Tag: health care reform

CBO: Democrats Bend Health Care Cost Curve — in the Wrong Direction

This is too good.  Directly from the ABC News blog post, “CBO Sees No Federal Cost Savings in Dem Health Plans:”

Here’s a blow to President Obama and Democrats pressing health care reform.

One of the main arguments made by the President and others for investing in health reform now is that it will save the federal government money in the long run by containing costs.

Turns out that may not be the case, according to Doug Elmendorf, director of the nonpartisan Congressional Budget Office.

Answering questions from Democrat Kent Conrad of North Dakota at a hearing of the Senate Budget Committee today, Elmendorf said CBO does not see health care cost savings in either of the partisan Democratic bills currently in Congress.

Conrad:  Dr. Elmendorf, I am going to really put you on the spot because we are in the middle of this health care debate, but it is critically important that we get this right.  Everyone has said, virtually everyone, that bending the cost curve over time is critically important and one of the key goals of this entire effort.  From what you have seen from the products of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?

Elmendorf:  No, Mr. Chairman.  In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount.  And on the contrary, the legislation significantly expands the federal responsibility for health care costs.

Formatting in original.

Back to the Bad Old Days of High Marginal Tax Rates

As Mike Tanner has written, the health care bill means a big tax hike – indeed, a lot of tax hikes.  It also means a reversal of one of President Ronald Reagan’s great achievements, bringing down the top marginal income tax rate. 

Reports the Washington Times:

Small-business owners are warning that the economy would suffer under a health care bill proposed by House Democrats, which would drive tax rates for high-income taxpayers to levels not seen since before President Reagan’s tax reform of 1986.

The top federal income tax rate, which Mr. Reagan and a bipartisan Congress lowered from 50 percent to 28 percent, would reach 45 percent in 2011 if Congress and President Obama enact the surtaxes that are part of the health care reform plan that House Democrats announced Tuesday.

Small-business owners, who would take a direct hit from the surtaxes, expressed dismay over the proposal, saying it would force them to curtail hiring and reduce wages amid the worst recession in a generation.

“If they institute a 5 percent surtax on income, it will have a severe impact on small businesses that are already hurting,” said Michael Fredrich, whose Wisconsin company, MCM Composites, molds plastic parts.

“We run maybe three days a week, sometimes four days a week, sometimes zero days,” he said. “I can tell you that at some point, people … running a small business are just going to say, ‘To hell with it.’ “

Individuals tend to focus on their tax burden.  After all, our overall tax bill reflects the amount of money we lose as legislators speed about the country allegedly “serving” us while promoting their own political ends. 

Marginal tax rates more directly affect decisions on saving, investment, business formation, work effort, job creation, and more.  Even politicians not enamored of the “rich,” whatever that term means, should recognize that we all benefit from an economic system which encourages entrepreneurship.

Proponents of big tax hikes might want to recall Aesop’s Fable, The Goose that Laid the Golden Eggs.  Wreck the economy, and the health care system will crash too.

The Health Care Reform Bill Will Cost $500 Billion in New Taxes

House Democrats released their 1,018 page health care reform bill, America’s Affordable Health Choices Act of 2009, yesterday.

This bill is a dog’s breakfast of bad ideas paid for by more than $500 billion in new taxes. The reform would impose an individual mandate on individuals, requiring every American to buy a government designed insurance package or pay a new tax equal to 2.5 percent of their income. At a time of rising unemployment, businesses would be required to provide health insurance to workers or pay a new tax equal to 8 percent of workers wages. These new taxes could drive the total cost to taxpayers much higher than the $500 billion in direct taxes in the bill.

In addition, the bill includes a host of new insurance regulations that will drive up the cost of insurance premiums, and a new government-run insurance plan that will “compete” with private insurance. That government-run plan will ultimately force millions of Americans out of their current insurance plan and into the government-run system. This is a health care “reform” under which Americans will pay more for worse care.

To get an idea of what sort of bureaucratic nightmare that would ensue with passage of this bill is illustrated by the Republican Staff of the Joint Economic Committee here.

For regular updates on the reform process as it progresses, check out Cato’s health care Web site.

Good News: Health Care Express Slows

Health care “reformers” (meaning those who want to effectively nationalize America’s medical system) have long understood that their best hope in the new political environment is to ram through legislation with the claim that it is an emergency and won’t wait.  The longer the American people think about the increased cost, decreased choice, and other negative impacts of a a government takeover, the less likely they are to support it.

Thankfully, the government health express has slowed noticeably in recent weeks.  Even supporters are coming to doubt that legislation can be approved before Congress goes home in August.  Reports Politico:

Health care reform proponents are growing pessimistic that they can meet President Barack Obama’s August target for passing a bill — saying the next four weeks must fall together perfectly, without a hitch or a hiccup.

