Lies, Damned Lies, and CBO Estimates
Washington is buzzing with news that the Congressional Budget Office has a new cost estimate for the President’s proposal to further expand the federal government’s control over the health care system. The White House is doubtlessly pleased because the takeaway message, as blindly regurgitated by the Associated Press, is that a giant new entitlement program is going to “drive down red ink:”
The Congressional Budget Office estimated the legislation would reduce the federal deficit by $138 billion over its first 10 years, and continue to drive down the red ink thereafter. Democratic leaders said the deficit would be cut $1.2 trillion in the second decade – and Obama called it the biggest reduction since the 1990s, when President Bill Clinton put the federal budget on a path to surplus.
Michael Cannon already has explained that the cost estimate is fraudulent because of what it leaves out, so let me explain why it is fraudulent because of what it includes. The CBO has a very dismal track record of getting the numbers wrong, in part because there is no attempt to measure how a bigger burden of government has negative macroeconomic effects, but also because the number crunchers do a poor job of measuring the degree to which people (recipients, health care providers, state and local politicians, etc.) will modify their behavior to become eligible for other people’s money. The problem is compounded by similar mistakes for revenue estimates from the Joint Committee on Taxation, which (like CBO) makes no attempt to capture macroeconomic effects and has a less-than-stellar history of predicting behavioral responses.
If the legislation passes, we will get more spending, more taxes, and more debt. Equally troubling, we will get more dependency. That’s good for Washington and bad for the country.
Filed under: Government and Politics; Health, Welfare & Entitlements; Tax and Budget Policy
Wednesday Links
- Busy with an ambitious domestic agenda, the Obama administration has put trade issues on the back burner. Let’s hope it stays that way.
- A little lesson on how government works. (As opposed to how it’s supposed to work.)
- There has been talk that House Democrats are planning to “deem” the health care bill into law without calling for a vote. If you’re not sure how that process works, read this.
- Contrary to a growing belief in Washington, revaluing China’s currency will not cure the trade deficit.
- Podcast: “ObamaCare Threatens Innovation” featuring Michael F. Cannon.
David Goldhill: “A Democrat’s Case For ‘No’”
David Goldhill has done it again.
You may recall his article, “How American Health Care Killed My Father,” from the September 2009 issue of The Atlantic.
Now, at HuffingtonPost, he comments on the health care legislation that may soon face a final vote (of some sort) in the House:
[C]ontinuing our Party’s almost unquestioned conflation of health insurance with health care, the central feature of the proposed “reform” is further extension of our flawed insurance-based system…[D]espite the Administration’s recent heated rhetoric, most of the entrenched health industry interests are quietly or openly in favor of this bill. Should the bill become law, I suspect we will look back at it as an industry bailout…
How…can Democrats in the depths of a recession support a massive tax increase on middle-class job creation…? How…could we justify diverting even more of middle class income to support our broken system of care, further starving families of funds for all their other needs? Most uninsured Americans lack insurance only temporarily; how many of them would trade lesser lifetime job prospects and lower disposable income for the short-term retention of health insurance?…
If the legislation had any real prospect of controlling health care spending, would the pharmaceutical industry be funding the “yes” campaign?
As a former Democrat who hung door knockers for Michael Dukakis in 1988, I know the heavy heart with which he writes. Read the whole thing.
Watch the video to hear Goldhill’s story:
Obama’s Populism a Hoax: ObamaCare Is a Sop to Big PhRMA
From the invaluable Tim Carney:
The Obama team regularly dismisses opponents as industry lackeys. The Democratic National Committee blasted out e-mails this week warning that “for every member of Congress, there are eight anti-reform lobbyists swarming Capitol Hill” and “Congress is under attack from insurance lobbyists.”
But drug industry lobbyists, according to Politico, spent the weekend “huddled with Democratic staffers” who needed the drug lobby to “sign off” on proposals before moving ahead. Meanwhile, we learn that the drug lobby is buying millions of dollars of ads in 43 districts where a Democratic candidate stands to suffer for supporting the bill. The doctors’ lobby and the hospitals’ lobby are also on board with the Senate bill.
