In the Daily Caller, I explain how the failure of ObamaCare‘s “CLASS Act” highlights the fatal flaws in the rest of the law:

As it turns out, CLASS collapsed even before its 2012 start date. The same thing happened when Obamacare imposed the same sort of price controls on health insurance for children in September 2010: the markets for child-only coverage collapsed in a total of 17 states, and are slowly collapsing in even more…

In the face of this setback, Obamacare supporters are naturally declaring victory. Jonathan Cohn of The New Republic sees “vindication.” Kevin Drum of Mother Jones proudly announces, “What happened here is that government worked exactly the way it ought to.” The Washington Post’s Ezra Klein instructs, “The CLASS experience should, if anything, make us more confident in the underlying law.” It’s hard to argue with such logic, but let’s try…

Obamacare inspires confidence in its supporters, then, because one part of the law throws a Hail Mary pass to prevent another part of the law from stripping Americans of the insurance that currently protects them from illness and impoverishment. Feel safer?

So if you’d like secure protection from illness and impoverishment, repeal ObamaCare. Or say your prayers.

The CLASS Act: This Is Confidence-Inspiring? is a post from Cato @ Liberty - Cato Institute Blog

David Frum knows that ObamaCare can’t be repealed.  But don’t worry, he also knows how to make it palatable to Republicans:

1. Move up the start date of ObamaCare’s state waiver program from 2017 to 2014.  As I explain here, that program will only produce alternatives to ObamaCare that are equally or more anti-market, such as a single-payer system.  Frum wants that to happen sooner.
2. Raise taxes, on everybody.  I swear I am not making that up.
3. Replace ObamaCare’s individual mandate with an equally coercive tax credit that accomplishes the same thing, but which the courts would probably uphold.  Bra-vo.  Frum implies it is necessary to “work around” the fact that Republicans are not “entirely rational” when it comes to the individual mandate.  (True, but they’re getting more rational all the time.)
4. Republicans should embrace government rationing of health care.  Frum counsels Republicans to “unleash the cost controllers” and become the “green eyeshade party willing to do the disagreeable work of squeezing waste from the system.”  How?  Well, he doesn’t call for Medicare vouchers, under which enrollees would ration their own care.  In fact, he has thrown cold water on that idea.  But the only alternative is to have the government ration care.  And Frum makes no distinctions between the elderly and non-elderly, which leads me to believe he wants Republicans to ration care to the under-65 crowd too.  Slap that on a bumper sticker!

In sum, Frum’s GOP-palatable alternative to ObamaCare is … ObamaCare.  But maybe more coercive.  And implemented sooner.  With higher taxes.  And less vulnerable to legal challenges.  And with Republicans playing the bad guy.

Frum laments that Republicans mistakenly threw away the opportunity to work with Democrats to implement these brilliant ideas in 2009 and 2010.  But Republicans did so because these brilliant ideas hurt people.  They were wrapped into a bill called ObamaCare, and Republicans rejected it.  They were right to do so.  And they are right that ObamaCare can’t be fixed.

(Related: Ramesh Ponnuru previously took down Ross Douthat’s ideas for fixing ObamaCare.)

(Also related: CNN has signed Frum to provide conservative commentary during the 2012 election.)

On ObamaCare, David Frum Just Doesn’t Get It is a post from Cato @ Liberty - Cato Institute Blog

Columbia Business School economist Ray Fisman has a piece at Slate.com discussing the first-year results of the Oregon Health Insurance Experiment.  In brief, when Oregon transferred an average of $3,000 from taxpayers to poor people in the form of Medicaid coverage, it did those poor people some good.

Fisman’s interpretation of the results is different from mine in mainly two respects.  First, I describe the one-year benefits of Medicaid coverage as modest; he says they’re “enormous.”

A more fundamental difference concerns whether expanding Medicaid was a cost-effective use of the taxpayers’ money.  Fisman writes:

Given the added expense, did the Medicaid expansion prove to be cost-effective? That is, did the treatment group actually have better health outcomes?

That’s not what cost-effectiveness means.  For Medicaid to be cost-effective, it must (A) produce benefits and (B) do so at the same or a lower cost than the alternatives.

