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Obamacare complicates rather than improves the provision of health care to American Indians.
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The Cato Institute tops a new measure of think tank performance in the United States, according to a recent report. Cato bested all other U.S. think tanks in the main category of “Aggregate Profile per Dollar Spent.” “I’m grateful to the Center for Global Development for showing that Cato gives its sponsors something I wish government gave more of to taxpayers: bang for the buck,” said Cato CEO John Allison.
Speaking to some 500 libertarian students at the International Students for Liberty Conference last weekend, Cato adjunct scholar Tyler Cowen noted:
Rep. Paul Ryan gave an alternative State of the Union address without mentioning Social Security or Medicare. That’s like discussing the Miami Heat without mentioning LeBron James, Dwayne Wade, or Chris Bosh.
A colleague forwarded me a letter his friend received from their local hospital. The friend needs surgery. His health insurance has a very high deductible, so he figured he would do some comparison shopping. He asked the local hospital to quote him a price. Here’s how the hospital responded:
[This] hospital typically charges between $2,360.45 and $22,290.74 for this procedure or service. This is an estimate only…
Our goal is to provide you with the most informed and accurate estimate of the cost of your treatment. If circumstances result in a final bill that exceeds this estimate by more than 20%, we will work together with you to resolve the balance.
For surgical services, the price quote does not include any physicians’ charges. The surgeon and/or anesthesiologist will bill you separately for his or her time.
That price range varies nine fold, or 11 fold if you count the additional 20 percent. Translated from Hospitalese into English, the letter essentially said:
Our hospital faces so little competitive pressure, we’re just going to blow you off.
If you do have your surgery here, don’t even think about complaining about the bill unless it exceeds $27,000.
Or even then.
The hospital noted – correctly – that “people react in their own individual way to surgery.” Those individuated reactions could easily lead to an 11-fold cost variation for the same procedure. That information is useful to a hospital. It is not useful to a patient who is trying to find the lowest-cost hospital.
One would expect hospitals (or ambulatory surgery centers) to find some way to cope with the uncertainty about costs and provide useful price information to patients. For example, hospitals could offer the same flat price for each procedure; the flat price would cover the higher costs of patients who experience complications. Or they could quote higher prices to patients who have risk factors associated with complications. While they’re at it, they could also include the physicians’ charges. In a competitive market, hospitals that didn’t do these things would lose customers to hospitals that do.
The problem is that most hospitals do not operate in a competitive market. Many states pass regulations that block entry by new hospitals. Government interventions from Medicare to the tax exclusion for employer-sponsored health insurance block the creation of health systems that face greater incentives to offer a single “package” price and to reduce the uncertainty associated with surgical complications. Those same interventions also encourage excessive health insurance, which reduces the share of patients who pay out of pocket for surgeries in this price range. That reduces the demand for useful price information.
Price transparency is not a problem for government, private insurance companies, or employers. They control the money, so they get all the price information they demand. If we want to give patients useful price information, we need to let patients control the money.
Washington Post blogger Ezra Klein asks of Rep. Paul Ryan’s (R-Wisc.) Medicare voucher proposal (co-authored with former Congressional Budget Office director Alice Rivlin):
Why are the cost savings in his bill possible, while the cost savings in the Affordable Care Act aren’t?…when it comes to the ACA, Ryan firmly believes that seniors will quickly and successfully force Congress to reverse any reforms that degrade their Medicare experience. That’s a fair enough concern, of course. What’s confusing is why it isn’t doubly devastating when applied to Ryan-Rivlin.
Set aside that Klein violates Cannon’s First Rule of Economic Literacy: Never say costs when you mean spending. And that he uses the word “affordable” to describe ObamaCare.
There are two reasons why the Medicare spending restraints in the Ryan-Rivlin proposal are more likely to hold than those in ObamaCare.
First, ObamaCare’s restraints amount to nothing more than ratcheting down the price controls that traditional Medicare uses to pay health care providers. Structuring Medicare subsidies in this way – setting the prices that Medicare pays specific providers – makes it very difficult to lower those prices, because the system itself creates huge incentives for providers to organize and lobby to undo those restraints. As I explain more fully in this op-ed from September 2010, Medicare vouchers would change that lobbying game by reducing the incentives for provider groups to expend resources in the pursuit of higher Medicare spending. That gives the Ryan-Rivlin restraints a much better shot at surviving. (Seriously, it’s a pretty cool feature.)
Second, Klein predicts a backlash against Medicare vouchers because he says it amounts to “giving seniors less money to purchase more expensive private insurance.” The notion that Medicare is less costly than private insurance is pure, uninformed nonsense. Medicare and a “public option” are attractive to the Left precisely because such programs hide the full cost of their operations from enrollees and taxpayers. It is a virtue of vouchers that they would reveal to Medicare enrollees the actual prices of the coverage and services they demand, because that information will spur enrollees to be more cost-conscious when selecting a health plan and consuming medical services. That, in turn, will force insurers and providers to compete on the basis of cost to a degree never before seen in this nation, competition that will generate the sort of cost-saving innovations that Jim Capretta discusses here.