So the battle at this point is not reformers versus industry, as Obama would have you believe. Rather, it is a battle between most of the health care industry and the insurance companies.
(And the insurers are not opposed to the whole package. On the bill’s central planks — limits on price discrimination, outlawing exclusions for pre-existing conditions, a mandate that employers insure their workers and a mandate that everyone hold insurance — insurers are on board. They object mostly that the penalty is too small for violating the individual mandate.)
Filed under: General; Government and Politics; Health, Welfare & Entitlements
AP: Obama Misleads Voters about ObamaCare’s Effects on Premiums
Buyers, beware: President Barack Obama says his health care overhaul will lower premiums by double digits, but check the fine print…
The [Congressional Budget Office] concluded that premiums for people buying their own coverage would go up by an average of 10 percent to 13 percent, compared with the levels they’d reach without the legislation…
“People are likely to not buy the same low-value policies they are buying now,” said health economist Len Nichols of George Mason University. “If they did buy the same value plans … the premium would be lower than it is now. This makes the White House statement true. But is it possibly misleading for some people? Sure.”
Nichols’ comments are also misleading — which makes the president’s statement not just misleading but untrue.
Under ObamaCare, people would not have the option to buy the same low-cost plans they do today. That’s the whole problem: under an individual mandate, everybody must purchase the minimum level of coverage specified by the government. That minimum benefits package would be more expensive than the coverage chosen by most people in the individual market. Their premiums would rise because ObamaCare would take away their right to choose a more economical policy.
Note also that the CBO predicts premiums would rise by an average of 10-13 percent in the individual market. Consumers who currently purchase the most economic policies would see larger premium increases.
Finally, the Obama plan would also force millions of uninsured Americans to purchase health insurance at premiums higher than current-law premium levels, which they have already rejected as being too high. Their premium expenditures would rise from $0 to thousands of dollars. Yet the CBO counts that implicit tax as reducing average premiums, because those consumers are generally healthier-than-average. Only in Washington is a tax counted as a savings.
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Questions for Thoughtful ObamaCare Supporters, Part III
I’ve already posted two series of such queries. But every day brings new questions to mind. So here are a few more:
- What does it say that pharmaceutical-industry lobbyists are meeting with House Democrats to write this legislation behind closed doors? Or that the pharmaceutical industry is preparing to spend millions of dollars on advertisements in support of the legislation?
- Does it trouble you that a former federal judge writes, “Under Article I, Section 7, passage of one bill cannot be deemed to be enactment of another“?
- Does it trouble you that Speaker Pelosi says of the proposed “deeming” strategy, “I like it because people don’t have to vote on the Senate bill“? (Emphasis added.)
- What does it say that left-of-center The Washington Post editorializes that the Democrats’ endgame seems “dodgy” and “threatens to turn into something unseemly and, more important, contrary to Democrats’ promises of transparency and time for deliberation”?
- What does it say about the feasibility of the Obama health plan that Speaker Pelosi is drawn to the “deeming” strategy, which she once opposed in a court of law?
The Bill Is Deemed Passed
Today’s question at Politico Arena is:
Should Democrats be worried that health care could be subject to a successful court challenge?
My response is:
I’m the first in my family not to be a lawyer. But Mike McConnell’s article seems compelling to me. As he notes, Article I, Section 7, of the Constitution requires that a bill must pass both houses of Congress to become a law. Duh. And for those who have trouble with that concept, he goes on: “As the Supreme Court wrote in Clinton v. City of New York (1998), a bill containing the ‘exact text’ must be approved by one house; the other house must approve ‘precisely the same text.’”
