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.