Both of these reasons boil down to the truism that nobody spends other people’s money as carefully as they spend their own. We’ll make a lot of progress in this country when the Left realizes how much damage they’ve done by ignoring that truism.
From my latest Kaiser Health News op-ed:
When 34 Senate Democrats joined all 47 Republicans last week to repeal ObamaCare’s 1099 reporting requirement, their votes confirmed what their talking points still deny: ObamaCare will increase the deficit, no matter what the official cost projections say…
This public-choice dynamic [of concentrated benefits and diffuse costs] is why the Congressional Budget Office, the chief Medicare actuary, and even the International Monetary Fund have discredited the idea that ObamaCare will reduce the deficit. It is one of the principal reasons why, as Thomas Jefferson wrote, “The natural progress of things is for liberty to yield, and government to gain ground.” In other words, the game is rigged in favor of bigger government.
It also explains why the Obama administration is sprinting to implement ObamaCare in spite of a federal court having struck down the law as unconstitutional. The White House needs to get some concentrated interest groups hooked on ObamaCare’s subsidies – fast.
Read the whole thing here.
The following chart shows that ObamaCare’s unfavorables reached 50 percent in the latest Kaiser Family Foundation poll. That’s higher than at any point since KFF started tracking ObamaCare’s unfavorables in January 2010. The KFF poll also found that opposition is much more intense than support; 19 percent view the law very favorably, while 34 percent view the law very unfavorably. Despite the availability of the these nuggets, KFF’S press release chose to deemphasize the surge: “Americans Remain Divided Over Health Reform With An Uptick In Public Opposition As GOP Ramped Up Repeal Campaign.”
Even more entertaining was this chart, which purports to show that Americans oppose defunding ObamaCare by nearly 2-to-1.
Dig a little deeper, though, and you’ll find that 16 percent of the public opposes defunding ObamaCare because they want to see the law flat-out repealed. A less-misleading pie chart would show that 33 percent approve of defunding, 16 percent say “don’t defund, just repeal” (total: 49 percent), and 46 percent disapprove of defunding ObamaCare.
Other findings include:
Despite these generally sensible views, 68 percent believe that Congress can balance the budget without cutting Medicare.
Now that a bipartisan coalition in the House has voted to repeal ObamaCare, an even larger bipartisan coalition has approved a Republican resolution directing four House committees to “replace” that ill-fated law. House Resolution 9 instructs the committees to “propos[e] changes to existing law” with the following goals:
Three things about the Republicans’ “replace” effort:
First, America’s health care sector has historically been handicapped by one political party committed to a policy of (mostly) benign neglect, and another party committed to degrading that sector’s performance through government subsidies, mandates, price controls, and other exchange controls. Republicans now appear to be taking a different posture, and that’s encouraging — but not entirely. When Republicans set their minds to reforming health care, they are often as bad as Democrats. (See the Republican “alternatives” to ClintonCare. Or Medicare Part D. Or #4-#7 above.) Exactly how House Republicans plan to deliver on the above goals remains to be seen.
Second, no matter how House Republicans plan to deliver on the above goals, their proposals will be preferable to ObamaCare. Republicans quite literally could not do worse if they tried.
Third, no matter how good the Republicans’ proposals are, they will be utterly ineffective so long as ObamaCare remains on the books. ObamaCare’s influence is so pervasive and harmful that it makes real health care reform all but impossible.
So it’s a bit premature to be talking about replacing ObamaCare.
The symbolism of today’s House vote is striking. Within a year of ObamaCare’s enactment, the House of Representatives has voted overwhelmingly to repeal it.
That didn’t happen with Social Security. It didn’t happen with Medicare. Social Security and Medicare did not face sustained public opposition from the moment they were introduced in Congress. They did not pass by one vote, in the dead of night. They were not challenged as unconstitutional by half the states in the union. They were not struck down as unconstitutional by a federal court within a year of enactment.
The House vote to repeal ObamaCare is just the latest sign that ObamaCare goes too far, that it creates a more intrusive government than the American people are willing to accept.
But the House vote is not mere symbolism, as the Obama administration would have us believe. This vote has moved the ball forward on repeal. This and further similar votes in both the House and Senate will reveal where members stand on repealing ObamaCare. Voters may use that information to replace pro-ObamaCare members with people who will vote to repeal ObamaCare in the next Congress. That’s how the political system works.
At the same time, this repeal vote makes it more likely that the Supreme Court will strike down ObamaCare. Like it or not, the Supreme Court follows the election returns. This vote shows the Court that it will not pay a price in the public’s esteem if it overturns ObamaCare.
Today’s vote makes it more likely that someone with the power to scrap ObamaCare will do so – and the Obama administration knows it. Why else would they come out with both guns blazing against a purely “symbolic” act?
When that happens, it will be a good day for America. Real health care reform is impossible while ObamaCare remains on the books.
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