So the “deemed passed” rule doesn’t seem to be constitutional. Then the interesting question is, Will the Supreme Court strike down a major piece of welfare-state legislation just because Congress didn’t dot all the i’s and cross all the t’s. After all, some of us think the Supreme Court has failed to strike down legislation whose substance violates the Constitution. Would it be more forthright on a procedural issue? Would it dare to tell the political branches that they can’t have the health-care program they worked on for 14 months, negotiating careful and complicated compromises in both houses?
But then, the reason that Democrats are contemplating such an audacious scheme is precisely that they can’t find a bill that a majority of the House will vote for. So this wouldn’t be like the Supreme Court striking down Franklin Roosevelt’s Agricultural Adjustment Act, which passed Congress quickly and overwhelmingly in May 1933. It would not involve the Supreme Court standing up to the unified political branches. Rather, it would only require the Court to tell Congress that they have to actually pass bills before they become law, which apparently a majority of the House is not prepared to do.
Filed under: Government and Politics; Health, Welfare & Entitlements; Law and Civil Liberties
Massachusetts Treasurer Blasts RomneyCare and, Equivalently, ObamaCare
Massachusetts state treasurer and recent Democrat Timothy Cahill has harsh words for the health plan foisted on his state and the identical plan that President Obama is trying to foist on the nation. From The Boston Globe:
“If President Obama and the Democrats repeat the mistake of the health insurance reform here in Massachusetts on a national level, they will threaten to wipe out the American economy within four years,” Cahill said in a press conference in his office.
Echoing criticism leveled by congressional Republicans in recent weeks, Cahill said, “It is time for the president, the Democratic leadership, to go back to the drawing board and come up with a new plan that does not threaten to bankrupt this country.”
[T]he state’s health insurance law…Cahill said, “has nearly bankrupted the state.”
Cahill said the law is being sustained only with the help of federal aid, which he suggested that the Obama administration is funneling to Massachusetts to help the president make the case for a similar plan in Congress.
“The real problem is the sucking sound of money that has been going in to pay for this health care reform,” Cahill said. “And I would argue that we’re being propped up so that the federal government and the Obama administration can drive it through” Congress.
Commonwealth Connector, the independent state agency established to help residents find the health insurance, has “totally failed,” to create competition and connect people with affordable insurance, Cahill said, pointing out that 68 percent of the residents it serves receive subsidized care.
“We haven’t done anything about driving down costs,” Cahill said. “We haven’t helped small business. We haven’t changed the way we pay for health care and the way we deliver it.”…
Asked for solutions today, Cahill said he would seek to “level the playing field” between hospitals that charge different rates for similar procedures, seek to increase competition by allowing health insurance companies plans to sell plans across state lines, and would slash benefits mandated under state law.
For more on the Massachusetts health plan, see “The Massachusetts Health Plan: Much Pain, Little Gain.”
Filed under: Cato Publications; Health, Welfare & Entitlements
More Questions for Thoughtful ObamaCare Supporters
Last week, I posted a series of questions that I hoped would get supporters of ObamaCare thinking.
I received a brief response from the Center for American Progress’ Matt Yglesias on Twitter. The Guardian’s Sahil Kapur provided a thorough response, and even posed a question in return.
I appreciate Kapur’s effort, and plan to respond. But before I do, I wonder if he (or any other thoughtful ObamaCare supporter) would answer just a few additional questions:
- What does it say that Democrats are having this much trouble getting their health care legislation through Congress even after hiding 60 percent of its cost?
- What does it say that Virginia’s legislature, including its Democratically controlled Senate, has approved legislation blocking the Obama plan’s centerpiece? Or that 31 other states are considering legislation or amending their constitutions to do the same?
- What does it say that veteran and centrist health economist Alain Enthoven writes, “The American people are being deceived...the bills in Congress…do little or nothing to curb [health care] expenditures. When the American people come to understand that ‘reform’ was not followed by improvement, they are likely to be disappointed.”
- What does it say that some Democratic pollsters are in open revolt against ObamaCare?
- What do you make of Yuval Levin’s observation that, in order to enact ObamaCare, Democrats must “amend a law that doesn’t exist yet by passing a bill without voting on it“?
