The Obamacare cost-savings mirage
Remember that promise the Obama administration made, that health care reform would be financed by cost-saving machinations that would eliminate waste while maintaining quality? Turns out that those measures are unspecified and unknown, theoretical and untested, and that major players such as Jonathan Skinner “mused recently that ‘the key lesson’ from a new study challenging some of his findings ‘is how little we know about the science of health-care delivery.'”
That’s no surprise, really; I’ve explored the problem at some length previously, here and here.
What may be news is that it has become apparent that the Obama administration has known about the difficulties of cost-savings for quite some time, and has been grasping at the straw of waste-cutting in order to sell a program it knows will cost the American people a great deal of money. The track record of such cost-saving measures in the past is dismal:
The new cost-control apologists concede that there isn’t any actual plan for controlling costs: Throw enough speculative policies against the wall, they say, and some breakthrough will stick. Yet Mr. Orszag’s no-less-confident predecessors spent decades trying to pull down Medicare spending with little to no success…More relevant examples include Medicare’s “relative value” payment scale, which was designed in 1985 by the Harvard economist William Hsiao to encourage more primary care. That’s this year’s rallying cry too. “Diagnosis-related groups” were introduced into Medicare in 1983 to alleviate hospital cost growth, and what a monumental success that turned out to be. With only brief periods of relatively slower growth, nominal Medicare spending has risen on average at an annual rate of 9.6% since 1980. Over the same period total Medicare spending has grown 13-fold, climbing from 1.2% of the economy to 3.2% today.
The real problem?
(a) Modern state-of-the-art health care is expensive.
(b) To insure everyone would be very expensive.
(c) There is no magic rabbit to pull out of a hat; no free lunch.
But liberals and the Left like to pretend otherwise.
Yes, the best way – perhaps the only way – to control costs is to forbid any further advances in medicine. We all wish it would be otherwise, that there would be ever-improving health care, available at ever-falling prices. But I haven’t located that planet yet.
And when I do find it, I’m not sure who among you I shall tell. I think I will require that you grant me three wishes before I share that information.
Our ADD-HD President is a LIAR. Period. A Lying, Liar who LIES. There, I’ve said it. Medicare is broke in 7-years. Meantime, The Bamma wants to expand it to people far under 65. Additionally, he claims to want Medicare gutted…errr…streamlined to cur $500-Billion.
Pause…BWHAAAAAAAAAAaaaaaaaaaaaa…!
Everybody over the age of 18 recognizes that the only way to reduce costs is to have patients have more skin in the payment for services. Meaningful co-pays would make it necessary for consumers to make cost/benefit decisions about the nature and amount of care. Any other solution is doomed to failure. However, a reasonable cap on tort awards, and less government mandated coverage would also help significantly. Such an approach would not take 2000 pages to describe or 100 new government groups to administer. Cost control seems too simple doesn’t it?
Neoneocon said, “Modern state-of-the-art health care is expensive.”
Only because the federal govt. controls +50% of the payment stream and the remaining is primarily paid by third party payers. Separating payer and user leads to price inflation. If your employer paid for your food would you eat out more or less? Would you eat more or less lobster/steak/etc.?
AVI said, “Yes, the best way – perhaps the only way – to control costs is to forbid any further advances in medicine. We all wish it would be otherwise, that there would be ever-improving health care, available at ever-falling prices. But I haven’t located that planet yet.”
But recent studies show that technology improvements reduce healthcare costs.
You live on the planet where healthcare is available at ever-falling prices. Lasik eye surgery is one and voluntary cosmetic surgery is another. Neither are covered by most insurance policies or government payments and thus rely on market forces to set pricing.
Mark Perry at Carpe Diem blog says, “Employer-Provided Medicine Is Completely Illogical “. http://mjperry.blogspot.com/2009/11/employer-provided-medicine-is.html
The fix for the system is really fairly simple, but likely untenable because we have adjusted to the current dysfunctional system and now believe health care is freely provided by employers or the government.
The fix is to provide health care savings accounts to anyone who wants them allow generous pre tax contribution levels and no tax on medical distributions. And then tax preference individual major medical policies. For example, $5000 deductible major medical policy would offer a tax deduction and offer a tax rebate of up to $1000 as a matching contribution for monies invested in the HSA. Competition in the first $5000 of health care spending by individuals will reintroduce competition into the system and will cause medicine to begin to follow the common technology pattern of lowering costs and increasing value.
The lack of potential for graft makes this an untenable political solution.
But of course there must be downsides to such a plan. Probably, but not the ones which commonly come to mind. http://www.marginalrevolution.com/marginalrevolution/2009/08/consumer-drive-health-care-plans.html
Neo also said, “There is no magic rabbit to pull out of a hat; no free lunch.” Sigh there never is, or is there?
http://cafehayek.com/2009/07/health-care-lies.html
Note how the private purchase total annual out-of-pocket cost is less then the cost of insurance for the employer paid plan and it covers more people than the employer plan. I would rather take the employer paid cost as income and purchase the private plan and invest the difference in the HSA.
Using this strategy many would never need Medicare but again lack of graft will not permit the politicians to even approach such plans in large numbers.