The OHIE establishes only that there are some (modest) benefits to expanding Medicaid (to poor people) (after one year).  It tells us next to nothing about the costs of producing those benefits, which include not just the transfers from taxpayers but also any behavioral changes on the part of Medicaid enrollees, such as reductions in work effort or asset accumulation induced by this means-tested program.  Nor does it tell us anything about the costs and benefits of alternative policies.

Just as some opponents of ObamaCare over-interpreted previous Medicaid studies, Fisman and other ObamaCare supporters are over-interpreting the OHIE.

ObamaCare Supporters Are Over-Interpreting Oregon Medicaid Study is a post from Cato @ Liberty - Cato Institute Blog

That’s the title of my latest Kaiser Health News column, which addresses President Obama’s offer to accelerate the waiver process that would allow states to replace many of ObamaCare‘s most offensive provisions:

If you think that means the president was himself exhibiting flexibility, you would be wrong. Despite the rhetoric about compromise, what the president actually did was offer states the option of replacing his law with a single-payer health care system three years earlier than his law allows…

HHS Secretary Kathleen Sebelius has written that ObamaCare gives states “incredible freedom” to implement the law. We now know what she meant: states are free to coerce their residents even more than ObamaCare requires. What’s incredible is that she calls that freedom.

Apologies to to the Housemartins.

So This Is Freedom? They Must Be Joking. is a post from Cato @ Liberty - Cato Institute Blog

Supporters have gone to great lengths to make ObamaCare appear popular or to make repeal seem impossible.  But this op-ed by my friend Jonathan Cohn made my jaw drop.

First, Cohn notes that the Senate recently voted down two efforts to repeal one of ObamaCare’s more unpopular provisions: the “1099 reporting tax,” which will place an enormous burden on small businesses.  ”Neither provision,” Cohn obliquely reports, “got enough votes to pass.”  He concludes:

Critics of health care reform [sic] this week thought they would get their first win in the campaign to repeal the Patient Protection and Affordable Care Act. Instead they got a lesson in just how politically challenging a wholesale repeal might be.

If opponents can’t even repeal the unpopular parts of ObamaCare, how can they repeal the whole thing?

Cohn neglects to mention a few important details.  The reason neither amendment received “enough votes” is because, due to procedural considerations, each would have needed a 2/3 majority to pass — i.e., 67 votes.  The Republican amendment actually received 61 votes.  (The Democratic amendment received only 44 votes.)  Reading Cohn’s account, though, you might think — and Cohn might think, or just want you to think — that both failed because they lacked majority support.  In fact, the Republican amendment received a filibuster-proof majority.  Even though it included $19 billion of spending cuts.  And in a chamber with only 41 Republicans.  (Another six arrive next month.)  And the mere fact that Democrats offered an amendment to repeal part of ObamaCare is notable in itself.  Cohn’s spin aside, the skirmish over the 1099 reporting tax shows that Democrats are divided and ObamaCare supporters are on the run.

Second, Cohn writes, “advocates of repeal have one extra liability that the law’s architects did not — a lack of majority support even before the wrangling begins.”  As evidence, he cites a single Gallup  poll from July 2009 that found 50 percent of the public supported “comprehensive health care reform.”  Oy, where to begin.  First, by Cohn’s own single-poll standard, he is just flat wrong.  Advocates of repeal can point to the latest Rasmussen poll, which shows that 58 percent of adults support wholesale repeal.  (Polls have clocked support for repeal as high as 61 percent.)  Second, support for “comprehensive health care reform” is not the same thing as support for ObamaCare.  If Gallup were to ask Cato employees whether they support comprehensive health care reform, my guess is that at least 50 percent would answer yes.  (Presumably, Cohn would then write an oped titled, “Even Libertarians Support ObamaCare!”)  Advocates of repeal have something else going for them, too: 17 months of consistent public opposition to ObamaCare.

No one is saying that getting repeal through the Senate is likely in the next two years.  But the fact that supporters have to shade the truth like this suggests they are nervous.