- What does it mean if Democrats decide that ObamaCare will die if it faces a simple, up-or-down, majority vote in the House?
Filed under: Government and Politics; Health, Welfare & Entitlements
Axelrod: ‘Louisiana Purchase’ Somehow Not One of Those Corrupt, State-Specific Bribes
The House leadership plans to hold a vote, more or less, on the Senate health care bill this week. President Obama says he wants to “ge[t] rid of many of the provisions that had no place in health care reform — provisions that were more about winning individual votes…than improving health care.” White House spokesman Robert Gibbs says Democrats will “take the pot-sweetening out of the process.” Yet Democrats have decided to retain the Senate bill’s $300 million subsidy for the state of Louisiana, commonly known as the “Louisiana Purchase,” and other state-specific bribes pot-sweeteners.
On ABC News’s This Week yesterday, Obama advisor David Axelrod argued that the “Louisiana Purchase” is not targeted solely at Louisiana:
The president does believe that state-only carve-outs should not be in the bill. There are things in the bill that apply to groupings of states…for example…what has been portrayed as a provision relating to Louisiana says that if a state, if every county in a state is declared a disaster area, they get some extra Medicaid funds. Well, that would apply to any state…
Sure, in theory. But as ABC News reported in November, the bill speaks of “certain states recovering from a major disaster” and “spends two pages describing what could be written with a single world: Louisiana.”
Axelrod would have us believe that after Senate Majority Leader Harry Reid (D-NV) wrote the best darned bill he could, he slapped his head and said, “Omigosh! The way I worded this one subsidy provision, it would only apply to Louisiana — the home state of a senator whose vote I need! Gee whiz, what are the odds??” Using Axelrod’s rationale, if Reid had included a $10 billion pension for “all African-American former presidents,” that would not be an Obama-only pot-sweetener because it would apply to any African-American former president.
Filed under: Government and Politics; Health, Welfare & Entitlements
Last-Second Shots
On Sunday the University of Kentucky Wildcats saved their SEC tournament championship on a second-chance shot with 0.1 seconds left on the clock.
That’s a great way to win a basketball game, but not a good way for Congress to impose 2000 pages of federal rules on one-seventh of the American economy.
Filed under: Government and Politics; Health, Welfare & Entitlements
ObamaCare Cost-Estimate Watch, Day #265
Today, the Congressional Budget Office released what may be the penultimate cost estimate of ObamaCare. Or maybe it will be the 12th-to-the-last. Whatever.
That document — unlike the CBO’s score of the Clinton health plan — includes no cost estimates of the legislation’s private-sector mandates. As I have written previously, the private-sector mandates accounted for 60 percent of the cost of the Clinton plan. The Obama plan is remarkably similar, which is probably why Democrats have systematically suppressed any such estimates this time around.
President Obama has implicitly acknowledged that the CBO estimates do not reflect the legislation’s full cost. Yet it has now been 265 days since Congress saw the first version of the Obama health plan, and we’re still waiting for a full cost estimate.
And so, the ObamaCare Cost-Estimate Watch maintains its lonely vigil. At least The New York Times is listening.
For ObamaCare to Become Law, House Must Approve Senate Bill Unchanged
According to Roll Call:
The Senate Parliamentarian has ruled that President Barack Obama must sign Congress’ original health care reform bill before the Senate can act on a companion reconciliation package, senior GOP sources said Thursday.
So…before you can amend a law, it has to be a law? What a concept.
Thursday Links
- Greece, here we come…. Congressional Budget Office estimates budget deficits will average nearly $1 trillion per year for the next decade.
- Matt Drudge re-titles a Cato op-ed: “Mob Tactics Used to Push Healthcare Through.”
- Daniel Griswold: “On trade, as on so much else, the populists have it wrong again. Free trade and globalization are great blessings to families across America.“
- Could Dennis Kucinich bring both sides of the aisle together to end the war in Afghanistan?
