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Elmendorf: More Cost Control; Orszag: We're Already On It.

Doug Elmendorf, director of the Congresional Budget Office, sent tremors through Washington when he gave congressional testimony on Thursday. Appearing first before the Senate Finance Committee and then the House Ways and Means Committee, Elmendorf declared that his office had not yet seen evidence that health reform legislation would substantially reduce the cost of medical care over the long run. Within minutes of the first appearance, blackberries all over town were buzzing, as e-mails carried headlines like this one from the Washington Post: "CBO Chief: Health Reform Measures Weaken Economy."

That particular headline was a bit hyperbolic. Elmendorf's point was, I think, more along the lines of "Health Reform Measures Won't Stop Health Care from Getting Really, Really Expensive."

But, generally speaking, the impression of news accounts was correct: Elmendorf had warned Congress that the reform bills he'd seen wouldn't do enough to control costs. And, for the record, he's probably right about that.

Still, the legislative process is far from finished. There are plenty of opportunities to make reform focus more on cost control and plenty of people trying to do just that, although the political obstacles they face are considerable.

The key thing to remember about Elmendorf's remarks is that CBO has, so far, seen just two pieces of legislation. One is the bill that the Senate Health, Education, Labor, and Pensions (HELP) Committee passed earlier this week. That bill doesn't include the types of reforms that would make a big difference in long-term spending trends, but that's mostly a function of jurisdiction. HELP can't touch Medicare or Medicaid, nor can it fiddle with the tax code. Yet it's through those two levers Congress would most likely influence the growth in health care costs. (It remains to be seen what the Senate Finance Committee, which has that jurisdiction, will do.)

The other piece of legislation CBO has seen--the bill produced by three House committees working together--is another story. That's a complete bill, including Medicare, Medicaid, and the tax system. And the experts who have studied the language closely--or, at least, those I've contacted in the last few days--seem to agree with Elmendorf: The bill, they say, doesn't include the sorts of big reforms that would reduce costs significantly.

But that bill is still very much a work in progress, as House leaders themselves acknowledge. And the White House, among others, has some ideas about how to shape it.

Despite a vow not to draw lines in the sand about reform legislation, President Obama has been adamant that any bill make substantial progress on cost reduction--a pledge his Budget Director, Peter Orszag, reiterated in the course of a brief (and previously scheduled) interview he gave TNR Thursday afternoon. "The legislation that emerges from this process has to contain key provisions that will bend the curve over the long term," Orszag said. "The president has said that and we're in the middle of a legislative process, so it's not surprising that, as you go through that process, there are modifications that are necessary."

It may sound a bit bland. But, as proof of the admnistration's determination to press this issue, Orszag cited a proposal that the administration circulated on Capitol Hill this week.

As first reported by David Rogers in Politico, the administration is effectively calling to reconstitute, and strengthen, MedPAC--a commission that now advises Medicare on how it pays for medical services and wares. The recommendations of this new commission, which the administration would call IMAC (the Independent Medicare Advisory Commission), would go into effect automatically, unless either the President or Congress decided to block them. It's similar to an idea that Senator Jay Rockefeller and Representative Jim Cooper have been promoting in their respective chambers. Orszag called it "the most important game-changer" now on the table.

The idea is not without its critics; some members of the House, in particular, have raised concerns about taking payment policy further away from democratic (small "d") control. But many if not most policy experts think it's about time Congress got out of the business of micro-managing Medicare. And Orszag was quick to point out that, under the administration's proposal, both the president and Congress would retain the power to vote down the commission's recommendations--or, for that matter, make any other statutory changes to Medicare they wished.

In any event, whether that particular proposal--or any other "game-changers," including modifications to the tax treatment of health beneifts, which Elmendorf was pushing--becomes part of the final health reform bill is very much an open question. One big problem: Many of the lawmakers complaining that reform won't go far enough to control costs aren't willing to back proposals that actually would control costs. Over at the Post website, Ezra Klein has devised a clever five-part test for any politician--or anybody else, for that matter--who wants to criticize reform by citing Elmendorf. It's a safe bet many of reform's loudest critics would fail.

One last point: Do remember that even if reform ends up without game-changing cost control, it may create political conditions that make future cost control more likely. That seems to be happening in Massachusetts, which enacted sweeping coverage expansions a few years ago. Remember, too, even if reform did nothing but guarantee everybody access to care, without bending the curve, it'd still be a pretty big accomplishment.

--Jonathan Cohn