Tag: health care reform

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.

Why Wal-Mart Supports an Employer Mandate

wal-mart-logoA couple of years ago, I shared a cab to the airport with a Wal-Mart lobbyist, who told me that Wal-Mart supports an “employer mandate.”  An employer mandate is a legal requirement that employers provide a government-defined package of health benefits to their workers.  Only Hawaii and Massachusetts have enacted such a law.

I couldn’t believe what I was hearing.  Wal-Mart is a capitalist success story.  At the time of our conversation, this lobbyist was helping Wal-Mart fight off employer-mandate legislation in dozens of states.  Those measures were specifically designed to hurt Wal-Mart, and were underwritten by the unions and union shops that were losing jobs and business to Wal-Mart.

But it all became clear when the lobbyist explained the reason for Wal-Mart’s position: “Target’s health-benefits costs are lower.”

I have no idea what Target’s or Wal-Mart’s health-benefits costs are.  Let’s say that Target spends $5,000 per worker on health benefits and Wal-Mart spends $10,000.  An employer mandate that requires both retail giants to spend $9,000 per worker would have no effect on Wal-Mart.  But it would cripple one of Wal-Mart’s chief competitors.

So yesterday’s news that Wal-Mart is publicly endorsing a “sensible and equitable” employer mandate – i.e., a mandate that hurts Target but not Wal-Mart – didn’t come as a surprise to me.  It merely confirmed what I learned in a cab on the way to the airport: Wal-Mart has gone native.  That great symbol of the benefits of free-market competition now joins its erstwhile enemies among the legions of rent-seeking weasels who would rather run to government for protection than earn their keep by making people’s lives better.

In 2007, Wal-Mart officially joined the Church of Universal Coverage when it entered one of those countless strange-bedfellows coalitions with the Service Employees International Union.  At the time, I criticized Wal-Mart for “self-congratulatory puffery” and “jump[ing] on the big-government bandwagon.”  I also criticized then-CEO Lee Scott for spouting economic nonsense.  (I later learned that Scott was not amused.)

This is so much worse than that.

The Ultimate Question: Freedom or Power?

Here I was, sick with worry that the questions I hoped to pose to President Obama about his health reform plan would never be answered.  Thank God, Matthew Holt stepped up to the plate.  Or the wicket.  Whatever.

What follows are some of my questions (addressed to the president) and Holt’s responses (in italics).

Mr. President, in your inaugural address and elsewhere, you said you are not interested in ideology, only what works. Economists Helen Levy of the University of Michigan and David Meltzer of the University of Chicago, where you used to teach, have researched what works. They conclude there is “no evidence” that universal health insurance coverage is the best way to improve public health. Before enacting universal coverage, shouldn’t you spend at least some of the $1 billion you dedicated to comparative-effectiveness research to determine whether universal coverage is comparatively effective? Absent such evidence, isn’t pursuing universal coverage by definition an ideological crusade?

Sadly Michael, universal coverage is not about improving public health. If you want to do that, go teach some kids age 1–5 and build some sewage systems. Universal care is about making sure that the costs of health care are fairly distributed. Under the systems you prefer and the one we now have they’re distributed from the poor and sick to the healthy and wealthy—many of whom we both know work in the health care system. But apparently there was NOT ONE MENTION of the uninsured or sick people bankrupted by the system in the whole hour.

Holt’s categorization of my preferred health care “system” and the un-mentioned uninsured aside, he makes my point for me: universal coverage is about ideology, not health.  In fact, Holt demonstrates that the Church of Universal Coverage would be happy to have people die sooner if that would promote its ideo-religious goals.  I really should send him a fruit basket.

A draft congressional report said that comparative-effectiveness research would “yield significant payoffs” because some treatments “will no longer be prescribed.” Who will decide which treatments will get the axe? Since government pays for half of all treatments, is it plausible to suggest that government will not insert itself into medical decisions? Or is it reasonable for patients to fear that government will deny them care?

Why should patients fear it? We know that less intensive care is better, and cheaper primary care is better than more extensive specialty care.

So the government will insert itself into medical decisions.  Gotcha.  Holt is really clearing a lot of things up.

To answer his question, though, the concern is that one size really doesn’t fit all, and that the government’s rules will, shall we say, break my eggs to make his universal-coverage omelette.

You recently said the United States spends “almost 50 percent more per person than the next most costly nation. And yet … the quality of our care is often lower, and we aren’t any healthier.” Achieving universal coverage could require us to spend an additional $2 trillion over the next 10 years. If America already spends too much on health care, why are you asking Americans to spend even more?

Ah we agree. All the money should come from the current system, even if it means reducing the incomes of pundits, bloggers and those who sponsor them, and a few people in the system. Sadly the politics of the US means that apparently Obama can’t say that.

So nice when we can agree.  Now if only there were some way to deny incumbent producers the power to block more efficient ways of doing things … to block “progress,” if you will … hmmmmm

You found $600 billion worth of inefficiencies that you want to cut from Medicare and Medicaid. If government health programs generate that much waste, why do you want to create another?

You’re saying all government programs are the same? That means the US Marine Corps and the Iraqi volunteer EDF (or whatever it’s called) are the same. I could start a government program that saved $600b very easily in Medicare & Medicaid. I might make a few enemies.

Holt is right.  A new program might waste a lot less.  (Or a lot more.)  But the best part of his answer is that leftist impulse: “I could design a better social order if we could just get rid of that whole constitutional democracy thing.”

You and your advisors argue that Medicare creates misaligned financial incentives that discourage preventive care, comparative-effectiveness research, electronic medical records, and efforts to reduce medical errors. Medicare’s payment system is the product of the political process. What gives you faith that the political process can devise less-perverse financial incentives this time?

See my above answer, oh and abolish the Senate.

I refer my right, honorable friend to the answer I gave some moments ago.

You have said there are “legitimate concerns” that the government might give its new health plan an unfair advantage through taxpayer subsidies or by “printing money.” How do you propose to prevent this Congress and future Congresses from creating any unfair advantages?

I don’t know but I’ll make a deal. I’ll promise my health plan won’t have use an unfair advantage if you promise that AHIP’s members will stop lobbying Congress to rip-off the taxpayer.

Again, so helpful of Holt to acknowledge that the playing field between government and private insurers could never be level.

And to keep the insurance industry from ripping off the taxpayers, it seems we will have to give up either (1) the freedom of speech and to petition the government for a redress of grievances, or (2) the power that government currently wields over our health care sector and that the insurance companies’ lobbyists so often bend to their will.

Which brings me to Holt’s byline:

Matthew Holt is a vicious blogger who wouldn’t mind being President for a day or two but not without the ability to break Congress to his will in the first ten minutes.

Doesn’t sound like he would choose freedom over power.

Setting the Record Straight on Health Care Reform

President Obama took to the airwaves Wednesday in an effort to promote his plan for a national government-run health care system. He answered questions on rising costs, taxing benefits, and many other issues during an ABC News special on health care reform called “Questions for the President: Prescription for America.”

After live-blogging the ABC special, Cato scholars Michael D. Tanner and Michael F. Cannon dissect the president’s health care plan point by point.