Tag: health care reform

$98 Billion in Improper Payments

The Obama administration and its allies in Congress want the federal government to expand its role in subsidizing health care. We are told that this expansion will restrain rising health care costs. But an OMB report yesterday that the government made $98 billion in improper payments last year – $55 billion of which came from Medicare and Medicaid – ought to raise suspicions about that claim.

According to Reuters, OMB Director Peter Orszag told reporters that the embarrassing figures from Medicare and Medicaid demonstrate the need for health care reform. I would concur if “reform” meant reducing the government’s role in health care. However, he means the opposite, which raises the question of how giving more money to an already waste-prone and bureaucratic federal health system can possibly make sense for the economy.

The administration has promised to cut down on improper payments with the aid of a new executive order. According to the Associated Press:

Under the executive order, every federal agency would have to maintain a Web site that tracks improper payments, error rates and outstanding payments. If an agency doesn’t meet targets for reducing error rates for two years in a row, the agency director and responsible official will have to directly report to OMB to explain the delinquency and new actions they will take.

Somehow I doubt this will amount to much of a deterrent. The AP also said the administration plans to impose penalties on government contractors who receive improper payments. But last month it was reported that “the Department of Defense awarded nearly $30 million in stimulus contracts to six companies while they were under federal criminal investigation on suspicion of defrauding the government.”

Democrat Tom Carper, chairman of the Senate subcommittee on federal financial management, seemed to partly understand the broader meaning of the improper payment estimates:

It goes without saying that these results would be completely unacceptable in the private sector, as they should be in government, especially at a time of record deficits…Unfortunately, these numbers may still be just the tip of the iceberg since they don’t even include estimates for several major programs, including the Medicare prescription drug plan.

Yes, Senator, which is precisely why bigger government – be it stimulus, bail outs, or health care reform – is an inferior option to letting the marketplace provide for our wants and needs.

Carper is also right about the $98 billion figure being the “tip of the iceberg.” As has been noted here before:

The Government Accountability Office estimates that the two major government health programs are currently losing a combined $50 billion annually to such payments. But that estimate probably low-balls the actual losses. Harvard’s Malcolm Sparrow, a top specialist in health care fraud, estimates that 20 percent of federal health program budgets are consumed by improper payments, which would be a staggering $150 billion a year for Medicare and Medicaid.

See this essay for more on fraud and abuse in government programs.

Tuesday Links

  • In the past eight months, the unemployment rate has jumped from 7.2 percent to 10.2 percent. Here’s why.
  • Three trillion reasons to hope the Senate is not as fiscally reckless as their counterparts in the House on health care reform.
  • Obama a federalist? Not quite: “Not yet a year into his administration, Obama’s record on 10th Amendment issues is already clear: He’ll let the states have their way when their policies please blue team sensibilities and he’ll call in the feds when they don’t.” More here.
  • It’s time to get immigration reform right: “Republican leaders need to liberate themselves from the Lou Dobbs minority within their own ranks that will oppose any legalization. Democratic leaders need to face down their labor-union constituency that opposes any workable temporary-visa program. Working together, President Obama and a bipartisan majority in Congress can seize the current opportunity to reform the immigration system and finally fix the problem of illegal immigration.”
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ObamaCare’s ‘Sweetheart Deal’ for PhRMA

The New Republic’s Jonathan Cohn reports that back in March, IMS Health projected slightly negative revenue growth for the pharmaceutical industry but recently changed that projection to 3.5-percent annual growth from 2008 through 2013.

“What changed?” Cohn asks. “A major factor, according to IMS, was the emerging details of health care reform … Put it all together, and you have more demand for name-brand drugs … enough to boost revenue significantly.” And:

“If this bill is implemented,” the report concludes on page 138, “an increase in prices on new drugs can be expected.”

How could this be happening?  Oh yeah:

That brings us back to the deal that the Pharmaceutical Researchers and Manufacturers of America, which represents those companies, made with the White House and Senate Finance Committee …

The industry agreed to embrace health care reform and, later on, launched a massive advertising campaign to promote the cause. In exchange, the White House and Senate Finance–which had been asking various industries to pledge concessions that would help pay for the cost of coverage expansions–promised not to seek more than $80 in reduced payments to drug makers.

To an industry as big and profitable as the drug makers, giving up $80 billion over ten years wouldn’t seem like much of a sacrifice–a point critics started making right away. But if IMS is right, the drug industry wouldn’t even be giving up $80 billion, in any meaningful sense of the term. If anything, it’d be making more money. Maybe quite a lot of it.

Which is what I predicted, both here and here.

