Proposal's Cost Savings Seem to Be Elusive

The latest health bill to emerge from the Senate contains a slew of measures designed to control costs. But it would be years before they kick in, and many may only put a dent in spending. Taming health spending is one of President Barack Obama's top objectives for the sweeping legislation, along with extending coverage to the nation's uninsured. A major source of that spending comes from the ballooning cost of the Medicare health insurance program for the elderly, which is cited by congressional budget crunchers as the biggest long-term contributor to the nation's deficit. A health-care reform sign is carried into a hearing room in Washington before Sen. Baucus unveiled new legislation. Mr. Obama and lawmakers have pledged to rework the system so it pays doctors, hospitals and other health-care providers for the quality of service they provide and reduces their incentives to perform unnecessary tests and procedures. But Senate Finance Committee Chairman Max Baucus, the architect of the bill unveiled Wednesday, conceded that under his legislation, such changes would be slow in coming. 'This is going to take time, the Montana Democrat told reporters Wednesday. 'It's not going to be accomplished overnight.' The bill would cut $409 billion from Medicare over the next decade, according to an estimate from the Congressional Budget Office. It also creates an independent Medicare Commission that would have new powers to eliminate wasteful spending in Medicare that would save about $23 billion over a decade. The Senate Finance Committee staff said the most-powerful mechanism in the bill to lower health spending was a 35% tax on insurance companies for particularly generous health plans they would offer, defined as those worth $8,000 a year for an individual and $21,000 a year for a family. Health policy experts said such plans encourage liberal use of health services, and that taxing them would discourage employers from offering them. The proposal would also limit the amount consumers could contribute to flexible spending accounts, which allow the use of tax-free money to pay for medical expenses such as prescriptions and doctor visits. That amount would be capped at $2,000 a year starting in 2013, and the restrictions on what would be covered could become tighter."

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