When the Congressional Budget Office this week stated that a health care reform bill proposed by Sen. Ted Kennedy, and now under consideration in Washington, would cost $1 trillion over 10 years, all the momentum that health-care reformers had spent years building up hit a brick wall.
At the end of the week, hardly anyone remembers what President Obama said in what was to have been a landmark address to the American Medical Association on Monday, but everyone remembers the $1 trillion figure. Ironically, what the president said was that the reason we have to act now to change our health care system is because costs are out of control. It is “essential” to “control the spiraling cost of health care in America,” the president said.
“Today, we are spending over $2 trillion a year on health care -- almost 50 percent more per person than the next most costly nation. And yet, as I think many of you are aware, for all of this spending, more of our citizens are uninsured, the quality of our care is often lower, and we aren't any healthier. In fact, citizens in some countries that spend substantially less than we do are actually living longer than we do.
“Make no mistake: The cost of our health care is a threat to our economy. It's an escalating burden on our families and businesses. It's a ticking time bomb for the federal budget. And it is unsustainable for the United States of America.”
Obama bases his case for health care reform almost entirely on the argument that health care is way too expensive in this country. Yet if that is so, then why does every reform plan being seriously considered in Washington right now spend even more?
The president complains that we spend $2.4 trillion a year on health care. Yet even if the cost of reform is kept to $1 trillion over a decade, that would still raise America’s health care costs by $100 billion a year.
Yes, the president claims that these costs amount to investments that would reduce total health care spending in the long run. But he also claimed that no one making less than $250,000 a year would see a tax increase of any kind on his watch, and less than six months into his administration we already have a cigarette tax hike, fuel efficiency standards that raise the average automobile price by about $2,000, and a proposed new tax on energy.
It is unclear how any of the health-care reforms likely to pass a Democratic Congress would actually reduce total health care spending. Instead, they would shift spending. The grand prize – a “public option,” meaning government-provided health insurance for the middle class – would decimate private health insurance by luring people into the subsidized plan. Would that reduce what we spend on health care? Only if the government refused to pay for treatments private insurers now cover. The legendary cost savings that are supposed to come from government’s ability to obtain bargains through bulk purchasing or bullying providers into doing the government’s bidding would have to be balanced against the equally legendary waste and inefficiency of state-run bureaucracies.
Reform could increase, not decrease, total health care spending. The Washington Post reported this week that many health economists warned that Obama’s plan to cut Medicare reimbursement rates could increase total health care spending. If hospitals and doctors’ offices can’t get as efficient as Obama claims they can, they will simply raise prices to make up for the revenue lost to Obama’s cuts.
Unintended results can also be seen in the Kennedy bill, which the CBO pegged at $1 trillion over 10 years. The bill doesn’t simply add to the rolls of the insured. It shifts who is insured and who isn’t. The CBO calculated that if the bill became law, by 2017, some 23 million people would lose their health insurance. Because 39 million would gain coverage, the bill would result in 16 million more Americans having insurance than could be expected under current law. But that’s old comfort for those who lost plans they liked. And the gain comes at a price of $62,500 a person. How is that progress?
The president talks about reducing costs, but his real goal is shifting costs – and control. If the goal were to reduce the total amount of money Americans spend on health care, then the president would be proposing changing the incentive structure. As the CBO noted, right now doctors and insurers have strong incentives to provide expensive services that don’t always improve health. Change those incentives, and you improve health while cutting costs. But that’s not the meat of what Obama and the Democrats in Congress are proposing.
The biggest changes they are proposing are various methods of moving more people into government-subsidized insurance coverage. That would not be the proposed reform of anyone whose primary concern was to make health care more affordable for all Americans. But it would be the proposed reform of anyone whose primary concern was gaining more control over health care decisions in America.
The reason these reforms cost so much is because they aren’t intended to reduce costs. They are intended to expand government power. And that is very, very costly.