Medicare
Much of the cost containment in both bills centers on Medicare. That's not only because the government's health insurance program for the elderly is such a big component of the federal budget, but also because — spending more than $450 billion a year — it drives much of what happens in the private health insurance market as well.
Both bills reduce the reimbursements that Medicare pays health care providers and certain types of privately run insurance programs for Medicare recipients, known as Medicare Advantage plans. But the Senate bill also contains an element that the Obama White House, as well as many economists, consider to be a potential "game changer" on health care costs. That is a 15-member independent commission, known as the Independent Payment Advisory Board, that would have the power to bring down Medicare spending when it exceeds a certain measure of inflation. However, the board would operate within limits. It would not be allowed, for instance, to recommend anything that would ration care or change benefits for current Medicare recipients. Congress could block the commission's recommendations, but only if it turns them all down at once rather than picking and choosing.
The House bill does not contain such a commission, in part because lawmakers themselves wanted to retain the ability to set Medicare payments (which can be channeled to hospitals in members' own districts), and in part because the proposal has come up against opposition by senior citizens groups.
President Obama has strongly signaled that he wants this provision in the final bill, so some version of it probably will be. What remains to be seen is whether there will be an effort to weaken the commission's authority, and as a result, its ability to impact health costs.
There are also a number of other differences in the two bills with regard to Medicare. The House measure, for instance, would require that the HHS Secretary negotiate pharmaceutical prices directly with the drug companies — something that the Senate is not likely to go along with. And both bills would establish a number of pilot programs to test innovative methods of coordinating medical care among providers; one major question is how much power the HHS Secretary will have to implement those programs on her own, rather than having to seek Congress' permission to do so.