Bending the Cost Curve: Ryan’s Roadmap Would Succeed Where ObamaCare Fails
From my oped in today’s Investors Business Daily:
Rep. Paul Ryan’s (R-Wis.) “Roadmap for America’s Future” proposes even tighter limits on Medicare’s growth, leading columnist Bruce Bartlett to opine, “the Medicare actuaries have shown the absurdity of the Ryan plan by denying that Medicare cuts already enacted into law are even worthy of projecting into the future.”
On the contrary, experience and public choice theory suggest that the Ryan plan has a better shot at reducing future Medicare outlays than past efforts, because the Roadmap would change the lobbying game that fuels Medicare’s growth.
For more on Ryan’s Roadmap, click here. For more on Medicare, read David Hyman’s Medicare Meets Mephistopheles. For more on public choice economics, click here.
Great Moments in Government-Run Healthcare
Somebody sent me this story from the Drudge Report and I can’t resist the temptation to share. What really astounds me is not that a Swedish man sewed up his own leg after waiting for a long time in a hospital. Heck, I wouldn’t be surprised if things like that happened in all nations. The really disturbing part of the story is that the hospital then reported the man to the police. A classic case of “blaming the victim.” The bureaucrats in Sweden’s government-run healthcare system obviously were not pleased that he called attention to their failure.
A 32-year-old took the needle into his hands when he tired of the wait at Sundsvall hospital in northern Sweden and sewed up the cut in his leg himself. The man was later reported to the police for his impromptu handiwork. “It took such a long time,” the man told the local Sundsvall Tidning daily. The man incurred the deep cut when he sliced his leg on the sharp edge of a kitchen stove while he was renovating at home. “I first went to the health clinic, but it was closed. So I rang the medical help line and they told me that it shouldn’t be closed, so I went to emergency and sat there,” the man named only as Jonas told the newspaper. After an hour-long wait in a treatment room, he lost patience and proceeded to sew up his own wound. “They had set out a needle and thread and so I decided to take the matter into my hands,” he said. But hospital staff were not as impressed by his initiative and have reported the man on suspicion of arbitrary conduct for having used hospital equipment without authorization.
Taking the Constitution Seriously
Today Politico Arena Asks:
Is Health Care Repeal Gaining Steam?
My Response:
It’s striking how POLITICO Arena contributors on the left like Professors Skocpol and Jost blithely dismiss the idea that the Constitution could actually limit what Congress may do in the area of “social welfare” — including such monstrosities as ObamaCare. It’s as if they had no conception, despite their years of schooling, of what the Constitution is all about. It’s not a document that authorizes the federal government to do whatever may be in “the public interest,” as conceived by those in power at any moment. It’s a carefully crafted plan for government that both grants and limits power, so that individuals may plan and live their own lives.
Judge Henry Hudson got it exactly right when he wrote: “While this case raises a host of complex constitutional issues, all seem to distill to the single question of whether or not Congress has the power to regulate — and tax — a citizen’s decision not to participate in interstate commerce.” The left may ridicule the suits that have been brought against ObamaCare by more than 20 states and others, but in doing so they ridicule nothing less than the American heritage of limited constitutional government. If ObamaCare revives that heritage, it will all have been worth it.
Obamacare Complexity vs Free Market Simplicity
Free markets are characterized by voluntary exchange between buyers and sellers. Mapping that relationship is absurdly simply, as this image indicates.
Indeed, the only reason I even bothered to include that image was for purposes of comparison. Here is a new flowchart prepared for the Joint Economic Committee showing the healthcare system under Obamacare.
It’s worth noting, by the way, that the system already was a disaster even before Obamacare was enacted. In the health care sector, free markets are only allowed to operate in very rare cases, such as cosmetic surgery, laser eye surgery, and (for better or worse) abortion. The rest of the sector was heavily distorted by government intervention. Obamacare simply makes a bad situation worse.
ObamaCare Remains Unpopular, or Round Two of My Exchange with Maggie Mahar
Maggie Mahar responds to my response to her critique of Michael Tanner’s claim that ObamaCare is deeply unpopular. Mahar’s alternative narrative, espoused by many on the Left, is that “the more voters learn more about the reform legislation, the more they seem to like it.”
Mahar shows that her narrative works if you begin looking for a trend at the high-water mark of opposition, if you look at a few select polls, if you look at not-so-straightforward poll questions, if you interpret simultaneous declines in both support and opposition as growing support, and if you devise a rationale for ignoring the views of those who most oppose ObamaCare. Which is to say, her narrative doesn’t work. ObamaCare remains deeply unpopular.
