Obama adviser: health reform to ease deficit

Christina Romer, the chair of the Council of Economic Advisers, testifies before a Joint Economic Committee hearing on the economy on Capitol Hill in Washington October 22, 2009.

WASHINGTON (Reuters) - Countering Republican critics' claims that healthcare reform is too costly, a top White House adviser said on Monday reforming the U.S. health insurance market will significantly reduce the federal budget deficit.

"Done correctly, health care reform can genuinely slow the growth rate of health care costs and thus put us on a path to greatly reduced budget deficits in the long run," said Christina Romer, chairwoman of the White House Council of Economic Advisers.

While some critics say Democrats' efforts to regulate the insurance sector should wait until the deficit is under control, they should instead see it "as the most significant act we could take to tackle the deficit," Romer said in speech to the Center for American Progress, a Washington-based think-tank that backs Democrats' reform proposals.

The bid by President Barack Obama, a Democrat, to pass a healthcare overhaul bill this year has met stiff resistance from Republicans who say it is too expensive and would be an intrusive government move into the healthcare market.

Efforts to finalize such legislation come as the budget deficit for fiscal year 2009 topped a record $1.4 trillion -- or 10 percent of the nation's overall economy.

The federal government is one of the largest healthcare payers through various public insurance programs such as Medicare as well as healthcare coverage for its employees.

Slowing the rate of growth for healthcare costs would improve the federal budget, Romer said, if those savings are used to pay down the deficit and not diverted to other uses.

A 1.5 percentage point decrease in healthcare spending in 2014 would lead to a 1 percent drop in the deficit by 2020, she said, adding that by 2040, the deficit would be reduced by 6 percent.

Obama has said he wants a final plan this year to increase the number of Americans with healthcare coverage while reducing costs.

BETTER BUDGET

Current bills in Congress are on track to provide tens of millions more Americans with health insurance, Romer said. More than 46 million people in the United States currently lack coverage.

The proposed legislation would pay for the expanded coverage in the short-term and "not add one dime to the deficit," she said. The legislation also would significantly improve the nation's budget over time, she added.

Savings are expected to come from reducing wasteful spending, better coordinated care, and an end to higher payments to private alternative healthcare plans for older Americans known as Medicare Advantage, Romer said.

It is still unclear whether they will include a government-run health insurance plan, or "public option," to compete with insurance companies, but Romer said such a plan could help slow growth.

"I actually personally have been quite persuaded that the public option can be an important source of cost growth containment," she said after her speech.

But some critics say the five congressional bills focus too much on the insurance sector and do not do enough to curb healthcare spending such as by changing the way doctors get paid or targeting expensive, chronic medical conditions.

Democrats are expected to begin debating proposals next month before passing a final, blended bill from both the U.S. House of Representatives and the Senate.

(Reporting by Susan Heavey; editing by Vicki Allen)