Health Care Reform Costs

Via Greg Mankiw comes this quote from Michael Kinsley

But people, even liberals, are starting to get unnerved by the cost of all this. We now talk of trillions the way, even a few months ago, we spoke of billions. In mid-June, the Senate health committee put out its version of reform and was horrified when the Congressional Budget Office figured that it would cost a trillion dollars over 10 years (over current spending) and would still leave millions uninsured. The committee retreated to its lair and re-emerged in early July with a revised plan “scored” by the CBO as costing only $600 billion and leaving only 3 percent of the population uninsured. Six hundred billion doesn’t sound like all that much to achieve, or come close to achieving, an important and long-standing goal such as universal health care. But keep in mind that health-care reform is supposed to save money. Its premise is that the current path is unaffordable. In that sense, a “mere” $600 billion extra is total defeat.

We have spent or will spend $787 billion on the stimulus, President Obama’s budget is a bloated monster, TARP is $700 billion, and now we are looking to add $600 billion for health care reform. I am reminded about what Rahm Emanuel said they would do, “Not let a good crisis go to waste” and it appears they are not letting the crisis go to waste and are using it to expand the size, scope and power of government.

FILED UNDER: Bureaucracy, Economics and Business, Government, Health, US Politics, , , , , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. PD Shaw says:

    I’m reminded of another quote attributed to a famous Illinoisian, Everett Dirksen: “A billion here, a billion there, pretty soon, you’re talking real money.” Boy, how out of date that one is!

  2. odograph says:

    It’s interesting when people choose to say “over 10 years.” When it is a project with a start and end it might make sense. On the other hand, when something is ongoing, with pretty clearly per-year costs, why the grouping? Why choose ten years as a group?

    Seems designed to get to a trillion. Imagine how “over a century” would work! Though maybe ten trillion in a hundred years seems cheap again

  3. Steve,

    Weren’t you one of Obama’s supporters last year. Are you just now noticing the emperor has no clothes and that the taxpayers are going to be stuck with the tailor bill.

  4. Steve Plunk says:

    Like many I am not surprised by this new government overreach. The hope and change is mostly about hope the economy isn’t ruined soon. Like they say, when you need an aspirin don’t take the whole bottle. Obama and the Dems want radical change rather than gradual measured changed that can be controlled, monitored, and adjusted. The arrogance is astounding.

  5. Scott Welch says:

    Agreed with the comment about speaking in terms of a decade. If put in place, it would be here to stay.
    Unfortunately I do not believe that people can even fathom a trillion dollars.
    And, realistically, the only way to fund such an endeavor would be by implementing a LOT of specialized consumption taxes. (But, hey, maybe that is the way not to increase the income taxes on gold ole Main Street USA…)
    There are way too many holes in this legislation.

  6. odograph says:

    We’re facing a lot of similar “problems with large numbers” lately. I think a lot of it has to do with population growth. With 300M Americans and 6B world pop (perhaps those are outdated), pretty much anything that is population-total is going to bend our heads toward large numbers.

    The suggestion to always quote per household is one possible fix.

  7. Barry says:

    ” In mid-June, the Senate health committee put out its version of reform and was horrified when the Congressional Budget Office figured that it would cost a trillion dollars over 10 years (over current spending) and would still leave millions uninsured.”

    A) A trillion dollars over 10 years is $100 billion $/year. Using ten-year pile-ups is deliberately misleading, akin to treating buying a house as if you had to pay the full price up front.

    B) A good plan, which covered 90% of those currently uninsured, would still leave ~5 million uninsured. In a country of 300 million people, if 99% are covered, there are still ‘millions uninsured’.

    C) Mankiw is a serial bullsh*tter who had to turn the comments off on his column blog because peons on the internet punked him like the fraud that he is. I have not seen anything on which he is trustworthy.

  8. steve says:

    Do you worry more about how much you spend or what you get for what you spend?

    Steve

  9. Our Paul says:

    Said it before, but it has to be said again. As I understand our Health Care problems consists of the following five points:

    (1) We pay more per capita for health than any other OECD country.
    (2) We have worse health care outcomes by practically all measures than other OECD countries.
    (3) The rate of increase in health care costs on a per annum is greater than any other OECD country.
    (4) One out of six Americans have no health insurance, more than 35% of Americans are considered under insured.
    (5) Employer provided health insurance place many of our industries at a competitive disadvantage in comparison to other countries.