Mahar claims that support for repealing ObamaCare has been trending downward since reaching its high water mark of 63 percent on May 22, as measured by the polling firm Rasmussen Reports. This was shrewd; if you’re going to look for a downward trend, the high water mark is an excellent place to start. But it doesn’t paint an accurate picture of what’s been happening with public support for repeal. Starting on the enactment date, as I wrote before, “Rasmussen finds opposition to repeal hovering between 32-42 percent, and support for repeal hovering between 52-63 percent, with no clear trend on either side.” No clear trend, and a majority consistently supports repeal. Check out Rasmussen’s data and see for yourself.
Next, Mahar selects a few polls that do support her narrative (e.g., Gallup, NBC/Wall Street Journal, Kaiser Family Foundation). For example, in her first post, Mahar cites an NBC/Wall Street Journal poll from June that suggests voters would prefer a Democratic congressional candidate who didn’t want to repeal ObamaCare over a Republican who did. Aside from the results being barely statistically significant, the question she cites introduces confounding factors such as party affiliation. When that same poll asked a more straightforward question, it found that 47 percent of respondents would be enthusiastic about or comfortable with a candidate’s desire to repeal ObamaCare, compared to 40 percent who would have reservations or be uncomfortable.
Moreover, selecting just a few polls probably paints a less accurate picture than looking at something like Pollster.com, which aggregates all polls and therefore (presumably) cancels out the quirkiness of individual polls.
The ‘Public Option’ Is Back
That didn’t take long at all. Left-wing congresscritters have (re-)introduced legislation to create a “public option” in ObamaCare‘s health insurance exchanges.
The Congressional Budget Office scores the bill as reducing federal deficits by $53 billion by 2019. How? Paying doctors and hospitals less! Put that on a bumper sticker! The public option would use Medicare’s price and exchange controls to pay doctors and other health care providers 5 percent more than Medicare does. Except for prescription drugs: the public option would, ahem, “negotiate” those prices, meaning it would use a separate price-control scheme and pay less than Medicare does. (That means PhRMA probably won’t be bankrolling the public-option campaign the way it bankrolled the pro-ObamaCare campaign and is bankrolling the re-election bids of its congressional benefactors.) Providers, such as community hospitals, would take a huge pay cut if some of their privately-insured patients suddenly only paid Medicare plus 5 percent.
When costs explode under ObamaCare the way they are exploding under RomneyCare, expect the public option to be the Left’s go-to solution. In CongressDaily, co-sponsor Rep. Raul Grijalva (D-Ariz.) says:
By reintroducing it, we make sure that people don’t forget this is a viable option…. I think as the health bill is implemented, more and more people are going to come to the realization that cost containment and competition aren’t as robust as they should be, because of the absence of the public option.
Naturally. Because the first thing that comes to mind when I think cost-containment and competition is government health care programs.
For a refresher on how the Left confuses cost-containment with spending-containment — and on why the public option is a really, really, really bad idea — see my paper, “Fannie Med? Why a ‘Public Option’ Is Hazardous to Your Health.”
A Response to Gruber on RomneyCare & Health Care Costs
I just came across this letter to the editor of the Wall Street Journal from MIT economist Jonathan Gruber. I don’t know how to confine myself to just one of the letter’s many problems. So brace yourselves, here comes the fisk.
Joseph Rago’s article on Massachusetts health-care reform (“The Massachusetts Health-Care ‘Train Wreck‘,” op-ed, July 7) is exactly the type of selectively misleading use of facts upon which opponents of health-care reform have been relying over the past year.
No comment, other than remember the phrase “selectively misleading use of facts.”
Health-care reform in Massachusetts has covered 60% of the state’s uninsured, has done so at roughly the cost projected before reform was enacted in 2006, and remains overwhelmingly popular with the residents of the state.
Regarding coverage gains, Massachusetts officials used to claim that RomneyCare reduced the share of uninsured residents from around 10 percent to 2.6 percent. In a study released this year, Aaron Yelowitz (a former student and coauthor of Gruber’s) and I show why that figure is too low and why the actual figure is likely 5.1 percent or higher. The study on which Gruber relies — like all other such studies — neither mentions nor attempts to measure the problem that Yelowitz and I identified: uninsured Massachusetts residents appear to be responding to the individual mandate by concealing their lack of insurance, which would inflate the coverage gains. Since that study obtained results similar to our results for Massachusetts adults, that study’s estimate of a 60-percent reduction in the uninsured appears to be an upper-bound estimate, rather than a point estimate.
