Why the Democrats’ Health Care Overhaul May Die
The problem that Democrats have faced from Day One is finally coming to a head.
The Left and the health care industry both want universal health insurance coverage. The industry, because universal coverage means massive new government subsidies. The Left, because that’s their religion.
But universal coverage is so expensive that Congress can’t get there without taxing Democrats.
- Sen. Jay Rockefeller (D-WV) is the biggest opponent of Sen. Max Baucus’ (D-MT) tax on expensive health plans because that tax would hit West Virginia coal miners.
- Unions vigorously oppose that tax because it would hit their members.
- Moderate Democrats in the House oppose Rep. Charlie Rangel’s (D-NY) supposed “millionaires surtax” because they know it would hit small businesses in their districts.
And on and on…
But if congressional leaders pare back those taxes, they lose the support of the health care industry, which wants its subsidies.
- That’s why the health insurance lobby funded this PriceWaterhouseCoopers study saying that premiums would rise under the Baucus bill: the $500 billion bailout they would receive isn’t enough. They also want – they demand – steep taxes on Americans who don’t buy their products.
- The drug companies, the hospitals, and the physician groups are likewise demanding big subsidies, and will run ads to kill the whole effort if those subsidies aren’t big enough.
As always, health economist Uwe Reinhardt put it colorfully:
It’s no different from Iraq with all the different tribes…‘How does it affect the money flow to my interest group?’ They are all sitting in the woods with their machine guns, waiting to shoot.
Once the shooting starts, industry opposition will sway even Democratic members, because there are physicians and hospitals and employers and insurance-industry employees in every state and congressional district.
Can President Obama and the congressional leadership satisfy both groups? My guess is, probably not, and this misguided effort at “reform” will therefore die. Again.
The Economic Case for Health Care Reform
There’s an old Yiddish saying that, “If my bubba had wheels she’d be a trolley.” So goes the logic of the Obama administration in their paper released yesterday, “The Economic Case for Health Care Reform.” Their claim is that reducing health care costs would help the economy. Yes, if health care costs were reduced it would likely help the economy, though we should remember that the health care industry is part of the economy.
There is nothing in Obamacare, however, that will reduce costs. In fact, expanding coverage may cause costs to rise. One study by MIT’s Amy Finkelstein suggests that the prevalence of insurance itself has roughly doubled the cost of health care. So, if Obama succeeds in expanding insurance coverage, it’s very likely to increase the cost of care.
Take Massachusetts for example. Three years ago, Massachusetts governor Mitt Romney signed into law one of the most far-reaching experiments in health care reform since President Bill Clinton’s ill-fated attempt at national health care. Proponents promised the reforms would reduce health care costs, suggesting the price of individual insurance policies would be reduced by 25-40 percent. In reality, however, insurance premiums rose by 7.4 percent in 2007, 8-12 percent in 2008, and are expected to rise 9 percent this year. This is compared to a nationwide average increase of 5.7 percent over the same three years. Nationally, on average, health insurance for a family of four costs $12,700; in Massachusetts, coverage for the same family costs an average of $16,897.
In fact, since the bill was signed, health care spending in the state has increased by 23 percent. Thus, despite individual and employer mandates, the creation of an insurance connector and other measures that increase insurance regulations, Massachusetts has failed to bring costs down.
President Obama and Congressional leaders have endorsed expanding coverage in similar ways to Massachusetts. The proposals would undoubtedly make it easier for some people to get coverage, but would also raise insurance costs for the young and healthy, making it more likely they would go without coverage. This leaves two choices: revert to the individual mandate (President Obama opposed the mandate as a candidate) or increase subsidies to try to cut costs to young and healthy individuals, thereby adding to the already substantial cost of the proposed plans.
Ultimately, controlling costs requires someone to say “no,” whether the government (as in single-payer systems with global budgets), insurers (managed care) or health care consumers themselves (by desire or ability to pay). In reality, any health care reform will have to confront the fact that the biggest single reason costs keep rising is that the American people keep buying more and more health care.
Church of Universal Coverage Begins Its Campaign against that Pesky CBO
Last Monday, when lobbyists for the six biggest health care industry groups joined President Obama to announce their support for reducing health care spending by $2 trillion over 10 years, I penned and voiced my suspicion that the real motivation was to pressure the Congressional Budget Office to assume that Democrats’ health care reforms would reduce spending, despite the lack of evidence. My wife said that hypothesis sounded a little . . . conspiratorial.
Last Thursday, when it was revealed that there was no actual agreement and that the White House basically manipulated the industry to get a week’s worth of good health care press, I started to doubt whether strong-arming the CBO was really the goal of that media stunt. Then Jonathan Cohn set me straight.
In an article for The New Republic aptly titled, “Numbers Racket,” Cohn acknowledges that the biggest problem facing Democrats is that the $2 trillion cost of universal coverage has to come from somewhere. Cohn, like many Democrats, complains that the “curmudgeonly” CBO isn’t letting reformers off the hook by assuming that universal coverage will (partly) pay for itself. Cohn also acknowledges that pressuring the CBO was a likely purpose of last week’s media stunt:
The CBO took nearly the same positions back in 1994 — a fact not lost on either the White House or congressional leaders, who have communicated their concerns publicly and privately. One apparent purpose of bringing industry leaders to meet Obama this week was to showcase the potential for cutting costs; see, the administration seemed to be signaling, even the health care industry thinks it can save money by becoming more efficient.
Democrats have set their sights on legislation that would give government enormous power over Americans’ earnings and medical decisions. The main political obstacle to those reforms is their cost, thus Democrats are pressuring the CBO to pretend that those costs don’t exist. The CBO (and everybody else) should resist the Democrats’ effort to make truth yield to power.
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
How Does It Feel to Be at the Table Now?
On Monday, the Obama administration held a well-publicized love-fest with lobbyists for the health care industry. It turns out that rather than a “game-changer,” the event was a fraud. And the industry got burned.
At the time, President Obama called it a “a watershed event in the long and elusive quest for health care reform“:
Over the next 10 years — from 2010 to 2019 — [these industry lobbyists] are pledging to cut the rate of growth of national health care spending by 1.5 percentage points each year — an amount that’s equal to over $2 trillion.
By an amazing coincidence, $2 trillion is just enough to pay for Obama’s proposed government takeover of the health care sector.
Yet The New York Times reports that isn’t the magnitude of spending reductions the lobbyists thought they were supporting:
Hospitals and insurance companies said Thursday that President Obama had substantially overstated their promise earlier this week to reduce the growth of health spending… [C]onfusion swirled in Washington as the companies’ trade associations raced to tamp down angst among members around the country.
Health care leaders who attended the meeting…say they agreed to slow health spending in a more gradual way and did not pledge specific year-by-year cuts…
My initial reaction to Monday’s fairly transparent media stunt was: “I smell a rat. Lobbyists never advocate less revenue for their members. Ever.” The lobbyists are proving me right, albeit slowly. (Take your time, guys. I don’t mind.)
Filed under: Cato Publications; Government and Politics; Health, Welfare & Entitlements
Toles on Obama/Health-Care-Lobbyist Media Stunt
Today’s Washington Post has a terrific editorial cartoon about this week’s announcement by President Obama and health care industry lobbyists that they’re all willing to reduce health care spending growth by 1.5 percentage points.
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