- Podcast: “Seventies Redux?” featuring John Samples, author of the forthcoming book The Struggle to Limit Government.
Filed under: Foreign Policy and National Security; General; Government and Politics
A Tale of Two Frauds
The President has announced a government crackdown on Medicare and Medicaid fraud. The effort appears to be an attempt to make it easier for Americans to swallow the health care “reform” he’s trying to shove down their throats. As House Republican leader John Boehner correctly asked, “Why can’t we crack down on fraud without a big-government takeover of health care?”
As I’ve noted before, improper payments made by Medicare and Medicaid is may well be $50 billion more than the already appalling $100 billion annual figure the president cited. Administrative efforts to rein in fraud and abuse are welcome, but they won’t solve the huge and fundamental inefficiencies of these programs. Because the law requires government health care programs to quickly get payments out the door, Uncle Sam will always be engaged in a costly game of “pay and chase.”
The broader problem is that government programs aren’t subject to market discipline. Policymakers and administrators have little incentive to be frugal because they face few or no negative consequences when playing with other people’s money.
Most of us have noticed how good private companies can be at reducing fraud. I recently received a call about questionable charges on my Discover credit card. After quizzing me on a list of purchases made with my card in the past 24 hours, it became clear that someone had gotten control of my account. Discover immediately closed the account, opened an investigation, and removed me from any liability for the fraudulent charges.
What amazed me is that I only had about $300 worth of charges on my card. It’s not a big account and thus not a big money maker for Discover. Yet, within 24 hours of a string of suspicious charges, the company was right on top of it before I even realized anything nefarious was going on. Private markets don’t always work this well, but government programs almost never do.
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
What Is ‘Meaningful’ Health Insurance? Who Decides?’
Noting that premium increases, such as Anthem’s proposed 39-percent hike in California, have caused individuals and employers to purchase less coverage, Kaiser Family Foundation president Drew Altman writes:
Rising health care costs and insurance company practices are leading not just to more expensive premiums, but to skimpier, less comprehensive coverage as well; slowly redefining what we have known as health insurance. To be sure, some economists argue that this is precisely what should happen…But this is not likely how regular people see it. Appropriate cost sharing is one thing, but we may be reaching the point in the individual market where the policies many people have simply cannot be considered meaningful coverage.
Of course, this is the whole idea behind President Obama’s proposed tax on high-cost health plans: higher prices will cause people to purchase less coverage, which will temper health care spending.
But whether Altman is correct depends on what the meaning of “meaningful” is. When individuals pare back the amount of insurance they purchase, they are revealing what they consider to be meaningful coverage. (The same is true when employers opt for less-comprehensive coverage, though employers’ revealed preferences are obviously a poor proxy for what their workers value.)
If Altman thinks the coverage that individuals are choosing “cannot be considered meaningful coverage” (note the passive voice), he is implicitly stating that individuals are not the best judges of their own welfare. And the only way to devise an alternative definition of meaningful coverage is through the political process.
It is difficult to argue that the political process does a better job of selecting meaningful coverage. That process forces many consumers to purchase coverage that they don’t find meaningful (e.g., chiropractic, acupuncture, circumcision), that they find offensive (e.g., abortion, contraception, in-vitro fertilization), or for treatments that are downright harmful (e.g., high-dose chemotherapy combined with autologous bone-marrow transplant for late-stage breast cancer).
Letting consumers reveal their preferences is possibly the worst way to define “meaningful coverage.” Except for all the others.
Questions for Thoughtful ObamaCare Supporters
What does it say that the American polity has consistently rejected a wholesale government takeover of health care for 100 years?
What does it say that public opinion has been consistently against the Democrats’ health care takeover since July 2009?
What does it say that Democrats are having this much difficulty enacting their health care legislation despite unified Democratic rule? Despite large supermajorities in both chambers of Congress, including a once-filibuster-proof Senate majority (see more below)? Despite an opportunistic change in Massachusetts law that provided that crucial 60th vote at a crucial moment? Despite a popular and charismatic president?
