I've written several posts on related topics, but hearing HHS Secretary Sebelius on Sunday's Meet the Press discuss a trillion in savings over the next decade and Obama doing the same yesterday is deliberately misleading: for instance, ask economists or climatologists to comment on forecasts years in the future. (In fact, Obama mistakingly did the same also over the coming decade.) In computing, we have an acronym: GIGO (garbage-in, garbage-out). The models are SIMPLIFICATIONS of reality and minor changes in assumptions can have significant bearings on outcomes. Sebelius, in response to Paul Ryan's (WI-R) critique pointing out the modest $100B-plus "savings" for 10 years of taxes and 6 years of benefits, and many of the funds coming from unrealistic cuts in an underfunded Medicare program, argues that the GOP is purposefully ignoring the "real" savings over the second decade. The fact that Obama and Sebelius are explicitly promoting unreliable projections, with explicit caveats from the CBO, show the desperation of this Administration in misleading the American people.
It's all about controlling costs. Yeah, right. Talk about hubris: we've more than doubled the federal debt over the past decade, and yet Obama, fresh off the largest federal deficit in American history and likely in the process of topping himself this fiscal year, is seriously going to criticize the health care sector on cost containment?
To a certain extent, Obama is correct: the health care bubble is unsustainable, just like the 2000 Nasdaq stock market crash, the recent and ongoing real estate bubble, the education (including higher education) bubble, and (as I've been mentioning) the Big Government bubble. Bubbles don't end very well.
There are certain factors we already know: labor costs are considerable, which is aggravated by capacity issues in the production of physicians and nurses. For example, I have two relevant nieces, one of whom is a registered nurse in Texas and another due to graduate this May. The younger niece couldn't find a nursing program opening in her home state of Colorado. There are ways many of us in the private sector market have already seen relevant adjustments: for instance, I didn't have a personal physician in the Baltimore area when I relocated here in 2004; I was concerned about some minor foot swelling and didn't want to wait 2 to 3 weeks to see a new physician, but my company health insurance required prior approval through a screening nurse, and I was directed to a mini-clinic a few miles away. So when Obama repeats, several dozen times, about the misuse of emergency rooms for routine health issues, he's really not talking about something the 85% of Americans in some health insurance plans (and over 90% are happy with their private sector health plan--Obama can only dream of a 90% job approval rating) aren't already aware of; there are cost incentives for policyholders to remain within their preferred providers.
In other cases, we are dealing with quality/cost trade-offs. And if Obama thinks he can do things like pay for the costs of the government bureaucracy on health care by fraud prevention, let's point out that the private sector has tackled fraud from the get-go, and they are still facing inflationary pressures; the fact that the public sector has not done the same, e.g., with Medicare (there are well-known examples of more profitable procedure niches where certain unethical parties try to talk seniors into having these procedures done) speaks volumes of just why you don't want the federal government micromanaging the health care sector. For instance, if the counts of a certain procedure and provider performing said procedure are unusually high, it's a flag for further investigation. There are also implications for government meddling in innovation in medical technology, treatment and drugs; any deviations from "official" protocols could have implications for offending doctors, from denied payments to potential revocation of medical licenses or imprisonment. It's precisely these kinds of things that we small-government conservatives worry about.
There are other costs. For instance, the concept of health insurance has been perverted. We are not talking about large-scale, unexpected costs, but insurance being used to pay for routine or minor expenses. (That's the basic we conservatives have been pushing for tax-advantaged health savings accounts--to accommodate routine or minor expenses.) Then there are mandates, which correlate with cost. (I've often used in vitro fertilization as my prototype mandate where childless couples try to dump their related medical costs across the insured base. The President, of course, gives short shrift to this consideration, arguing the federal government, not existing state insurance regulators, need to be involved in setting the mandate baseline.)
Obviously it's not just policyholders whom need to do their part in cost containment, but doctors as well, particularly in terms of testing. I remember a few years back having a high-deductible policy and between jobs. I had to dig out of my own savings some $1600 to cover medical tests that the doctor ordered. I was relieved of the fact the tests didn't show anything, but I couldn't help but feel he was writing a blank check on my back. Whether these tests were actually part of the defensive medicine problem, we need doctors to have a vested interest in minimizing the costs per patient. To a certain extent, Obama has targeted an approach we have already seen in the private sector, e.g., bundling services versus piecemeal/cost-plus arrangements.
We also have to realize that government is part of the problem, but not the solution. For instance, the number of Medicare and Medicaid patients continues to grow, mostly below cost. In essence, doctors and hospitals redistribute their costs back to their private-sector patients and/or their insurance companies.
Some of the cost trends are beyond anyone's control (despite Obama's state of denial). For example, we have an aging population, and age is correlated with expense.
But the big picture is being missed. When we add more policyholders and more medical exams, tests, etc., and the people count to accommodate them, we are adding costs to the system, not reaping the benefits
What's really irritating in this jack-of-all-enterprises, master-of-none federal government want to take over the sector (it already pays for 46% and counting), but it's not setting up real lockboxes for its entitlements; it's been perpetuating this Ponzi scheme where a large number of workers pay, not into a diversified pool of assets, directly to current beneficiaries plus Treasury IOU's to cover this Congress's overspending. (This Ponzi scheme is not sustainable as a large number of baby boomers crowd through Medicare's doors with long life expectancies.) It's not insurance; it doesn't have reserves to cover insurance losses. In fact, it's sitting on over $8T in public debt and another $4.5T in obligations to entitlement reserves. The private industry sector doesn't have that luxury. Have we learned nothing from AIG's underfunded reserves and the federal government's backing of GSE securities?
