the past few years, lays out the case in a blog post citing a new study out of the Institute of Medicine:
    The need for health insurance reform just became clearer with the release from the non-partisan Institute of Medicine (IOM) of an estimate that the health care system contains over $800 billion in excess costs, a number consistent with previous studies. In other words, according to this new estimate, we spend more than $800 billion a year on health care that does not make us healthier. The result is higher premiums for us all and higher costs for the government — but it also means you may receive tests and procedures that you do not need, putting your health at risk.
    According to the study, excess costs arise from a variety of sources. Excessively high administrative costs for insurers, physician and hospitals come to about $200 billion. Unnecessary services, such as using more expensive brand name drugs when generics are just as good and overusing tests and treatments compared to professional guidelines, account for another $200 billion or so. Errors and avoidable complications add $75 billion, and fraud adds another $75 billion.  Preventive measures — both in terms of keeping healthy people healthy and keeping people with chronic illness such as diabetes out of the hospital — tack on another $55 billion. And the list goes on. 
    The big question is how can we get reduce these costs?  The IOM identifies different levers to push change, including: uniform administrative requirements for paperwork; reform of payment incentives so that they are more oriented toward results and quality; increased reliance on evidence-based quality practices; the development of more independent evidence of what works and what does not work; electronic clinical records that can be shared and are privacy protected; and providing incentives for more consistent and widespread prevention interventions. As one goes down the list, almost all these changes have been endorsed by the Administration and most are included in the reform bills making their way through Congress, including the legislation currently being considered by the Finance Committee.   

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  • Going the Distance - 10K ideas

    Posted by OMB Director Peter Orszag on October 2, 2009 at 9:14 AM EDT

    Cross-posted from the OMB blog.
    Last week, OMB launched the President's Save Award, a contest for federal employees to come up with the best idea to save taxpayer dollars and make the government perform more effectively and efficiently.
    Today, we received the 10,000th submission and we now have 10,266 entries (to be exact!).
    If you are a federal employee and have not participated yet, there is good news: you have two weeks to enter. To submit your idea visit www.SaveAward.gov. The winner will meet with President Obama and have his or her idea incorporated into the FY 2011 Budget. (We also will recognize the agency with the highest participation rate so make sure your co-workers enter too!).
    Overall, the SAVE Award will help us identify what works and what doesn’t, so taxpayer dollars are used in the most productive and effective way possible.
    Peter Orszag is Director of the Office of Management and Budget

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  • Reality Check: Nancy-Ann DeParle's Stellar Record