The number of weeks that’s happened recently? Zero.

A series of setbacks has made the task of completing floor votes in both chambers virtually insurmountable, given the plodding pace of the Senate. The official line from the White House and the congressional leadership is it’s possible, but privately, there are a dwindling number of aides who would put money on it.

And without a deal by August, the ripple effects could start to endanger the prospect of health care reform this year altogether — chief among them, the closer it gets to the 2010 midterm elections, the harder it will be to get members to make the toughpolitical decisions needed to vote on a bill.

This is good news.  The U.S. health system needs fixing.  But the more rushed they are, the less likely policymakers are to do the right thing.  We need a medical system that is more responsive to consumers and market forces rather than to political forces and government dictates.

Chait Calls Out Conservatives on Rationing

I’ve been struggling with how to respond to an article by The New Republic’s Jonathan Chait, who accuses conservatives of hypocrisy and Republicans of whorishness when it comes to wasteful spending in Medicare and other government health programs.  I have grudgingly decided that a good fisking is the only way to go.

Chait writes:

Two weeks ago, President Obama offered to cut several hundred billion more dollars out of the Medicare and Medicaid budget to help make room for health care reform. This sort of gesture ought to appeal to conservatives, right? Apparently not. The Heritage Foundation warned, “At a time when Medicare is dangerously close to bankruptcy, it is shortsighted to funnel funds into the creation of another government-run program instead of shoring up Medicare.” A National Review editorial complained, “These cuts in Medicare and Medicaid payments are nothing more than reimbursement reductions with no empirical or economic basis to justify them.”

A couple of problems here.  Chait takes the National Review quote out of context.  The magazine’s most recent issue states: “Republicans should not have only harsh words for Obama’s ideas. If he truly believes that he can squeeze hundreds of billions of dollars from federal health programs, then he should be encouraged to do so. But the savings should be banked before they are spent.”  The Heritage quote is odd in that it suggests that conservatives should make “shoring up Medicare” a priority.  But it makes essentially the same argument.  Chait gives a false impression when he suggests that all conservatives are knee-jerk opponents of reducing wasteful Medicare spending.

No empirical basis to justify them? Since when do conservatives require an empirical basis to justify cutting social spending?

Ah, the gratuitous swipe.  Chait actually has something useful to say about conservatives’ approach to health care.  Too bad they just stopped listening.

The health care debate has been presented as a conflict between spendthrift Democrats and skinflint Republicans. The reality is closer to the opposite. Conservatives may make up the strongest opponents of new government spending (to cover the uninsured), but they also make up the strongest opponents of cutting existing spending. Health care has become the new defense spending–a category of public outlay that the right has trained itself to defend in even the most wasteful iterations.

Actually, the conventional wisdom fits the reality pretty well.  Democrats’ desire to reduce the rate of growth in projected Medicare and Medicaid spending is not a sign of parsimony.  They want that money so they can hand out new government subsidies, and they then want to raise taxes to hand out even more new subsidies.  Mo’ money, mo’ money.  I defy Chait to find me a conservative so eager to spend other people’s money.  As for the Right defending wasteful health care spending, see the National Review quote above.

The U.S. health care system, as you probably realize, is a vast cesspool of waste… Alas, every dollar of what we call waste is what somebody in the industry calls “income.” So anything that makes the system more efficient makes somebody unhappy, and that somebody has a team of lobbyists.

I have no quibble with this, except that the Left endlessly bleats that the U.S. health care sector is wasteful, but never draws any connection to the fact that government controls half of it directly and even more indirectly.

This may help explain why conservatives have embraced the rather unlikely cause of stopping cuts in Medicare payments to doctors and hospitals. It would also explain the conservative attachment to “Medicare Advantage”–the program created in 2003 that enrolls some Medicare prescription-drug recipients into private insurance rather than traditional Medicare. Medicare Advantage costs $922 more per recipient than traditional Medicare, which makes it a lucrative boondoggle for the insurance industry. Conservatives defend it on the grounds that it offers “better benefits and better value,” as the Heritage Foundation puts it.

Medicare pays for things using price controls.  At present, those price controls unjustly enrich doctors, hospitals, and insurers.  Obama proposes to reduce future Medicare spending by ratcheting down those price controls.  Conservatives object.  Chait suggests the reason is because conservatives are in bed with the doctors, hospitals, and insurers.  Yet there are other potential explanations.

One, conservatives may be indifferent to how Medicare’s price controls look. (Does anyone really expect Washington to come up with the right price, or the right per-unit measurement?)  But since they object to the overall direction of Obama’s health care reforms, they may want to highlight the downsides of these particular changes.  That’s exactly what Obama did to Sen. John McCain (R-AZ) during the 2008 presidential election: “Senator McCain would pay for part of his plan by making drastic cuts in Medicare.”

