The health care industry just flopped on the floor and exposed its belly to President Barack Obama in a craven gesture of submission.
Groups such as America’s Health Insurance Plans and the Pharmaceutical Research and Manufacturers of America — key players in defeating Hillary Care in 1994 — sent Obama a letter voluntarily offering to control costs. They can’t spell out with specificity how they’ll conjure up $2 trillion in savings during the next decade, but that’s beside the point. Less important than the (un)reality of the pledge is its symbolism.
Groups that could be expected to resist the further nationalization of health care are shouldering their way to the bargaining table in the hopes of protecting themselves from the worst of legislation they consider inevitable. For a president who made a cottage industry of hope during his campaign, Obama is benefiting from rank fear in his dealings with potentially recalcitrant business interests, from Chrysler’s secured creditors to the health care industry — get on board or get run over.
The letter allowed Obama to hail a “historic” coming together of former antagonists on health care in a White House event emphasizing the most salable part of his health care pitch — a reasonable-sounding commitment to reduce ruinous health care costs on families and business. The casual listener could be forgiven for thinking that Obama’s passion is for reducing spending, not increasing it, and for working with the private health care industry cooperatively rather than overregulating it or supplanting it.
The groups’ missive lends a superficial plausibility to the argument of proponents of Obama-style reform that covering more people is consistent with painlessly reducing costs. The argument goes that, in the current system, the costs of providing health care to the uninsured are shifted onto everyone else. Yes, but it’s a tiny effect. A study in the journal Health Affairs found that this phenomenon accounted for at most a 1.7 percent increase in insurance premiums. Nor does more preventive care or health information technology — a couple of Obama’s favorite talking points when touting cost reduction — produce miraculous, or any, savings, according to the Congressional Budget Office.
Massachusetts enacted a health care reform bill in 2006 that included an individual mandate to buy insurance, exactly on the theory that it would save money by ending cost shifting. Instead, costs have exploded. Public spending on health care has jumped 42 percent since 2006. At risk of becoming the Iceland of health care reform, the state is scrambling to avoid getting bankrupted by its cost-saving program.
Nationally, the most significant cost shifting is arguably the product of Medicare, which pays doctors and hospitals preset fees per procedure, and so encourages overuse of resources and prevents the emergence of meaningful prices in health care. The program overpays for some services, underpays for others and spreads gross inefficiency throughout the system. It is also a fiscal basket case, sporting an $86 trillion unfunded liability.
This is why it’s so perverse for Obama to suggest the creation of a “Medicare for all” program as salve to our health care system. This is sold as a “public option” that people can choose only if they want it. As a practical matter, government will stack the deck in favor of its option to the detriment of private insurance. Businesses will be happy to dump their employees into the public system. The health care policy firm The Lewin Group estimates that as many as 120 million people with private insurance now could end up in the public plan, depending on how it’s structured. Imagine a “reform” of the country’s mail-delivery system that drastically increased the market share of the U.S. Postal Service and nudged FedEx and UPS toward oblivion.
Aside from its initial $1.5 trillion price tag over 10 years, the Obama plan will inevitably mean exploding public costs — and higher taxes and/or rationing and price controls — once it’s been implemented on sugary, unrealizable promises. The imperative for Obama now is simply to find a way to make the medicine go down, and if industry is willing to help, all the better.
Rich Lowry is a syndicated
columnist. He can be reached
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