Obama's Attempts to Turn the Tables on Public Sector Health Care Criticisms
If you object to the government meglomaniac takeover and rationing of health care, Obama has news for you: you're a hypocrite for not attacking health insurance bureaucracies, which he claims also ration care. He then steps it up to the level of delusional: he tells people, with a straight face, that health insurance companies are maximizing profits because they have an unfettered ability to raise rates and are able to jettison unprofitable policyholders in a vicious circle. The public sector and/or non-profits aren't motivated by the unseemly element of profits and executive perks.
What you have is a President without a basic understanding of business and economics and a perverse analysis of health insurers. Let me first point out I've seen this line of progressive arguments before in a different context. One student in one of my MIS courses several years ago suggested that I had a sinister motive in maintaining comparably higher standards and expectations in terms of computer assignments and the like. He (or she) speculated that I was out to drive other students out of the class, to make it easier on myself--fewer assignments and papers to grade. The student was utterly clueless.
First, there are high fixed costs to running a course; sometimes you are able to economize if you are doing multiple sections of the same course, but I always had to teach multiple courses. Given the changing nature of IT, I tended to rotate textbooks in courses (which meant redoing class lecture notes) and did not reuse computer assignments and tests. Whether I had 20 or 35 students, I still had to prepare lecture notes, computer assignments, tests, etc.; the marginal costs (i.e., grading another test or assignment) were modest. I had no agenda to restrict the number of students or majors in my discipline; in fact, growing discipline enrollments provided additional resources and the opportunity to teach more elective courses. (For instance, I wanted to teach courses on human factors in information systems, which I finally got to do at ISU.)
Second, there were already ways to cut down my relative efforts in teaching activities without resorting to class attrition. For instance, it was my decision alone whether to require computer assignments and the nature or number of assignments. The same considerations also applied to exams, quizzes, etc. If my goal was to lower the number of student assignments to grade, I could simply cut down the number of class assignments.
Third, the allegation that my requirements were based on my personal convenience was simply not true; in fact, my standards were motivated by a sense of professionalism. The unspoken truth at the universities where I taught as a professor was that our programs were not competitive with other universities in the state and it was affecting demand for our graduating seniors with employers. For instance, at UTEP I had some program majors, graduating seniors, whom had never previously written a computer program from scratch. As a junior or visiting professor, I had limited influence. What I could control was what happened in my classes; I made a conscious effort to right-size my requirements (for instance, in many computer science freshman courses, up to a dozen assignments or more might be required; I was assigning at most a handful). Some of my colleagues did require computer programs, but in many cases they were little more than word processing exercises. So I got a reputation among some students for being "unrealistic". Politically, it would have been a lot easier for me to go with the flow.
Going back to Obama's superficial criticisms of the health insurance industry, Obama has made mention of insurance company documents speculating on how much the market can bear in terms of insurance premiums. Certainly at-risk policyholders whose health costs exceed the cost of insurance have a vested interest to pay premiums at any price. But Obama is ignoring what happens when lower-risk policyholders opt out of insurance, effectively self-insuring, paying for medical services a la carte (a traditional business model). For example, a young adult, struggling to get by in a fragile recovery, may only see a doctor once a year (if that). So he or she may think, why should I pay, say, $4000 a year, vs. $100-$200 for an annual check up? (Of course, cancer and other deadly diseases don't have age limits.) The residual $3800 isn't "pure profit"; it's used to help cover the cost of treating sick people (including young people). If and when the healthy young man opts out, the health insurer has to make up the $3800; typically it spreads the cost among the remaining policyholders. This can become a vicious circle as healthier people continue opting out of insurance. This is not a conspiracy for higher premiums; the health insurer knows if he raises rates, he'll lose some of his most profitable customers and find it difficult to replace them. Rather, rates reflect underlying inflationary cost components and a smaller, higher-cost base.
What Obama wants people to think is that these increases are needed to pay for higher and higher profits. In fact, the markups are fairly small, with overall margins in pennies on the dollar. A business is not a charity; it's not like the government, which can pay for its bills merely by printing money. It has to aim for a profit to remain in business. The profit target has other virtuous dimensions as well; unlike the government that has sticky high employment with tenured public servants, it has an inherent incentive to minimize costs and invest in new labor-saving technologies.
The scare tactics Obama is using are unconscionable. Equating health insurer bureaucracy with government bureaucracy simply doesn't wash. The fact is that most ill Americans receive treatment for cancer and other covered very expensive conditions in a true insurance model; we don't have the same kinds of waiting periods that we've seen reported in Canada and Great Britain, for instance. If we saw health insurers dropping legitimate cases of people developing devastating illnesses while covered in a cost-saving move, knowing that the policyholder's premiums are not covering the cost of their care, we would be having an entirely different conversation. We have NEVER seen the kind of rationing horror stories mentioned above in the United States; we don't see health insurers deferring tests and surgical treatment in an effort to save costs.
Political Cartoon
IBD cartoonist Michael Ramirez reminds us how the private sector (through technological change) has made an earlier public service obsolete and uncompetitive:
Quote of the Day
Do I contradict myself? Very well then I contradict myself, (I am large, I contain multitudes.)
Walt Whitman
Musical Interlude: Still More Days of the Week Songs
Jimmy Buffett, "Come Monday"
Elton John, "Saturday Night's Alright for Fighting"
Daniel Boone, "Beautiful Sunday"
Cat Stevens, "Another Saturday Night"