Mark
I’m a systems analyst for a company that provides software to long-term care pharmacies. Our pharmacies service almost 100% nursing homes and assisted living facilities. I was around for the Prospective Pay debacle in the 90’s, where the federal government used years-old data to determine payment based strictly on diagnosis. If you had diabetes, they paid the flat diabetes rate, regardless of how much it actually cost to treat you.
The nursing homes couldn’t survive and stopped paying the pharmacies. The pharmacies couldn’t survive and started closing sites and laying people off. Just what we don’t need in this economy.
just so its clear and we know where this is going…
Obama Rewrites the Cold War
The President has a duty to stand up to the lies of our enemies.
http://online.wsj.com/article/SB124744075427029805.html
There are two different versions of the story of the end of the Cold War: the Russian version, and the truth. President Barack Obama endorsed the Russian version in Moscow last week.
Speaking to a group of students, our president explained it this way: “The American and Soviet armies were still massed in Europe, trained and ready to fight. The ideological trenches of the last century were roughly in place. Competition in everything from astrophysics to athletics was treated as a zero-sum game. If one person won, then the other person had to lose. And then within a few short years, the world as it was ceased to be. Make no mistake: This change did not come from any one nation. The Cold War reached a conclusion because of the actions of many nations over many years, and because the people of Russia and Eastern Europe stood up and decided that its end would be peaceful.”
The truth, of course, is that the Soviets ran a brutal, authoritarian regime. The KGB killed their opponents or dragged them off to the Gulag. There was no free press, no freedom of speech, no freedom of worship, no freedom of any kind. The basis of the Cold War was not “competition in astrophysics and athletics.” It was a global battle between tyranny and freedom. The Soviet “sphere of influence” was delineated by walls and barbed wire and tanks and secret police to prevent people from escaping. America was an unmatched force for good in the world during the Cold War. The Soviets were not. The Cold War ended not because the Soviets decided it should but because they were no match for the forces of freedom and the commitment of free nations to defend liberty and defeat Communism.
It is irresponsible for an American president to go to Moscow and tell a room full of young Russians less than the truth about how the Cold War ended. One wonders whether this was just an attempt to push “reset” — or maybe to curry favor. Perhaps, most concerning of all, Mr. Obama believes what he said
Guess what his historical ideas of other things is? including healthcare.
one should realize that he is using a false history to inform him of what actions to take and what are the right actions. like FDR saving the day by spending. and about printing money. and the assumptions that capitalism is inefficient. that bankers are servants of the states, negative vs positive rights.
swing! if ya never heard it before you might think it was new…
Employer-provided health insurance is a direct legacy of FDR. Employers got around his wage-price controls during WWII by offering health insurance as a new fringe. Didn’t cost much then in constant dollars either.
http://www.pollster.com/polls/us/healthplan.php?xml=http://www.pollster.com/flashcharts/content/xml/HealthCare.xml&choices=Oppose,Favor&phone=&ivr=&internet=&mail=&smoothing=&from_date=&to_date=&min_pct=&max_pct=&grid=&points=1&lines=1&colors=Favor-000000,Oppose-BF0014,Undecided-A69A37,No%20Opinion-68228B
Here are Jamie Irons’ Three Ironclad Laws of the Medical Marketplace:
(1) Everyone wants everything, from cosmetic surgery to chemotherapy.
(2) Nobody want to pay for anything or, what amounts to the same thing, everybody wants somebody else to pay for everything.
(3) If one is younger than thirty, and not yet married with children, one assumes one is immortal, and will never need health care.
The failure to understand these simple, self-evident principles, dooms ever effort to “reform” “health care.”
Jamie Irons
Let’s add another Iron Law of economics:
“If there is government money to pay for a good, the unit price of that good will increase faster than the level of general prices.”
Examples:
1) Healthcare
2) Higher education
3) Residential housing
4) Military hardware
We could add more examples.
This piece on mammograms makes me smile
http://feministlawprofessors.com/?p=14096
Apparently NYT will cut itself a hole in the ice and jump in. That’s how fast they want to sink.
artfldgr: Yep, Heaven Forbid that he tell those young Russians(or, young Americans!)some muscular Truth about the end of the Soviet Regime and the end of the Cold War. Heaven further forbid that they are told the TRUTH of the Vast Human Costs of the mass murdering Left Regime. Ya know, 30-40 million dead and endless 10s of millions in the Slave Labor Camps. Not only is Obama a tried & true Revisionist, but a Moral Coward as well.
Off-topic:
I’m no fan of President Obama. Nonetheless, I think it’s important to point out when his administration does something right. For example, Obama promised on the campaign trail to post pending bills on the Internet — and it seems that we’re finally seeing progress on that. (Look at some of the pending bills here.
Sorry for the digression… back to our muttons.
respectfully,
Daniel in Brookline
Mark, I don’t entirely disagree, but a large category of medications and techniques is left off of that analysis. Psychiatric medications are enormously expensive, but psychiatric patients are among the least-employed of our population. Transcranial stimulation is marginally better than ECT’s, but is much more expensive – and ECT’s aren’t that cheap either. Newer medications can cost a thousand a month or more.
People pay for lasik surgery because they can. Ditto for voluntary cosmetic surgery. This of course drives down prices. That’s not going to happen with psychiatric medications.