That was the headline in Friday's Wall Street Journal after Congressional Budget Office Director Doug Elmendorf told the Senate Budget Committee Thursday morning:
"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."
The media immediately portrayed Elmendorf as having torpedoed health care reform. This is like blaming the line judge in football for straigthening the chain before finding the fourth down play has fallen inches short of a crucial first down.
Back in 1993, then CBO Director Robert Reischauer was blamed for killing President Clinton's health care reform bill by estimating it cost far more than Clinton had advertised.
There seems to be a pattern here. The heavy political lifting required to beat back the forces of high cost health care proves too much for Congress, so they blame CBO.
Step back for a minute and look at what Congress has proposed so far in the House bill, H.R.3200, with CBO's estimates in parentheses:
- expand Medicaid and CHIP coverage a lot ($438 b. FY10-19)
- subsidize coverage through a federal health exchange ($773 b.)
- employer payments to the federal health exchange (-$45 b.)
- subsidize small business coverage ($53 b.)
- "play or pay" charges on employers and individuals (-$192 b.)
- associated revenue effects ($15 b.)
Add it all up, and you get a $1.042 trillion FY10-19 cost to the federal government.
To pay for it, the House would cut Medicare a little over $500 b. and impose a $544 b. high income tax surcharge of 1% of the adjusted gross income less investment interest expense of those between $350,000 and $500,000; 1.5% between $500,000 and $1 million; and 5.4% on those over $1 million. The surtax would hit 1.2% of all households and 4.1% of all small businesses, but those figures include millions who don't have enough income to pay tax.
To the credit of President Obama and Democratic leaders, health care reform will be paid for, but will it achieve its overall objectives of providing better care to all Americans at less cost? That's a much harder question that goes far beyond what can be quantified in CBO's estimates. The Dartmouth Atlas of Health Care has shown that approximately 30% of the $2.4 trillion we spend on health care does not improve health outcomes. In other words, 16% of our $14 trillion of GDP goes to health care and about 5% of it is wasted. No other country in the world spends more than 12%.
What's going on? It's complicated, but the general gist of it is that our health care system has become overly specialized, incredibly high tech, built on payments for quantities of care provided, not quality, and subject to all sorts of rent seeking and monopoly behavior by insurers, hospitals, pharmaceutical companies, doctors, and other health care providers. See Dr. Atul Gawande's June 1 New Yorker article for an excellent description of how this plays out in McAllen, Texas.
If you've got a headache, most doctors fearing a lawsuit will prescribe a $1,500 MRI to rule out the miniscule chance you've got a brain tumor. We focus entirely on heroic measures to overcome acute health problems that easily could have been prevented with mundate preventative measures, like eating right and exercising and getting proper checkups and vaccinations.
Good luck if you want to keep the same doctor for more than a few years. Change doctors because your old one stopped working with your health insurer, and you'll have to fill out hand written information for each new doctor you see, and most of their records are hand written.
Too many doctors have quit medical practice in digust. My stepdaughter is starting her final year of med school, and just about every doctor she knows tells her not to become a doctor.
In my opinion, it's a crime that, unlike any other developed country in the world, we deny health care to 46 million Americans, a third of whom are children.
President Obama is right -- we desperately need health care reform. However, no plan can correct this mess overnight. The costs of expanding coverage "score" right away, but the benefits are hard to "score." As a former congressional revenue estimator, I have time and time again discussed the limits of quantitative analysis in setting policy. Yes, you want CBO estimates to constrain runaway deficits, but you don't want them to impede sensible health care reforms.
The bottom line -- Congress needs to summon up the courage to pass health care reform, as imperfect as it may be, because to fail to tackle this problem will have increasingly terrible consequences both for health care and for the federal budget. We simply cannot continue blindly on the path to spending 20% or more of GDP on health care without any improvement in health outcomes.
Those in favor of government
Those in favor of government mandated health insurance would serve their own cause much better if they stopped manipulating the facts in an attempt to bolster their own case.
First, the 45.6 million number derived by the Census Bureau represents the number of people WITHOUT HEALTH INSURANCE, not DENIED HEALTH CARE, as the author mistakenly states. These are two very different things. In the US, hospitals are prohibited from turning away anyone who will be endangered by being refused treatment. And virtually all doctors will see patients without health insurance and take cash at a reduced rate (In my experience, this discount ranges from 20-40%). The truth is that very few people are denied health care altogether.
Secondly, the Census Bureau found that approximately 17% of those who responded as being uninsured were covered under Medicaid. In other words, approximately 6.7 million people responded incorrectly. This puts the true number of uninsured at approximately 38.9 million.
Thirdly (taking my second point into account), over 45% of these people live in families making over $50k/year and over 23% of these people live in families making over $75k/year. Given these two facts, perhaps a good chunk of these people are choosing to go without health insurance even if it can be afforded.
