The Banking and Strategy Initiative

President Obama’s plan to expand health coverage to the uninsured is likely to dig the nation deeper into debt unless policymakers adopt politically painful controls on spending, such as sharp reductions in payments to doctors, hospitals and other providers, congressional budget analysts said yesterday.

While popular measures such as increasing preventive care, expanding the use of electronic medical records and rewarding doctors for choosing more effective treatments have the potential to lower costs, “little reliable evidence exists about exactly how to implement those types of changes,” Congressional Budget Office Director Douglas W. Elmendorf said in a letter to Senate budget leaders.

“Without meaningful reforms, the substantial costs of many current proposals . . . would be much more likely to worsen the long-run budget outlook than to improve it,” he said.

The pronouncement from the influential budget office is likely to complicate the arduous task of enacting comprehensive changes this year. Democratic lawmakers, struggling to reach consensus, will lose support unless they produce a package that has the potential to lower the nation’s spiraling debt. But hospitals and drugmakers already are balking at proposals that would cut their federal payments, including a plan Obama unveiled last weekend to trim more than $300 billion from Medicare and Medicaid.

In recent days, Obama has embraced some of the very ideas the CBO advocates, including the proposal to reduce Medicare payments to spur hospitals and other providers to be more efficient. Obama also has said he is open to empowering a body outside Congress to slash payments to providers if they cannot cut costs on their own.

Both ideas could produce long-term savings, CBO said yesterday, and administration officials welcomed the report. “Many of the policies CBO believes could reduce costs in the long term have been proposed by the administration,” said Kenneth Baer, spokesman for White House budget director Peter Orszag.

But those ideas have yet to gain traction on Capitol Hill, where some influential Democrats have ruled out the notion of giving up control over Medicare payments.

Cutting costs will require “real action,” said  Sen. Judd Gregg (R-N.H.), the senior Republican on the Senate Budget Committee. The CBO report “strips away the political posturing and gets down to the basic fact that it will require alternatives that are generally unacceptable to the people who have been putting forward health-care plans.”

In addition to pressuring hospitals and doctors to reduce costs, Elmendorf suggested “significantly limiting” the tax-free treatment of health coverage that millions of Americans obtain through employers. Both “approaches could directly lower federal spending on health care and indirectly lower private spending on it as well,” he wrote.

Key Democrats in the Senate, including Finance Committee Chairman  Max Baucus(D-Mont.), are advocating a new tax on the most generous employer-sponsored health benefits. But the White House is opposed to the idea, which has the potential to ensnare the middle-class workers Obama vowed to protect from tax increases.

Yesterday, Baucus said committee members have resisted tax increases that are unrelated to health care. Aides said Baucus is trying to keep the 10-year cost of his reform package under $1 trillion, and to cover the cost primarily with spending cuts rather than tax increases.

“This process is hard. . . . You submit something to CBO, you get a score back, and then you’ve got to go talk to everybody about what the changes are that you might want to make to get the cost down, and that’s really what’s going on,” said  Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee.

Senate aides said Baucus had been looking at options that could push the price past $1.6 trillion over 10 years, a figure that startled some Democrats on the Senate Finance Committee, who met yesterday to discuss their options.

“It is clear there have got to be changes made to make the whole package affordable,” Conrad said.

As lawmakers grappled with the challenge of paying for a major expansion of coverage, three of their former colleagues — all former Senate majority leaders — finalized what they say is a blueprint for how to achieve the goal without busting the budget. Democrat Thomas A. Daschle and Republicans Robert Dole and Howard Baker will release a comprehensive proposal today for covering every American without putting the federal government deeper in debt.

The three advocate a mix of tax increases, spending cuts and new mandates guaranteed to annoy nearly every major player in the health-care debate, including a mandate on businesses to contribute to health insurance costs and a tax on some benefits provided through the workplace.

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