Blaming the Victim for Health Reform Difficulties
Peter Orszag and Barack Obama (White House photo)
Tyler Cowen’s weekend critique of the Obama administration’s health reform agenda is a bit odd. Basically, the administration is saying that while providing health insurance to the currently uninsured will cost money up front, that systematic reform has the potential to slow the rate of health care cost growth and reap large benefits. Importantly, this is the only way to prevent Medicare from bankrupting the entire country. Cowen’s critique of this is, in essence, that it will be very politically difficult to achieve the sort of cost controls Obama is talking about.
And indeed it will. But it seems strange to characterize this as a problem with Obama’s plan. What we have here is a Democratic president advocating for some tough reforms that will reduce public expenditures over the long run. Those reforms will be hard to implement. And one reason they’ll be hard to implement is that, as Ezra Klein notes, conservative politicians who ought to be the core constituency for endeavors to slow the growth of Medicare costs seem more interested in drawing blood from Obama than in slowing the growth of government. It seems to me that the most useful intervention from a right-of-center economist might be to try to build support in Congress for these politically difficult measures, not to attack the administration for putting unrealistic proposals on the table.
24 Responses to “Blaming the Victim for Health Reform Difficulties”
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June 15th, 2009 at 10:47 am
If the difficulties of controlling costs require full support, then do not ask for money up front, get right down to the task. It is hard to believe a cost savings that requires money up front.
June 15th, 2009 at 10:50 am
Why is your whole site italicized? Annoying….
June 15th, 2009 at 10:50 am
I blame the victim for the open italics tag.
June 15th, 2009 at 10:55 am
Open tag give this comment more emphasis than it deserves.
June 15th, 2009 at 11:01 am
I think we are doomed to spend somewhat more on health care than would be social optimal. Political reality dictates that we have to provide subsidies so that people can afford care. Since people aren’t paying the full price for their health care they will buy too much of it. The solution is probably fairly heavy and messy government intervention, but that’s just the way it is and we would all be better off if we come to terms with this.
June 15th, 2009 at 11:02 am
close tags
June 15th, 2009 at 11:02 am
Every once in a while you hear Obama mention that we already pay for the uninsured through medicaid, and through emergency room visits. But we also pay through the loss of productivity of those who get sick. Who actually wins in this? Do hospitals make money on serving those without insurance?
Also, on medicare, are doctors forced to accept medicare patients and thus the rates medicare pays, or do they do this freely?
June 15th, 2009 at 11:05 am
Health care reform is an open ended process, but getting everyone coverage is essential for anybody’s plan to ultimately control costs.
Any private payer (or even the Medicare program) who tries to propose prices to large health care provider is immediately hit with a bunch of imponderables about overhead and charity care and uninsureds and ER utilization — the whole system is so beset by distortions arising out of all kinds of cost shifting imperatives — by the government to private payers via hospitals and doctors, by hospitals to private payers via the uninsured, that, basically, we have no frigging clue what a break even price is or could be in an efficiently run facility. In other words, it will be very difficult to rationalize health care until it becomes obvious which health care systems and specialties (including ancillary providers) are inefficient or just trying to rob us blind through overestimation of the subsidies needed to do what they view as their mission.
June 15th, 2009 at 11:12 am
Regarding Medicare and Medicare rates:
For hospitals, any hospital that sees a Medicare patient must accept Medicare rates, full stop. It is a requirement of the program.
For doctors, there are essentially three buckets a doctor can choose:
1. Full participation — accepts Medicare rates completely and is paid by government directly.
2. Discretionary participation — accepts Medicare rates on a patient by patient basis, and gets paid directly for those patients for whom he accepts those rates, but, importantly, even if he doesn’t accept those rates, is still limited in what he can charge to something like 115% of the Medicare charge.
3. Opt-outs: Can see Medicare patients but MUST get a written understanding of beneficiary that beneficiary is completely responsible for paying and will not get Medicare coverage.
Just FYI, the Medicare system for compensating doctors is utterly and completely broken, and so grossly devalues primary care services that an increasing number of primary care physicians want nothing to do with Medicare. If that isn’t fixed, you can say sayonara to meaningful gains in access or cost control resulting from health care reform.
June 15th, 2009 at 11:14 am
P.S. No one is required to see Medicare patients. Hospitals more or less have to provide access to everyone, but doctors often can and do limit their practices. For instance, a doctor might refuse to take a “new” patient who is Medicare, but will continue to see existing patients once they become Medicare eligible. Some doctors limit the percentage of patients they are willing to see from public programs to protect their income and also, so as not to simply become the “dumping ground” from other doctors for patients they don’t want to see. These are all defensible so long as public programs underpay relative to private programs.
June 15th, 2009 at 11:32 am
It’s almost as if Republican politicians are more devoted to partisanship than to perpetuating their professed ideology… shocking I know…
June 15th, 2009 at 12:03 pm
Ponder the reality that Medicare costs are skyrocketing, despite the fact that cost shifting is already widespread, resulting in patients with private insurance being charged a lot more for identical procedures and technology than Medicare patients. Not to mention patients those few patients who pay without insurance being charged truly exorbinant amounts.