How to Tell When ObamaCare Supporters Are Nervous is a post from Cato @ Liberty - Cato Institute Blog

I must be losing my touch. I’ve let nearly two months pass without responding to Ezra Klein’s defense of RomneyCare, ObamaCare, and other centrally planned health care systems.  (For those who want to get up to speed: his original post, my reply, and his response.)  So here goes.

Klein notes that he and I had each used flawed measures of RomneyCare’s impact on health insurance premiums in Massachusetts.  Fair enough.  But Klein ignores the study I cited by John Cogan, Glenn Hubbard, and Dan Kessler, which estimates that RomneyCare increased premiums in Massachusetts by 6 percent.  The CHK study has limitations, but it is the best estimate available.  I hope Klein addresses it.

Klein’s fallback position is that even if RomneyCare increases premiums, that’s not an indictment of the law because cost-control was not one of its goals.  Never mind that Mitt Romney boasted, “the costs of health care will be reduced.”  Klein knows political rhetoric when he sees it.  Yet he oddly sees no parallels between the phony-baloney promises of cost-control used to sell RomneyCare and the phony-baloney promises of cost-control used to sell ObamaCare — despite ample assistance from people like Medicare’s chief actuary and Alain Enthoven (“the American people are being deceived“).

Then Klein throws down his trump card:

[E]ven a cursory read of the evidence would show that whatever the drawbacks of central planning, it covers people at an extremely low cost. Romney Care’s cost problem is a result of pasting a coverage-oriented quick fix atop our insane health-care system. Compare its costs to the British system, the French system, the German system, or any other system, and whatever your conclusions, you won’t walk away unimpressed by the ability of centralized systems to cover whole populations for much less money than we spend.

Oy, where to begin?  First, Klein violates Cannon’s First Rule of Economic Literacy: he writes that centrally planned systems cost less, when what he means is that they spend less.

Second, the phrase “whatever the drawbacks of central planning” is some serious hand-waving.  Those “drawbacks” include (among other things): the Medicare program’s suppression of comparative-effectiveness research, error-reduction efforts, care coordination, and other delivery innovations; Canada’s human-rights violating Medicare system; and the suppression of untold innovations in health insurance and medical treatment by government price controls.  Other than a few drawbacks, Mrs. Lincoln…

Third, our “insane health-care system,” as I blogged previously, “is the product of the old raft of government price & exchange controls, mandates, and subsidies.”  Prior to ObamaCare, government already controlled half of all U.S. health care spending directly, granted control over another quarter to employers, and regulated health care more heavily than perhaps any other sector of the economy.  Klein and his fellow central planners can’t deny paternity.  Our “insane health-care system” is the product of central planning.

Finally, only a cursory read of the evidence could lead to the conclusion that central planning contains health care spending.  Klein posts the following charts and concludes that since all those (other) centrally planned systems spend less on health care than the United States, central planning must result in lower health care spending.

Photo credit: By Robert Giroux/Getty Images

But if that were true, then one would expect per-capita spending on elderly Americans — who have universal coverage through the centrally planned Medicare program — would not be far out of line when compared to how much other nations spend per elderly resident.  Yet the United States is just as far out of here as overall.  According to the OECD, the United States spends about twice as much per elderly person as Canada, and more than twice as much as Australia spends.  (Alas, I’m not cherry-picking; these are the only four nations for which the OECD provides recent data.)

Source: OECD, author's calculations

(One could argue that the reason for this is that Medicare exists alongside the world’s largest (ostensibly) private health care sector, whose evils spill over into Medicare.  If that were the case, then moving all Americans into Medicare should reduce U.S. health care spending, bringing it back into line with other nations.  But consider that Klein and The New Republic‘s Jonathan Chait both acknowledge that Congress had to throw $2 at the health care industry for every $1 that ObamaCare cut from future Medicare spending. How exactly could Congress move 250 million Americans into Medicare (which presumably would reduce overall spending), or reduce Medicare spending later, given those constraints?  How, exactly, would an independent rationing board survive the political dynamics that produce such outcomes? Prediction: it won’t.  The narrative that central planning contains health care spending just doesn’t hold water.)

Klein, The New Republic‘s Jonathan Cohn, and others have taken a big step by acknowledging that RomneyCare is struggling.  When they shift the blame to “the American health care system,” however, they obscure what’s really happening.  As I closed my previous post: “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.”