Regarding costs, I haven’t seen any updated numbers since the Massachusetts Taxpayers Foundation’s whitewash from May 2009. I’d like to see an updated, non-whitewashed report on actual spending and how it compares to the original projections, especially considering that in 2006, the Kaiser Family Foundation reported that Massachusetts “anticipates that no additional funding will be needed beyond three years.“ Updated figures would also allow us to judge how much RomneyCare spent per newly insured resident.
The state has seen a decline in its nongroup premiums of more than 50% relative to national trends…It reduced the costs to individuals of purchasing insurance…[an] enormous reduction relative to pre-reform…
Here’s where Gruber engages in his own “selectively misleading use of facts.” Yes, non-group premiums appear to have fallen for the 4 percent of residents in the non-group market — because RomneyCare shifted those costs to workers with job-based coverage.
It is true that reform has not slowed the growth of group health-insurance premiums, which have continued to rise at exactly the same rate as in the nation as a whole.
The first part of this sentence is an understatement; the second part is false. This report from the left-wing Commonwealth Fund shows that premiums in Massachusetts are growing faster than anywhere else in the nation. And the only study that has tried to isolate the effect of RomneyCare finds that it increased premiums for employment-based coverage by 6 percent (see cost-shifting, above).
Despite Gov. Mitt Romney’s claims, the Massachusetts reform was not designed to slow the growth of health-care cost growth.
It should be obvious by now that RomneyCare wasn’t designed that way. But it sure was sold that way. And so was ObamaCare. Any bets on how long before we hear apologists for both claiming that ObamaCare wasn’t designed to slow cost growth?
The PPACA also includes a series of changes that represent the best thinking about how to control costs, such as an independent rate-setting board for Medicare, pilots of innovative medical reimbursement approaches, and an end to the open-ended tax subsidy to the highest cost health insurance plans in the U.S. None of these is guaranteed to slow the rate of cost growth. But each is better than doing nothing, which was the alternative.
So the, ahem, best thinking on how to contain health care costs is (1) price and exchange controls set by (2) an unelected and unaccountable rationing board, plus (3) taxing health insurance. Bra-vo. Sure, Obama’s National Economic Council chairman Larry Summers says, “Price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time.” But when the alternative is nothing — nothing! — that means the bar for “best thinking” isn’t very high.
In the end, it is impossible to control health-care costs without first bringing as many citizens as possible into our health-insurance system.
As I blogged earlier today, it does not speak well of the Left’s approach to health care that in order to reduce wasteful government spending — or at least pretend to — they must first create more wasteful government spending.
Filed under: Cato Publications; General; Government and Politics; Health Care
RomneyCare Advocates: We Swear, This Time Centralized Planning Will Work
You know things aren’t going well in Massachusetts when supporters of RomneyCare write “there’s some evidence that the reforms signed into law by Mitt Romney in 2006 are struggling.” That’s how The Washington Post‘s Ezra Klein puts it in a post defending RomneyCare. The New Republic‘s Jonathan Cohn offers a similar defense.
Klein mentions only a few of the difficulties confronting Massachusetts. Here are a few more:
- The Commonwealth Fund reports that even though Massachusetts already had the highest health insurance premiums in the nation, premiums rose faster post-RomneyCare than anywhere else; 21-46 percent faster than the national average.
- A recent study estimates that RomneyCare has so far increased employer-sponsored health-insurance premiums by an average of 6 percent.
- The success that Klein sees in Massachusetts’ individual market — which accounts for just 4 percent of the private market — is merely the product of shifting costs to workers with job-based coverage.
- Contrary to Klein’s post hoc spin that RomneyCare “was never an attempt to control costs,” Romney himself promised that “the costs of health care will be reduced.”
- Aaron Yelowitz and I find evidence suggesting that uninsured Massachusetts residents are responding to the individual mandate not by obtaining coverage but by concealing their insurance status. Coverage gains may therefore be less than official estimates suggest.
- Evidence is mounting that, despite stiffer penalties than ObamaCare will impose, increasing numbers of people are gaming the individual mandate by only purchasing health insurance when they need medical care. Such behavior could ultimately cause the “private” insurance market to collapse.
Nevertheless, the Klein/Cohn thesis is basically that costs have been climbing and employers have been dropping/curtailing health benefits for decades. So you can’t blame that stuff on RomneyCare. We should instead be thankful that Massachusetts enacted a new raft of government price controls, mandates, and subsidies to protect residents from those features of “the American health-care system.”