Cohn concludes, “the drug industry has enormous leverage in Congress.” But Cohn still supports the president’s health care takeover. Or is it PhRMA’s health care takeover?

Abortion Funding and Health Care

President Obama’s approach to health care reform – forcing taxpayers to subsidize health insurance for tens of millions of Americans – cannot not change the status quo on abortion.

Either those taxpayer dollars will fund abortions, or the restrictions necessary to prevent taxpayer funding will curtail access to private abortion coverage. There is no middle ground.

Thus both sides’ fears are justified. Both sides of the abortion debate are learning why government should not subsidize health care. Tip of the hat to President Obama for creating this teachable moment.

Meanwhile, Catholics should be outraged at the United States Conference of Catholic Bishops (to which my grandfather served as counsel). Yes, the USCCB helped prevent taxpayer funding of abortions in the House bill. But at the same time, those naughty bishops have abandoned the Church’s doctrine of subsidiarity by endorsing the rest of the Democrats’ plan to centralize power in Washington.

As it happens, Caesar is the main source of funding for Catholic hospitals. That may explain why the bishops are so eager to render unto, ahem, Him.

Cross-posted at Politico’s Health Care Arena.

Putting Private Insurance Out of Business

Over at Think Progress, Matt Yglesias takes me to task for saying that the so-called public option in the House’s health care bill “would all but eliminate private insurance and force millions of Americans into a government-run system.”

Yglesias apparently still buys into the myth that the public option is, well, an option.

For people who receive health insurance through their employers, which is to say the vast majority of the Americans who currently have health insurance, the House bill would change very little. Or, rather, the biggest change would simply be the confidence that if, in the future, you cease to get health insurance from your employer (maybe you’ll lose your job or want to change jobs) that you’ll still be able to get health care. What’s more, of the minority of Americans who would be getting health care through the new “exchange,” the majority will probably sign up for private health insurance and everyone will have the option of doing so. If the government-run public plan is, for whatever reason, vastly more appealing than the private options then it will dominate. But if you believe the government can’t run health care well, there’s no reason to think that will happen. Whatever you think of that, though, the basic fact is that even if the public option does dominate the exchange most people will still have private employer-provided insurance.

That might be true if the new government-run program were going to compete on anything close to a level playing field.  But, because the public option is ultimately supported by the taxpayers, the playing field can never be level.   True, the bill does say that the new program is supposed to be self-sustaining, covering administrative and benefit costs entirely out of premium revenues.  But remember that Medicare Part B was originally supposed to support 50 percent of its costs through premiums.  That has shrunk to the point where premiums pay for less than 25 percent of the program’s cost.

And the government has a myriad of ways to prevent the true cost of the program from showing up in premium prices.  For example, the government-run plan will not have to pay state or federal taxes, and unlike private insurance plans, who can be sued in state courts, the government-run plan could only be sued in federal court.

At the very least, the program carries with it an implicit guarantee against future losses.  Suppose the public option prices its products too low and loses money.  Can you imagine that Congress is simply going to let it go bankrupt, go out of business?  Would a Congress that has bailed out banks and automobile companies because they are “too big to fail” resist subsidizing the government’s insurance plan if it began to lose money?   Even without the actual bailout, such an implicit guarantee has a value. For example, the implicit guarantees behind Fannie Mae and Freddie Mac were estimated to have saved those institutions $6 billion per year.

All of this means that the government-run plan would be significantly cheaper than private insurance, not because it would out-compete private insurance or because it was more efficient, but because it had unfair advantages.  The lower cost means that businesses, in particular, would have every incentive to dump workers from their current health insurance plan into the government plan.  And, if other provisions of the bill make insurance more expensive, as is likely, the incentive for employers to shift workers to the government plan would be even greater.   Estimates suggest that nearly 90 million workers could eventually be forced into the government plan.

As Robert Samuelson, dean of economic columnists, writes in the Washington Post, “a favored public plan would probably doom today’s private insurance.”

Samuelson is right.  There is nothing “optional” about a public option.  And that is just the way the Left wants it.

Reid’s Accomplishment

Including a Fannie Med with a “state opt-out” provision in the Senate Democrats’ health care bill accomplishes only this: it helps Majority Leader Harry Reid (D-NV) survive as majority leader by appeasing his left wing.  It doesn’t make it any more (or less) likely that Fannie Med will survive.

(Cross-posted at Politico’s Health Care Arena.)

Weekend Links

  • Cato v. Heritage on the Patriot Act, Round II. Today’s topic: “Where are the demonstrated examples of abuses of liberties because of the Patriot Act? Are there any provisions of the law that civil libertarians would find acceptable?”
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