Shifting the Blame for America’s Health Care Woes is a post from Cato @ Liberty - Cato Institute Blog

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.

RomneyCare Advocates: We Swear, This Time Centralized Planning Will Work is a post from Cato @ Liberty - Cato Institute Blog

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?

ObamaCare’s ‘Sweetheart Deal’ for PhRMA is a post from Cato @ Liberty - Cato Institute Blog

Until now the usual suspects hoping to win a government takeover of America’s health care system appeared to be confident of victory.  No longer, however.  Some of them, at least, are starting to notice the fact that health care “reform” will be incredibly expensive at a time when the U.S. government has no money.  Indeed, the problem is not that the Treasury is empty.  Rather, it is filled with IOUs for which foreign creditors, such as China, now worry about collecting on.

Writes Jonathan Cohn at the New Republic:

Attention fellow liberals who want health care reform: You are in danger of losing the fight for universal health insurance. And it’s not only–or even primarily–because of the public plan.

It’s because of the money.

Well, contrary to the belief of many on the Left, money does matter.  As much as we all might wish, money does not grow on trees.  And running the printing presses isn’t the panacea that some believe.

Cohn seems surprised that the Congressional Budget Estimate came in so high, but a complete bill almost certainly would cost even more.  Thankfully, the government-takeover bandwagon has hit a large bump, and even larger barriers must be overcome for health care “reform” to triumph.

Panic Starting to Set in Among Advocates of Government-Run Health Care is a post from Cato @ Liberty - Cato Institute Blog

The New Republic’s Jonathan Cohn accuses Americans for Prosperity (AFP) of “lies” for running an ad that claims “Washington wants to bring Canadian-style healthcare to the U.S.”

AFP’s ad is more defensible than Cohn’s criticisms of it.

Cohn elides the question of whether Shana Holmes (the woman featured in the ad) was almost killed by Canada’s Medicare system.  For a supporter of single-payer like Cohn, that is tantamount to admitting that, yeah, socialized medicine sometimes kills people.

Cohn argues that the ad is unfair because Canada has many advantages over the U.S. health care sector.  That may be true, but the ad doesn’t appear to defend American health care.  It merely says, “government should never come in between your family and your doctor” and “Don’t give up your rights.”  That’s not pro-American health care or anti-reform.  It’s just anti- the type of reform that Cohn wants.  And it points to one area where our semi-socialized U.S. health care sector appears to be superior to Canada’s: quicker access to intensive treatments.  Sometimes, that saves lives.  In fact, AFP could go farther and say that the United States has another edge over Canada, in that we develop nearly all of the best new medical technologies.  In fact, our medical technologies save Canadian lives, but Canada’s health care system (and its supporters) steal the credit.

Yet “the real lie,” Cohn claims, is that the ad suggests that “Washington” wants to impose a Canadian-style system on the United States.  Cohn calls that claim “demonstrably false.” But consider:

• President Obama has said he would prefer single-payer and has hinted that he would like to make incremental changes in that direction.
• Many people who support a new public plan (e.g., Paul Krugman) do so because they believe it will lead to single-payer.
• Massachusetts, which has already implemented most of the reforms that Obama and congressional Democrats are considering, is now contemplating a large leap toward Canadian-style health care by imposing capitation on its entire health care sector.
• Government rationing becomes increasingly likely as government revenues fail to keep pace with the cost of government’s health care promises.  (See again, Massachusetts.)
• The Left wants government to ration care.  That’s the point of the comparative-effectiveness research funding.  That draft House Appropriations Committee report committed a classic Washington gaffe when it said that certain treatments “would no longer be prescribed,” because it was admitting the truth.

Cohn is correct that no politician of influence is saying she wants to impose a Canadian-style system on the United States.  But I prefer to pay attention to what they’re doing.

AFP: 1.  Cohn: 0.

Cohn vs. AFP is a post from Cato @ Liberty - Cato Institute Blog

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.

Church of Universal Coverage Begins Its Campaign against that Pesky CBO is a post from Cato @ Liberty - Cato Institute Blog