In my week’s absence in the beautiful country of Costa Rica, I certainly missed a lot. God bless the peaceful, tropical atmosphere to keep me away from this mess. Since I know there’s been no shortage of analysis (some very good, while others wasting time on the usual political BS), I want to try to sort through the nonsense and highlight what really took place. I think a good starting place is to clear the myths of the health care bill…
Fact Sheet: The Truth About the Health Care Bill
Among my favorites:
4. The bill will make health care affordable for middle class Americans.
6. This bill provide health care to 31 million people who are currently uninsured.
9. This bill employs nearly every cost control idea available to bring down costs.
13. The bill prohibits dropping people in individual plans from coverage when they get sick.
15. This bill will stop insurance companies from hiking rates 30%-40% per year.
18 The bill will end medical bankruptcy and provide all Americans with peace of mind.
This is a good read. I cannot guarantee accuracy since I decided not to read the thousands of pages for this bill. However all the good, non bias sources I’ve read seem to confirm these myths stated above. Next let’s go to a more broad overview of costs…
The Real Arithmetic of Health Care Reform
ON Thursday, the Congressional Budget Office reported that, if enacted, the latest health care reform legislation would, over the next 10 years, cost about $950 billion, but because it would raise some revenues and lower some costs, it would also lower federal deficits by $138 billion. In other words, a bill that would set up two new entitlement spending programs — health insurance subsidies and long-term health care benefits — would actually improve the nation’s bottom line.
Could this really be true? How can the budget office give a green light to a bill that commits the federal government to spending nearly $1 trillion more over the next 10 years?
The answer, unfortunately, is that the budget office is required to take written legislation at face value and not second-guess the plausibility of what it is handed. So fantasy in, fantasy out.
In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges: The health care reform legislation would raise, not lower, federal deficits, by $562 billion.
Again, I’d be wary about placing firm belief in these numbers. I think the importance of this article is a demonstration that Obama and CBO estimates are far from certain. In fact, like all government economic estimates, I’d be cautious of overly optimistic assumptions. Considering this bill does absolutely nothing for costs, I expect total costs to run toward the higher end of estimates.
Finally let me recap the arguments I made when health care legislation appeared to be dead…
Health Care Fails
Source: CBO Budget
1) Health care is almost perfectly inelastic. This isn’t unique to US health care but helps explain why almost every country has significant health budget problems. People will pay any cost to seek treatment for life threatening or severely life altering conditions.
2) Despite claims to the contrary, our health system has no resemblance to a free market system. Most of the population has a system where their employers pay premiums and thus the consumer has little concern over cost. We have a Medicare/Medicaid government sponsored system with no rationing for some of the population. Then the remainder is left to fend for themselves and try to pay for insurance despite cost being driven up by the rest of the non free market system.
3) Since our system is built upon an insurance model, nobody cares about the prices. Most of the time, people don’t even know what health bills actually costs because it gets sent straight to the insurance company. This
4) Because most people expect their employers to supply medical coverage and wouldn’t work somewhere without this benefit, employers have no bargaining power over the insurance companies. Since the insurance companies can effectively charge whatever they want, they are unconcerned with rising prices. Given their free reign, they may even have incentive for price inflation.
5) There is zero competition for health care. Sure, doctors can compete based on quality and reputation but part of economic competition is charging appropriate prices. If consumers bought any other service (from auto maintenance to landscaping to computer repair), they would demand a price bid and compare among other local competitors. I’m willing to bet that nobody has ever called the doctor’s office and ask how much a visit will cost. I also guarantee it’s incredibly rare for someone to demand a price before any procedure or treatment. If nobody questions or compares prices, competition simply does not exist and there is no check on prices.
6) Losses from the uninsured guarantee health care providers will raise prices above break even cost. The insured are subsidizing the uninsured. While this might occur in any business (for example paying a premium because most businesses have to account for theft, depreciation, etc), health care becomes excessive. Because health care is such a necessary and expensive service, these losses are exponentially higher than any other business.
7) Health care providers are paid based on the amount of procedures provided rather than the quality of care. Since patients don’t check prices or what services are being charged, they are in no position to argue. If a doctor makes a mistake, they are paid just the same as if they did a perfect job. If a doctor wants to run several unnecessary tests, nobody will argue or check its necessity. In any other industry, excessive or non-quality performance would not go rewarded.
8 ) Malpractice insurance is unreasonably high because doctors are frequently sued for small mistakes or unavoidably adverse results. While most of these lawsuits don’t stand much chance of winning unless real malpractice has occurred, there is a big risk of excessive judgments or arbitrarily decided punishment. As long as malpractice is such a big concern, doctors have extra incentive to order unnecessary tests and charge large fees.
9) In today’s technologically driven society, there is no excuse for not having a universal patient information infrastructure. So much money is wasted on insurance paperwork and records management and passed on to the patient’s costs.
10) Prescription drug costs are out of control when the government is so willing to protect the big pharmaceuticals. Rather than focusing on improving their drugs or providing treatment for all conditions, pharmaceuticals are able to make ridiculous profits on certain drugs protected by their biggest buyers: the US government. Allowing generics to compete on price would drive down costs substantially.
I could come up with so much more but I think these are the major reasons for such outrageous health care costs. Rather identifying these problems and attempting to craft a solution, Democrats focused on coverage while Republicans fought for the systematic status quo. Neither of these approaches were realistic in dealing with the health care costs and hence we are left to choose between disastrous legislation or nothing at all. This is unacceptable given the horror stories in health care today and the prospect of the above graph representing our future.
The structural deficit due to Medicare and other health costs have not been addressed in the least. Meanwhile, all these other causes are completely ignored guaranteeing continued cost appreciation. Since cost is such a major problem, all of Obama’s stated goals are doomed to failure. One thing I can guarantee is we will be debating health care reform throughout the rest of this decade.
Now let’s proceed to the good things. I am absolutely happy to see millions more Americans receive coverage. I’ve said it over and over: it is unacceptable for people in our country to lack insurance and be forced into bankruptcy over their health. While we don’t address this in it’s entirety, this was a positive step for coverage. There were also plenty of logical provisions here. Restricting discrimination due to pre-existing conditions and extending the age for young adults to stay on their parents plan are good steps. I also think most American will be surprised to see how little this actually affects them. Most middle class Americans satisfied with their employer sponsored plan really won’t see any consequence here.
With such sparse good comments over a $1 trillion bill, it’s pretty clear I think there’s a lot of waste. Even though I don’t support such a plan, I think extending Medicare to all would have even been better policy here. The fact is, health care must be reformed and this just doesn’t do it. Neither does the Republican alternative. Historic… definitely not. At the same time, Armageddon it’s not either. It’s just another obligation we cannot fulfill and another broken system.