Two, the Heritage Foundation may be right that the controlled prices that Medicare Advantage plans receive are closer to optimality than what Obama proposes.  The cost comparisons Chait and others use typically omit some of the benefits of Medicare Advantage and some costs of traditional Medicare.  (Medicare Advantage plans do more than just dispense drugs.)

So the right defends having the government shell out more money in order to have (allegedly) better entitlement programs.

A third explanation is that conservatives fear a government that has the power to make people’s medical decisions more than they fear the higher taxes that result from lots of wasteful Medicare spending.  I rather suspect that is how most conservatives feel.  Most Americans, too.  Sure would explain why Medicare looks the way it does.

Even the staunchest free marketers have started to sound like the AARP. The Cato Institute’s Michael Cannon protested that Obama “ought not begin the [health care reform] effort by proposing to take something away from seniors, America’s largest and most politically active voting block.”

I don’t know which upsets me more: being lumped in with the Right or likened to the AARP.  Either way, it appears Chait was casting about for evidence to confirm his thesis and missed the fact that I was making a tactical point rather than a policy argument.  (I’m all for putting geezers on ice floes, but you don’t want to say that’s what you’re doing.)

And then you have the conservative apoplexy over “comparative-effectiveness research,” or CER. Right now, the federal government has little solid information to help figure out what treatments to fund under Medicare. That’s one reason why Medicare winds up finding so many unnecessarily costly medical interventions like expensive copycat drugs–or even interventions that do no good at all. In the stimulus bill, Obama got $1 billion to fund comparative-effectiveness research, which, as you may have deduced, helps compare the effectiveness of different medical interventions.

GOP Senate Minority Leader Mitch McConnell is co-sponsoring a bill to prohibit federal health care programs from using this research. Fellow Republican Jon Kyl, the bill’s sponsor, demands that CER not be used “to deny coverage of an item or service under a federal health care program.” The really silly thing here is that Medicare already has the ability to deny coverage for services it deems cost-ineffective. CER would merely arm the government with facts to make better-informed decisions…

I see three really silly things here.  The first is the Left’s approach to CER; I won’t get into it here, because I wrote a whole paper about it.

The second is Chait’s claim that Medicare already has the ability to make coverage decisions based on cost-effectiveness. Medicare has the legal authority to do so, but it definitely does not have the ability.

The third really silly thing is that Chait blames that inability — and the resulting wasteful spending — on industry lobbying or conservatives whipping up public fears about government rationing.  Chait and other Medicare supporters have no one to blame for wasteful Medicare spending but themselves.  If you support putting health care under the control of the political system, you cannot then blame that system (or the actors within) for doing what it always does.  You might as well blame a cow for going moo.  As I tried, tried, tried to explain to Paul Krugman: “Unless you have a plan to abolish Republicans, they’re part of your plan.”

Conservatives CERtainly [ha!] have understandable ideological reasons to oppose the Obama health care reform as a whole. It’s the particulars of their opposition that arouse curiosity. The right has presented its opposition to health care reform as principled disagreement with “big government.” But opposing “big government” can mean different things… The Republican Party and its ideological allies have defined it increasingly as whatever suits the profitability of the health care industry…

The health care industry has spent vast sums to influence politicians and opinion leaders, mostly on the right. Health care is an issue where precious few conservatives have paid any attention to the details of policy. And the industry is a natural ally of the conservative goal of preventing single-payer health care. So the industry has managed to define its self-interest as the conservative position on health care.

For the most part, I have to agree.  With precious few exceptions, conservatives couldn’t care less about health care.  (How else can we explain why the GOP tolerates things like Medicare Part D and Mitt Romney?)  When Democrats try to reform health care, many conservatives have no more to add to the conversation than “government rationing — bad.”

And therein lies the danger that Chait reveals.  If conservatives do nothing but object to government rationing — if they decide they prefer (A) high taxes and wasteful government spending to (B) a government that has the power to make people’s medical decisions — the growing cost of health care will generate public support for a government-takes-all solution, by which time conservatives will be seen as apologists for a pack of rent-seeking weasels.  If conservatives continue to ignore the details of health policy, they will increasingly fall prey to the fallacy that anything “private” is good.  Universal coverage through the private sector?  No problem.  Government subsidies for private insurers?  Hey, at least it isn’t socialized medicine.  Doctors/hospitals/drugmakers/devicemakers complaining the government isn’t paying them enough?  Well, if they’re in the private sector, they must be right.

But they’re not right.  People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

If conservatives choose either (A) or (B), the Left wins.  Conservatives need a way out of that box: (C) let seniors control the money and let markets set prices.  I can’t remember the last time I heard a movement conservative articulate that approach to Medicare reform.