But what should Congress do differently than before?
"... subject to all sorts of rent seeking and monopoly behavior by insurers, hospitals, pharmaceutical companies, doctors, and other health care providers"
Your forgot the politicians. Do they not gain from all this? And govern the whole situation to do so?
For instance, why does Medicare -- contrary to all common sense and economic logic -- cover routine, predictible medical expenses for seniors from the first dollar, but not cover disastrous disability expenses that require the like of nursing home care that can cost life savings and family home? So that the functioning competitive (cost restraining) market in routine medical care is destroyed, while the costs of unpredictible calamity land unsocialized on the individual. Double whammy. (Imagine if auto insurance operated that way!)
Could it be because seniors all know they will face out-of-pocket costs for predictible medical expenses -- but grossly underestimate the risk of calamity happening to them? Thus, politicians get more gratitude from seniors, in the form of votes, by picking up the routine costs they expect and not providing the real protection against serious disaster they need??
So politicians knowingly and intentionally designed the system to be vote-buying optimal at the cost of making it inferior for delivering service and socializing risk?
If so, why ever would politicians change their behavior suddenly now -- by this August! -- to make the system more economically and medically efficient at the cost of losing votes?
That's a serious question. I haven't seen one person in favor of this "reform" address it. Do any even think about it?
The heavy political lifting required to beat back the forces of high cost health care proves too much for Congress...
"Too much"? What lifting does it even try? It's labor is all in the other direction, happily doling out benefits someone else has to pay for. You made a list above. But, as Billy Mays would've said, there's more! Who set the rules to tie health care to employment? Congress! Who created the inequitable, misbegotten employer tax subsidy, and won't get rid of it? Congress! Who sets the rules that cause Medicare -- and thus the rest of the health system -- to reimburse by procedures rather than results and quality of life? Congress!
The politicians aren't weak helpless overpowered victims of the system, they are profiteers driving it.
Professor Samwick way back yesterday had a post about how politicians get votes by bringing home the bacon in the form of health care payments to constituents. Getting votes by increasing health care costs.
What about the Obama health plan is going to change this behavior by politicians? If nothing changes it, how can the plan succeed?
If nothing changes this, and the plan is enacted to give these politicians control over even more of the health system, how can it not make things even worse?
Orszag was challenged by Postrel a little while ago with "Why don't you just do it? If Medicare costs can be cut by 30%, show us it can be done before committing the whole country to an unproven claim?"
Orszag's answer was, AARP and Congress won't go along with any cost savings unless they get something back in the form of expanded coverage that they can say they've delivered to their constituents. So we can't just do it.
Doesn't that give away the whole game? For cost control, at most you'll get a one-time trade-off of this for that. After that, it will be Congress back to bringing home the bacon by delivering more health payments before every election.
Real cost control must be continual, unrelenting -- like a business does it. What incentive will Congress ever have to behave like that?? Orszag said it: Congress won't control costs. Just like frogs won't fly.
And why does nobody ever mention Medicaid? The other single payer government health program that already exists -- and is just riddled with endemic, "astonishing" fraud. Here's the City Journal on that and how government at all levels has refused to do anything about it. (So that fraud and "legal graft" levels have been reported at 40%(!) in both California and New York -- fraud, not inefficiency.)
When hard charging Eliot Spitzer was AG here why did he go after Wall Street and totally ignore NY's infamous Medicaid fraud? Because he knew denying medical benefits costs votes, and he knew how to get elected (if not stay elected).
How is it different for any other politician? How does Obama's plan change the incentives for politicians? If it doesn't, how can it possibly work to contain costs?
I mean if the politicians refuse to even get fraud down below these levels, then what are you hoping for -- and what is your justification for hoping it?
That's a serious, nonpartisan question.
BTW, I note that up in Mass they are pretty much throwing in the towel on their state health care plan because of "exploding costs" and are going to capitation.
Sort of ironic, that is. Now, to stay under the politically set per capita care budget, the government health program will be looking for reasons to deny care to people. Which is exactly what so many reformers accuse insurance companies of doing leading them to demand a government plan.
When the Mass plan was adopted people said it was a model for a national plan -- and they were right!
If the Obama plan passes, Congress will keep delivering the bacon just as before (what's to stop it?!) so costs will keep surging, and when the fisc can no longer afford it in about 10 or 15 years, capitation will come in. Cost cutting with a cleaver. Not by efficiency of procedure, but by top-down fixing of an expenditure cap. Then all the interest groups you mentioned will use their political influence to divy up the capped amount with their little cleavers. Glorious.
But that's how politicians are incentivized to act, how they get votes. What will Obama or anyone else do to change those incentives from "deliver the bacon" to "deliver performance/cost efficiencies"? That's the make-or-break quesion.
On the left, I haven't heard the issue even raised.