What does it say that 38 House Democrats voted against the president’s health plan?
What does it say that Massachusetts voters elected, to fill the term of Ted Kennedy, a Republican who ran against the health care legislation that Kennedy helped to shape?
What does it say that the only thing bipartisan about that legislation is the opposition to it?
What does it say that 39 senators voted to declare that legislation’s centerpiece unconstitutional?
What does it say that health care researchers — a fairly left-wing lot — think the Senate bill is unconstitutional?
What does it say that the demands of pro-life and pro-choice House Democrats, each of which hold enough votes to determine the fate of this legislation, are irreconcilable?
What does it say that House Democrats are actually contemplating a legislative strategy that would deem the Senate bill to have passed the House — without the House ever actually voting on it?
Given that ours is a system of government where ambition is made to counteract ambition, what does it mean that the only way to pass this legislation is for the House to trust that the Senate will keep the House’s interests at heart?
Question for the President
The rationale for your proposed tax on high-cost health insurance plans is that it would encourage people to purchase less-comprehensive coverage and thereby reduce health care spending.
If that’s a good idea, then why is it bad when insurers raise premiums?
Health Cost Projections to 2019: The Doc Fix Trick Again
Congressman Paul Ryan (R-WI) takes the President to task for cooking the books on projected health care costs, most egregiously with the “doc fix” — namely, assuming Medicare slashes physician payments by 21.3% this year and subsequently lets them fall continuously in real terms.
What nobody seems to have noticed is that the same phony “doc fix” taints the new “Health Spending Projections Through 2019” from Centers for Medicare and Medicaid Services (CMS).
Drew Altman, president and CEO of the Kaiser Family Foundation, tries to downplay the CMS forecast “that the public sector will start paying more than half of the nation’s health care bill starting in 2012, and that government spending will grow faster than private spending from 2009 to 2019 (an average of 7.0% per year vs. 5.2%).”
Worrying about such spending trends is a foolish “ideological battle over the role of government,” says Altman, because rapid increases in government health spending is “just the byproduct of economic and demographic trends” (recession and an aging population). “Is government health spending out of control?” he asks; answering “NO” in capital letters. “The report simply underscores the need to control health care costs in the public and the private sectors alike.”
On the contrary, the reason government health care spending is projected to slow down to 7% a year is, the CMS explains, “due principally to the 21.3% reduction in physician payment rates . . . mandated in current law.”
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
Obama’s HSA Gambit a Net Minus?
President Obama evidently thinks that if he promises not to kill health savings accounts (HSAs), opponents will swoon for his government takeover of health care. If that doesn’t do the trick, he should make clear that his health plan would not eliminate other things too, like the Defense Department and puppies.
Of course, that hollow gesture didn’t win the president any Republican support. But it may have cost him some Democratic support — or at least frayed the nerves of a few House Democrats. According to CongressDaily:
Liberals, meanwhile, are fuming over an addition Obama made to his proposal to make the effort appear bipartisan and possibly switch the votes of moderate Democrats who opposed the House bill last year.
The Congressional Progressive Caucus co-chairman, Rep. Raul Grijalva, D-Ariz., said Wednesday he is disturbed and bitter about an addition he said goes against Democratic principles.
“I’ve been leaning ‘no’ for a long time. That hasn’t changed,” Grijalva said about voting for the healthcare overhaul the Senate passed in December and a package of changes that would move through a separate bill through reconciliation.
Obama indicated he might be open to a provision that would encourage the use of health savings accounts, a tax-exempt savings account that typically is used in conjunction with a high-deductible plan. The provision would allow the exchanges to offer high-deductible plans.
“For some of us, the bitterness about HSAs in and the public option completely out, I don’t know how long that’s going to linger,” Grijalva said.
Which tends to confirm what HSA supporters have long feared: killing HSAs is the Left’s game plan.
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