Thursday’s (10/08/09) much heralded CBO report telling us that the Senate Finance Committee health care reform bill will cut the federal deficit by $81 billion over the next ten years is a diversion at best and accounting fiction at worst. Any way you slice it, this health reform bill is going to cost you more.
First of all, any second year accounting student could drive a homecoming float through the loopholes in the CBO’s numbers. Just one example: the analysis includes ten years of increased government taxes and fees, but only six years of health reform expenses. It also assumes that Medicare will cut Medicare doctor fees by a whopping 25% in 2011 and then make below-inflation-rate adjustments after that. The reality is that the Congress has scheduled cuts every year since 2003 but has cancelled them all at the last minute in the face of massive physician lobbying. But what if this time is different and these cuts actually do go through? If past is prologue, then doctors will simply intensify what many have already done in the face of Medicare’s increasingly punitive reimbursement rates:
- Stop accepting new Medicare patients.
- Increase the number of chargeable services, such as requiring pricey office visits instead of free phone calls for prescription refills.
- Increase their fees to the rest of us to make up the difference.
The net result is that Medicare still won’t save any money while the rest of us will have to pay more for our private insurance.
Then there is the proposed $201 billion tax on so-called Cadillac health plans (presumably named after the General Motors product because, once the tax is passed on expensive health plans, nobody will want to buy them either). This is intended as a rifle shot at excessive perks for highly-paid executives, but is actually a shotgun blast that will target union workers with rich negotiated benefits, the middle class in high-cost medical areas, and eventually everybody everywhere as medical inflation continues to outstrip the CPI. So if health care costs are too high now, we’re supposed to make them cheaper by taxing them? Somewhere, George Orwell is laughing his ephemeral head off.
But wait, there’s more. The Baucus bill contains a raft of revenue hits, taxes, fees, and mandated payments imposed on health insurance companies ($67 billion), drug companies ($23 billion), medical device makers ($40 billion), hospitals ($45 billion), employers ($2 billion), the states ($33 billion), along with miscellaneous reductions in payments and subsidies for other providers and Medicare beneficiaries ($22 billion) —all of which will increase the cost of health care in the private sector, further burdening our only engine of economic growth and job creation. Thus, while all this may indeed reduce the federal deficit, it does nothing to decrease total national health care costs—it’s just parasitic government cost shifting on a massive scale. And the CBO estimates there will still be 17 million uninsured Americans after the smoke clears on the Baucus legislation.
I must add that the $33 billion in increased state expenditures to pay for federally-mandated Medicaid increases will not apply to Nevada, which will be fully funded by the federal government. By amazing coincidence, Nevada is also the home of Senate Majority Leader Harry Reid. Go figure.
The CBO report is nothing more than window dressing on a reform process that utterly ignores the real driver of uncontrolled medical inflation—the lack of market discipline that could be driving medical costs down and quality up, as market dynamics have done in every other sector of our consumer economy. The Baucus bill is yet another example of the government’s long-held focus on treating the symptoms of our national health care disease rather than its cause. While the good Senator’s bill might temporarily help some people—maybe a lot of people—it will do nothing to prevent the looming train wreck for our national health care system.
There is no doubt that we need effective health reform, but it has to enable dynamic market solutions, not more rigid bureaucracies. The reality is that everyone—providers, employers, and consumers—will always game any economic system to their own benefit. Bureaucracies are inherently incapable of coping with this. Constantly changing markets thrive because of it.