The only problem is that “the American health-care system” is the product of the old raft of government price & exchange controls, mandates, and subsidies. The largest purchaser of medical care in the country (and the world) is Medicare. Medicaid is second. The Left complains so much about fee-for-service medicine fueling rising health care costs and reducing quality, you’d never know that their beloved Medicare program is the primary reason for its dominance. Likewise, the reason why employers are dropping and curtailing coverage is that the government turned the private health insurance market into an unsustainable employment-based system that is doomed to unravel. Cohn’s book documents the inhumanity of that system so well, you’d think it would sour him on the sort of centralized planning that created it. I could go on…
RomneyCare and its progeny ObamaCare are attempts by the Left’s central planners to clean up their own mess. If Klein and Cohn want to defend those laws, pointing to the damage already caused by their economic policies won’t do the trick. They need to explain why government price & exchange controls, mandates, and subsidies will produce something other than what they have always produced.
ObamaCare Still Unpopular, Especially among Voters
As of mid-July, it appears the American public still opposes ObamaCare, with the opposition strongest among those most likely to vote.
Judging by the latest data at the poll-aggregating site Pollster.com, a solid plurality of adults continues to oppose ObamaCare (46.8 vs. 40.1 percent):
The trendlines don’t look so good for supporters of the law. (The public isn’t so hot about President Obama’s handling of health care, either.) Yet the above graph includes (polls that include) adults who are neither registered nor likely to vote.
If you want to know how public opinion about ObamaCare will influence the November elections, you’ll want to look at polls of likely voters. Those suggest a majority opposes the law (51.3 vs 42.9 percent):
Dear Health Care Journos, There’s Nothing Free about ObamaCare
The Obama administration announced yesterday its plans for implementing ObamaCare‘s mandate that consumers purchase first-dollar coverage for preventive services. The press release reads (emphasis added):
Administration Announces Regulations Requiring New Health Insurance Plans to Provide Free Preventive Care
Of course the administration would emphasize that consumers will pay nothing for these services at the moment of service, and elide the fact that this mandate will increase their health insurance premiums. The administration’s use of the word “free” is what we call spin.
What’s surprising–and more than a little disappointing–is that journalists and headline writers at major media organizations would repeat the administration’s spin, as if the government really is giving away free stuff:
- New York Times: “Health Plans Must Provide Some Tests at No Cost…free coverage…free screenings…free preventive services…”
- Los Angeles Times: “Healthcare law offers preventive care at no cost”
- Politico: “New rules: Free preventive care…free under new federal guidelines.”
- Reuters: “Healthcare overhaul mandates free preventive care…no extra cost to consumers…Medicare patients will have access to free prevention services…”
- Wall Street Journal: “White House Unveils Free Preventative Services…services that will be free to consumers…free preventive care…free preventive care…”
Each use of “free” and “no cost” in these excerpts is false, even within its original context. There’s no such thing as a free lunch. Everything has a cost. No government can change that. Mandating that insurers cover certain services does not magically make them free. Consumers still pay, just in the form of higher health insurance premiums and lower wages.
The Wall Street Journal (in paragraph six), The New York Times (paragraph seven), Reuters (paragraph 16), and the Los Angeles Times (paragraph 19 or so) do mention that consumers will pay for this mandate in the form of higher premiums–but that doesn’t make the untrue stuff true. It just makes the article internally inconsistent. Moreover, the Los Angeles Times incorrectly suggests that the higher premiums would be offset by lower out-of-pocket spending. (The change in premiums will be larger due to moral hazard and administrative costs.) And Reuters mentions higher premiums only vaguely, and as if insurers would bear that cost. Each article also repeats the administration’s spin that spending more on preventive care would reduce health care costs, without mentioning that the Congressional Budget Office and other health care researchers dispute that claim.
Journalists need to be very careful with terms like “free” and “no cost.”
Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law
At more than 2,500 pages and 500,000 words long, the new health care bill — the Patient Protection and Affordable Care Act — is the most significant transformation of the American health care system since Medicare and Medicaid.
The bill’s complexity has created confusion, frustration, false expectations, and conflicts about its coverage and impact. An incisive new report by Cato scholar Michael D. Tanner provides an authoritative and deeply revealing explanation of its provisions.
The diagnosis: the bill is bad medicine. It is likely to make Americans less healthy, less prosperous, less able to direct their own health care decisions, and places huge burdens on our economy and already massive national debt. It is now certain that the debate over health care reform will be with us for much longer.
Update: Printed copies are now available for purchase for $10.
Restore Free Markets to Health Care
Eline van den Broek probably is not happy today since she was in South Africa watching her team lose a high-scoring (by soccer standards) battle with Spain, but she should be very proud of the new video she narrated that urges the repeal of Obamacare — and also points out some of the other reforms that are needed to restore a free market to the US health care system.
Her comments on how the American health care system was a mess even before Obamacare are particularly important and echo many of the points made by Mike Tanner and Michael Cannon.
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