Executive Intelligence Review
Subscribe to EIR

PRESS RELEASE


Obama Administration Calls for
Slashes to Medicare and Medicaid
To Balance the Budget!

June 2, 2009 (EIRNS)—Top White House advisors Larry Summers and Peter Orszag, as well as White House staffer Linda Douglass, admitted this morning, in response to a question from EIR's Paul Gallagher, that the Obama Administration intends to cut Medicare and Medicaid expenditures to balance the budget. Douglass said the Obama Administration intends to cut the expenditures by $300 billion in over ten years. The Medicare and Medicaid budget totalled $682 billion in 2008.

The interchange took place at a Council on Economic Advisors presentation on health-care reform. Gallagher asked: "You've said that a third of health care is wasted, that you want to cut one-third of health care expenditures in the U.S., but you haven't said anything about eliminating the overhead and waste, which predominantly comes from the HMOs, and that means this actually amounts to denying necessary health care along the example of the British NICE organization, which is precisely the same thing as categorizing some lives as 'unworthy to be lived,' as did the Nazis."

In response, Larry Summers, Obama's National Economic Advisor intervened to clarify that "The coverage savings that the Administration anticipates to go with expansion of coverage, are being paid for, in large part, by direct changes in identified costs paid to providers; measures such as 'Medicare Advantage' reform. Those measures, on those programs, medicare and medicaid, will provide for a balanced budget."

Then the Obama Administration's Budget Director Peter Orszag himself jumped in to say that "cost containment" in medical expenditures is necessary, to keep the system "budget neutral." During this period, "a significant share of short-term costs will come from savings from within medicare and medicaid...."

The interchange took place at an Executive Office Building media event, at which Christina Romer, Chairman of the Council of Economic Advisers (CEA) released her new CEA report, "The Economic Impact of Health Care Reform." Speaking with her were Senators Max Baucus (D-Montana) and Chris Dodd (D-Conn.), pledging their commitment to pass Obama's desired comprehensive reform legislation this year. Standing behind the panel were Larry Summers, Obama's economics adviser, Peter Orszag, Chairman of the Office of Management and Budget, and Nancy-Ann DeParle, White House Director of Health Care Reform.

Summers made a special point of delineating the phases of the cuts in health care in his "Obama reform" plan, for Medicare/Medicaid cuts up front, then more ongoing cuts to bring about "transformation" of the system—a behavioral code term for altering expectations to accept less treatment and more death. He said:

I think this is a crucial point, so I'm going to emphasize it one more time.

The coverage savings that the Administration anticipates to go with expansion of coverage, are being paid for, in large part, by direct changes in identified costs paid to providers; measures such as 'Medicare Advantage' reform. Those measures, on those programs, Medicare and Medicaid, will provide for a balanced budget.

Entirely separate from that effort, are a set of major goals for promotion of preventive care, which ultimately will reduce osts. The greater distribution through the system of the benefits of cost-effectiveness research, effectiveness-based medicine; the benefits and savings that come from the improvement of the quality of care that come from information technology; the greater knowledge of the treatment differentials that Peter and Christine have stressed, that will come from the benefits of promoting information technology.

All of those things, which have the potential to bring about broad cultural change, are NOT being relied on to finance increased coverage. They are a separate component. They are a separate component, given the estimates suggesting that a third of the system is waste. Given the estimate that healthcare inflation in excess of regular inflation is not constant, it's something that varies over time, and varies over time with the degree of government concern with respect to healthcare costs. These costs are the source of the 1.5% savings; and that 1.5% savings bring us the very powerful benefits that Professor Romer's study discussed.

So it's very important, in looking at this thing, to draw out that approach, to draw that distinction between the components of hard, scoreable savings, and this broader effort at system transformation, which is what this [CEA] study is about.

See the upcoming June 12 issue of EIR for a full report.