Health care costs that count in the Senate Finance bill

The fiscal report card on the cost of the Senate Finance Committee's healthcare bill could make a legislator burst with pride.

Not only does the bill's projected total cost of $829 billion come in under President Obama's $900 billion 10-year upper limit, it is estimated to also actually reduce the federal deficit by $81 billion in the decade that starts next year, and probably longer than that. So, at least, concludes the nonpartisan Congressional Budget Office (CBO) this week.

But let's take out the wide-angle lens and view the bigger picture. The United States faces unmet obligations under Medicare – the government healthcare program for seniors – of nearly $40 trillion. Removing $81 billion from that mountain is a bit like using a toy backhoe instead of a Caterpillar earthmover.

The idea of even tinkering with Medicare brought howls of outrage from Americans at town-hall meetings this summer. And yet, solving the country's crisis of escalating healthcare costs is impossible without reforming Medicare, which accounts for the bulk of government spending on healthcare.

Lawmakers well know both the fiscal and the political challenge of the Medicare program. That's why the Senate Finance bill – the expected template of any healthcare legislation – laudably includes a special new Medicare commission to cut costs. The commission's ideas will automatically go into effect unless Congress overrides them.

But even when lawmakers had a chance to punt the politics of doing Medicare reform to an independent commission, they chickened out. They placed significant restrictions on the commission, so that it will only be able to deliver $22 billion in cost savings over 10 years, according to the CBO estimate.

For instance, Medicare eligibility and benefits would be exempt from commission consideration, explains the CBO report. That's disappointing because only big structural changes such as eligibility based on income or reduced benefits will be able to strengthen Medicare's long-term fiscal outlook.

That would leave the new proposed commission nibbling around the edges by cutting federal subsidies for prescription drug premiums or changing payment rates and methods for fee-for-service providers. Even so, hospitals and hospices would be exempt until 2020.

It's important to have a real cost-saving mechanism such as the Medicare commission in whatever legislation emerges. The panel provides a safety valve given the uncertainties of other saving measures. As the Senate moves forward on healthcare, it should keep the commission, but drop the preconditions that would limit its ability to truly reform Medicare.