The Democratic Party, and then the Republican Party, has spent several decades training non-poor retirees to believe that the rationing of health care is mostly something that other people should endure. That has consequences. The people who make a point of saying that longer waiting times, in a place like Canada, is only for non-critical procedures (not entirely true, btw), miss the real point. Health care distribution and rationing is not a result of wonkery, but rather the result of electioneering. People who belong to the most sought-after electoral demographic, who have been trained to think that waiting times, even for non-critical procedures, are for other folks, are not really interested in hearing why they should support changes which will result in more rationing for the people in the most sought-after electoral demographic. They want what they want, and they damned sure intend to vote to get what they want.
This is, and has been for a long time, the largest impediment to fundamentally changing how health care is rationed in the United States.
June 15th, 2009 at 12:11 pm
I modified Cowen’s essay to substitute the other big government expenditure for Medicare. When looked at this way you can see that his argument has nothing to do with costs and everything to do with opposing more social spending – perfectly consistent with his libertarian views.
–
MILITARY expenditures threaten to crush the federal budget, yet the Obama administration is proposing that we start by spending more now so we can spend less later.
This runs the risk of becoming the new voodoo economics. If we canÂ’t realize significant savings in weapons costs now, donÂ’t expect savings in the future, either.
ItÂ’s not the profits of the military hardware companies or the overhead of the defense contractors that make American militarism so expensive, but the financial incentives for generals and the military services to recommend more programs, whether or not they are effective. So far, the American people have been unwilling to say no.
Drawing upon the ideas of the Harvard economist David Cutler, the Obama administration talks of empowering an independent board of experts to judge the comparative effectiveness of weapons expenditures; the goal is to limit or withdraw DOD support for ineffective ones. This idea is long overdue, and the critics who contend that it amounts to “rationing” or the government telling you which military programs you can have are missing the point. The motivating idea is the old conservative chestnut that not every private-sector expenditure deserves a government subsidy.
Nonetheless, this principle is radical in its implications and has met with resistance. In particular, Congress has not been willing to give up its power over what is perhaps the governmentÂ’s single most important program, nor should we expect such a surrender of power in the future. There is already a Defense Base Closure and Realignment Commission, but it isnÂ’t allowed to actually cut costs.
Scholars have been applying comparative-effectiveness research to Medicare for years, and the verdict is not altogether pretty. It turns out that some regions spend more on Medicare than others sometimes two or three times as much, as documented by the Dartmouth Atlas Project. Yet the higher-spending regions often fail to produce superior health care results.
If we are willing to take comparative-effectiveness studies seriously, we could make significant cuts in military costs right now. We could cut some reimbursement rates, limit coverage for some of the more speculative weapons, like some forms of anti-missile and space-based weapons, and place more limits on unnecessary legacy hardware.
Those cuts alone will not solve the fiscal problem, but if we arenÂ’t willing to take even limited steps to conserve resources, we shouldnÂ’t be spending any more money elsewhere.
Of course, we have not made such weapons spending cuts yet, and there are few signs that we will. A Gallup poll found that 44 percent of Americans believe that we spend to much on militarism and that only 22 percent believe that we spend too little. If the Obama administration covers more programs with government-supplied or government-subsidized contracts, the political support will broaden for generous benefits, their continuation and, indeed, expansion of current expenditures.
Suggested ways to lower costs include an emphasis on statesmanship, the use of electronic procurement records and increased competition among contractors. But even if these are likely to improve the quality of programs, they are speculative and uncertain as cost-saving measures. Keep in mind that while computers were remarkably powerful inventions, it took decades before they showed up in the statistics as having improved productivity in the workplace.
One idea embodied in a bill sponsored by absolutely no one is to finance new weapons programs by taxing the super wealthy. This makes sense in principle: why should capital gains be favored over salary by our tax system? But government-supplied procurement subsidies is a mainstay of the current military system, and there is no adequate replacement immediately in sight.
IT’S also hard to convince the American public that the solution to inefficient weapons systems is to tax the wealthy. And such a one-time tax increase would postpone but not eliminate the need to come to grips with ever-rising military costs.
It sounds harsh to suggest that the Obama administration cut areas of military spending, but, too often, increased expenditures and coverage are confused with good weapons systems. The reality is that our daily environment, our social status and our behavior including negotiation and foreign have more to do with good international relations than does military spending more narrowly defined.
The demand for international negotiations sounds like a moral imperative to take care of everybody, but in reality it would make only a marginal difference when it comes to the overall power of the American population. The sober reality is that international institutions is another way to spend money, which may or may not be a good idea.
The most likely possibility is that the government will spend more on militarism today, promise to realize savings tomorrow and never succeed in lowering costs. It is rare that governments successfully cut costs by first spending more money.
Mr. Obama has pledged to be a fiscally responsible president. This is the biggest chance so far to see whether he means it.