    Thus there are patient care issues and financial problems, all of which when projected into the future will get worse. It strikes me that to argue against potential solutions to the above problems without providing alternative approaches is the way ostriches solve threats.

    What we do know is that the American Health Care system is awash with money. It sloshes around the halls of congress, and fills the swimming pools of the executives of Insurance companies. And what we also know that lots of different people who contribute nothing to the actual delivery of health care are putting lots of that money into their own pockets. You are never going to decrease per capita health care costs, or change the rate of its increase unless you cut out those who are not contributing directly to health care.

    Arnold Relman, former Editor of the New England Journal of Medicine, examines this problem at the New York Review of Books. Too much of the academician in Arnold, so I will simplify. Go back to your first Biology class when you were introduced to the difference between saprophytic and parasitic organisms, and…

    Prior to this post brother Steve Verdon had a posting titled More Administrative Costs. In that post he quoted Ezra Klein and he urges us to read the whole article, which of course I did. If we examine this from Ezra’s post, we can immediately spot the difference between single pay and our current system:

    The hospitals and physicians who have to deal with these payers are spending tremendous sums of money too. Hospitals have billing departments. They employ people to argue over claims and navigate the rules of the dozen or so different insurance plans they contract with. And here the experts were unanimous: The problem is that the system is fractured.

    And thus the complexity of different insurance systems, each with different billing codes, each with various co-pay plans, and each and every one excluding different services, reign over the reimbursement system. It is estimated that your local doc and his staff devote between 30 to 35% of their time to billing function.

    I will digress for my spleen needs venting.

    In 1998 Barer and his colleagues published a seminal paper titled “Lies, Damned Lies, and Health Care Zombies: Discredited Ideas that Will Not Die”. The paper deserves a read, if for no other reason than the elegant and carefully crafted Discussion section. The abstract reads in part:

    The aging population story is, moreover, only one of a number of common misunderstandings, widely held and erroneous beliefs, about health care and its costs. The primary purpose of this paper is to explore the sources of this resilience. We will briefly review the current evidence on several ideas, but all of this is (or should be) well-known to the research community. We will then explore two important classes of reasons for the resilience of discredited ideas in health policy debates.

    The discredit ideas he termed Health Care Zombies, they are resilient for no matter how often you killed them with data, or information, they always come back.

    And let me tell you, the Zombies are on the march. Whether it be that in the US we pay more for drugs because we bear the brunt of R&D costs while European’s get a free ride, or how if we adopt a single payer, government sponsored system, health care will be rationed and the government will tell you what doc you can visit, the Zombies march on. My favorite Zombie, Canadians in mass crossing the boarder because of inadequate health care, actually made it into an Editorial in the Wall Street Journal.

    A special breed of Zombies is now on the loose. These guys are easily spotted. They argue that Medicare administrative costs are similar to those incurred by Private Insurance. And of course the over all cost to provide adequate Universal health care insurance is much too great. They are Aces at selective quotations. Read Michael Kinsley article in the Wa Po in its entirety it contains much of what I have said here, and in prior comments.

    Right on, not even a silver bullet or a stake through the heart will stop this breed of Zombies. In an insightful comment, Liza Minnelli said it all!

    R. Paul Miller, MD

  10. Steve Verdon says:

    YAJ,

    Weren’t you one of Obama’s supporters last year. Are you just now noticing the emperor has no clothes and that the taxpayers are going to be stuck with the tailor bill.

    What on Earth makes you write this?

    Our Paul,

    (5) Employer provided health insurance place many of our industries at a competitive disadvantage in comparison to other countries.

    Load of crap.

    (3) The rate of increase in health care costs on a per annum is greater than any other OECD country.

    True, but they are right behind us in heading for the same cliff’s edge.

    You seem to unware of this basic fact. The “solutions” being bandied about are not really “solutions”. Yes, easing up on the accelerator as you head for the cliff is a good idea, but we need to either turn the wheel or stop the car. Nobody is willing to do that. We need more competition not less. When ever and wher ever you see a lack of competition you see higher prices, less output.

    Whether it be that in the US we pay more for drugs because we bear the brunt of R&D costs while European’s get a free ride….

    I’d love to see your data on this. You claim that these things have been “slain” by data, but you got none. Zip. Zilch. Nada. Zero.