    Posted by Jesse Lee on September 28, 2009 at 1:34 PM EDT

    Reality Check
    One of the funny things about the debate over health insurance reform has been watching people who have for years clamored for cutting waste from Medicare contort themselves trying to find ways to oppose our efforts to do exactly that.  As the President noted in his Address to a Joint Session of Congress:
    Now, these steps will ensure that you – America's seniors – get the benefits you've been promised. They will ensure that Medicare is there for future generations. And we can use some of the savings to fill the gap in coverage that forces too many seniors to pay thousands of dollars a year out of their own pockets for prescription drugs. (Applause.) That's what this plan will do for you. So don't pay attention to those scary stories about how your benefits will be cut, especially since some of the same folks who are spreading these tall tales have fought against Medicare in the past and just this year supported a budget that would essentially have turned Medicare into a privatized voucher program. That will not happen on my watch. I will protect Medicare. (Applause.)
    In case you don’t want to take the President’s word for it, here’s what the AP reported in an article headlined "SPIN METER: Once Medicare's foe, GOP now boosts it":
    Last spring, most Republicans voted in favor of a budget proposal that would end Medicare in its current form for people under 55, offering vouchers instead to pay for private health care accounts.
    You can read more about this switcheroo, as it were, from a Washington Post story out this morning, and from the New York Times editorial referenced here earlier.
    A more recent attack has come from Stephen Moore of the Club for Growth, directed at the Director of our Health Reform Office Nancy-Ann DeParle. He leads off his attack citing various problems that various companies she’s been associated with have had, declaring that "We can thank Investigative Reporting Workshop of the American University School of Communication for this information." Well, Moore shouldn't be too thankful if his goal was smearing DeParle – here's what the report actually says about DeParle's direct involvement:
    "There is no reason to think that DeParle was directly involved in any of the actions that led to the investigations and sanctions. DeParle was a member of the board of directors of these companies, not the chief executive officer managing day-to-day operations. It is rare for directors to be held legally accountable for illegal dealings by management."
    Moore also claims that when DeParle ran Medicare during the 1990's, she did nothing to halt the waste and abuse that President Obama is fighting against now: "By the end of the Clinton administration, Medicare fraud was estimated by the U.S. General Accounting Office to costs taxpayers tens of billions of dollars a year. This happened on Ms. DeParle's watch. It makes one wonder how this czarina is going to root out waste when so much of it piled up the last time she was in charge."
    Unfortunately for Mr. Moore's argument, the reality is quite the contrary – DeParle helped cut errors and waste in half and saved taxpayers billions during her tenure. Again, the very report that Moore so graciously thanks includes this:
    The investigations and lawsuits are at odds with DeParle's reputation in Washington as a progressive, highly respected health policy analyst. During the late 1990s, when she ran Medicare, she pushed hard to raise medical quality standards and to clamp down on fraud and waste in the massive federal health plan for the elderly.
    "In my experience, she's the one administrator who really was tuned into the fraud issue," said William J. Mahon, a former director of the National Health Care Anti-Fraud Association. "She distinguished herself in putting fraud on the agenda."
    A few more examples:
    DeParle Headed Aggressive Campaign To Fight Medicare Fraud Cut Improper Payment Rate In Half In Just Two Years. "Medicare's aggressive campaign to fight fraud and overbilling has cut the improper payment rate in half in just two years, but the giant health program for the elderly still paid health care providers $ 12.6 billion last year for services that cost too much or were never provided, federal auditors said Tuesday. In 1996, when the government began systematically auditing a sample of claims by doctors, hospitals and other agencies, its erroneous payment rate was estimated at 14%...'We have turned the corner and we are heading in the right direction,' said Nancy-Ann Min DeParle, who heads the Health Care Financing Administration, which runs Medicare. She pledged to 'continue the aggressive effort to fight waste, fraud and abuse.'" [L.A. Times, 2/10/99]
    Medicare’s Error Rate Had Fallen From 14% To 6.8% By Final Year Of Clinton Administration. "The US Department of Health and Human Services said on Friday that the rate of improper Medicare payments was stable over the past 2 years. HHS said the projected percentage rate for 2002 was about 6.3%, the same figure reported for 2001 and a significant decrease from the 13.8% rate estimated in 1996, when the HHS Office of Inspector General (OIG) began calculating the number. In 2000, the error rate was about 6.8%." [Reuters, 1/24/03]
    Medicare Lost $23.2 Billion To Fraud, Abuse And Errors In 1996. "In all, government auditors told Congress that 14 cents of every dollar spent last year by Medicare, the nation's health care program for the elderly, was lost to such instances of fraud, abuse, or simple error. That amounted to $ 23.2 billion of the $ 168.6 billion Medicare paid last year to hospitals, doctors, laboratories and other health care providers." [AP, 7/18/97]
    Medicare Lost $11.9 Billion To Fraud, Abuse And Errors In 2000. "Medicare lost an estimated $11.9 billion to waste, fraud and mistakes last year, half of what was lost five years ago from improper payments to doctors and hospitals, auditors said Tuesday. U.S. Health and Human Services Secretary Tommy G. Thompson praised efforts to reduce the improper payments, which could range from innocent mistakes to outright fraud and abuse." [Milwaukee Journal Sentinel, 3/7/01]
    DeParle Convened HCFA’s First Conference on Combating Medicare Fraud and Abuse. "One of the first things Nancy-Ann Min DeParle did after taking over as head of the federal agency that administers Medicare was to visit South Florida with Sen. Bob Graham. Graham had promised DeParle, administrator of the Health Care Financing Administration, that shewould be able to witness Medicare fraud first-hand. He was right. During the trip in January, Graham and DeParle stopped in clinics where patients were being seen - and Medicare was being billed - but no licensed doctors were on site. They visited community mental health care programs where bingo games were being charged to Medicare as therapy. DeParle, 41, returned to Washington pledging to make the fight against Medicare fraud, estimated at $ 23-billion each year, her top priority. This month, DeParle sponsored a first for HCFA - a meeting of about 300 health care providers, private insurers, prosecutors and public officials on combating fraud and abuse." [St. Petersburg Times, 3/30/98]
    One would expect somebody who claims to be a principled conservative, who has talked for years about eliminating waste and abuse in the system, to praise DeParle's record and to embrace President Obama's attempt to do what Moore and other conservatives have called for year after year. But perhaps principles are of less importance than partisan hit pieces to some.
     

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  • Orszag on the Latest News Out of CBO on Reform

    Posted by Jesse Lee on July 25, 2009 at 4:51 PM EDT

    OMB Director Orszag walks us through the latest budget scores out of the Congressional Budget Office on health insurance reform.
    Read his full post.
     