June 15th, 2009 at 12:15 pm
Will Allen, your hatred for those who are older than you, browner than you, and generally anyone who isn’t Will Fucking Allen doesn’t mean that the rest of us care about your idiotic demands that we spend money murdering people and denying others health care. You are a sociopath and are beyond the reach of rational argument.
June 15th, 2009 at 12:15 pm
It is hard to believe a cost savings that requires money up front.
Sure, if you’re retarded. Businesses spend money all the time doing this exact thing.
That’s the reason you see things like POS terminals and computers where 30 years ago you saw manually operated cash registers and paper slips.
June 15th, 2009 at 12:27 pm
robertdfeinman, your substitution ignores the political reality that defense spending has, in fact, fluctuated over many decades. The electoral impetus for constant growth in defense expenditures is not nearly as strong as it is for constant growth in expenditures on health care.
June 15th, 2009 at 12:40 pm
it is always a huge mistake to assume that others are being honest in their proclaimed positions.
‘Conservatives’ don’t give a shit about the size of government or how much spending goes on. They only give a shit if that money goes to blacks or poor people instead of the rich and powerful
June 15th, 2009 at 12:41 pm
And one reason they’ll be hard to implement is that, as Ezra Klein notes, conservative politicians who ought to be the core constituency for endeavors to slow the growth of Medicare costs seem more interested in drawing blood from Obama than in slowing the growth of government. It seems to me that the most useful intervention from a right-of-center economist might be to try to build support in Congress for these politically difficult measures, not to attack the administration for putting unrealistic proposals on the table.
Gee, when Obama repudiates the entire Democratic Party’s matra of the 1990s – that Republicans were attacking granny by trying to cut Medicare costs – then Republicans will play along.
Until then… too bad. Republicans learned in the 1990s that Medicare was simply something which which to bash your opponents politically. Nothing more, nothing less. If Obama wants political cooperation, he needs to repudiate that Democratic mentality.
June 15th, 2009 at 12:59 pm
We’re going to screw the country unless our political opponents stop saying mean things.
Wow, there’s some COUNTRY FIRST for you!
June 15th, 2009 at 1:09 pm
I love it when my Republican neighbors rail on about Medicare … and then become old enough to be IN the program. Seems like they don’t have much to say about it after that … which is exactly what the rest of us need. Pay $300 a month to Blue Cross, or that same $300 a month to Medicare for Everyone? I’ll choose the latter every time! At least Medicare will let my DOCTOR prescribe all my treatment, not the Blue Cross bureaucrats! Now; if they’d just do away with that abortion called “Part D” and get some REAL drug benefits (AKA bargaining power against Big Pharma) into the mix …. [sigh]
June 15th, 2009 at 1:16 pm
joe, the people who “screwed the country” were the people who developed the political dynamic which brought about the current state of affairs. LBJ is dead, of course. The irony is that many of the developers of Medicare saw it as a firat step in getting to their ultimate goal of such a system for everyone. They didn’t expect Medicare to become the largest obstacle in reaching that goal. Unintended consequences are a bitch, aren’t they?
The largest proof that Gingrich was entirely overrated as a political operator was that he went out on the Medicare limb without first insisting that he be handcuffed to Clinton, Daschle and Gephardt. It was entirely predictable, like it is now, that anybody out on that limb alone will have it sawn off.
June 15th, 2009 at 1:20 pm
Cal is probably among those who believe that the private capital channeled into pharmaceutical companies doesn’t do anything but purchase Viagra ads during NFL broadcasts.
June 15th, 2009 at 3:55 pm
[...] Matt Yglesias responds to Cowen [...]
June 15th, 2009 at 6:36 pm
Re: Since people aren’t paying the full price for their health care they will buy too much of it.
Not this idiocy again! Aside from a trivial number of hypochondriacs people do not purchase healthcare the way they purchase food or clothing or toys. Healthcare is not a “good”, but rather a “bad”. Most people prefer to purchase none at all (regardless of their insurance coverage), and they only do so when compelled by circumstnaces. And yet, there is overspending on healthcare– but not due to the consummer. It is due rather to the providers– because they are the ones who make these decisions. Once you decide to go to a doctor you pretty much give up your autonomy in the matter and you do what he tells you. In fact, you may not even be aware of some of the stuff being done until you get a bill or an EOB for it*. And often enough you are not asked to give your assent to all such items. If you want to cut back on excess healthcare spending then squeeze the providers, not the patients, because the providers make most of the spending decisions.
* Example. I once went to an ER because I had a high fever and severe chest congestion, so I feared I had pneumonia, and since it was a Sunday the ER was my only choice. Two months later I got a bill for 200$ for “lab work”. Now I could not recall so as a drop of blood being drawn, nor anything of that sort, so I called to remonstrate, certain that there had been a mistake (or maybe deliberate fraud). But I was told that the 200$ was for the services of the respiratory technician who came in to take my pulse and listen to my breathing. Nobody asked me if I wanted that service, or identified it as something that would be billed separately– that’s how overspending on healthcare happens with the patient unable to assenr or refuse.