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  • Peter Orszag on Building a New Foundation for Growth

    Posted by Katherine Brandon on July 22, 2009 at 2:20 PM EDT

    White House Office of Management and Budget Director Peter Orszag addressed the Council on Foreign Relations today, outlining the Administration’s response to the economic crisis, and how the Administration is working to build a new foundation for economic growth and broadly shared prosperity.
    Orszag reminded the audience that when President Obama was elected in November, the economy was in a freefall.  The administration had to work to restore confidence. This is why the administration has been looking to the future, and laying the groundwork for a stable foundation, so that we will be prepared for future shocks.  The Capital Assistance Program, the Homeowner Affordability and Stability Plan, and the Recovery Act were all part of this approach. From his prepared remarks:
    In designing the Recovery Act, we also recognized that the economic situation we inherited was so severe that we needed to assure producers and consumers that aggregate demand would be boosted not just for a few months, but for a sustained period.  That is why we envisioned a Recovery Act that would ramp up rapidly in 2009, have its peak impact in 2010, and lay the groundwork for further growth thereafter.
    Now, the Recovery Act has encountered some criticism in recent days – from all sides. And a piece of legislation of this size and import should be scrutinized.  In conducting this debate, however, we need to understand what the Act was designed to do.
    Remember that the Recovery Act was designed to take effect over a two-year period with about 70 percent of all funds going out in the first 18 months.
    As a result, and since job growth typically lags behind economic activity, both Administration and independent forecasts have predicted that only a very small part of the total job creation expected from the Recovery Act would take place by the end of the second quarter.  Therefore evaluating how well the Recovery Act is working based on recent movement in employment numbers is misleading.
    Implementation of the Recovery Act is on schedule, and the $220 billion in relief has already had a direct impact. Orszag explained how the Recovery Act is helping our economy rebound:
    Goldman Sachs, for one, projects that the Recovery Act will add about 3 percentage points on an annualized basis to GDP in the second quarter and have a similar effect in the third quarter.  To be sure, other analysts may reach slightly different quantitative conclusions than Goldman Sachs – and in any case we have a way to go before anyone should become satisfied with our economic performance.  Nonetheless, it is becoming increasingly clear that the economy is no longer on the brink of disaster.
    The equity markets have rebounded, and credit markets have thawed.  The TED spread—an indicator of stress in private credit markets—was typically below 50 basis points before the crisis. In October of last year, it peaked at over five times that, at 460 basis points.  It has now settled back under 50 basis points.   And the consensus among private forecasters is that the economy will return to positive growth this year.
    But even as progress is made, this year will continue to be difficult for American workers, as the unemployment rate typically lags behind other parts of the economy. He argued that recovery is not just about rescue, but about rebuilding our economy so that we can have long-term, sustainable growth -- and that health care reform is an essential element to building this new foundation:
    The evidence is clear that the biggest threat to our fiscal future is rising health care costs. If health care costs grow at the same rate over the next four decades as they did over the previous four, Medicare and Medicaid spending will go from about 5 percent of GDP to about 20 percent by 2050. That was about the size of the entire federal government last year.
    Our fiscal future is so dominated by healthcare that if we can slow the rate of cost growth by just 15 basis points a year, the savings for Medicare and Medicaid would equal the impact from eliminating Social Security’s entire 75-year shortfall.
    The fiscal importance of health care reform is indisputable.  Yet in the current debate, there’s been a lot of controversy surrounding whether the bills that are emerging from Congress accomplish our fiscal goals or not.  So let me be clear: the President will not sign a health care reform bill unless it is deficit neutral with hard, scoreable savings over the next decade and on a stable trajectory as the decade ends.
    In addition to reforming health care in a deficit-neutral way, the President has also insisted that we take additional steps to transforming our system to one that delivers better care, rather than more care.
    Because if we fail to do more to move towards a high-value, low-cost healthcare system, we will be on an unsustainable fiscal path no matter what else we do.  As it stands now, the health care system does the opposite of what it should -- creating incentives for doctors and hospitals to provide more care, not the best care.
     

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  • Ending the "Speculation"

    Posted by Jesse Lee on July 20, 2009 at 2:45 PM EDT

    OMB Director Peter Orszag knocks down a few budget stories floating around.  

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  • Of SAPs and F-22s

    Posted by Jesse Lee on July 15, 2009 at 6:25 PM EDT

    When a President wants to go on record with his feelings about legislation that is making its way through Congress, he or (some day soon!) she issues a Statement of Administration Policy, or SAP. Today the President issued a SAP on the National Defense Authorization Act, which was generally supportive of the legislation but which laid out an unambiguous veto threat over one fiscally irresponsible provision.

    Get the details from OMB Director Peter Orszag at his blog.

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