Wednesday, June 17, 2009
When the Government Runs Health Insurance
President Obama’s announcement on Saturday that he was proposing an additional $313 billion in Medicare and Medicaid cuts over ten years — on top of the $309 billion in his 2010 budget — is noteworthy for a couple of reasons, despite the meager coverage it has gotten in most newspapers.
For starters, there’s the sheer hypocrisy of it all (see this and this). Recall that then-Senator Obama based his final push for the presidency in October 2008 largely on a coordinated attack on the health-care plan put forward by his Republican opponent, Sen. John McCain. Senator Obama told Americans that the McCain plan would be bad for the country because it would tax employer-paid health benefits “for the first time in history” and impose damaging Medicare cuts to partially pay for the costs of the tax credits McCain was offering.
Well, guess what?
President Obama is now all in for massive Medicare cuts, and he’s changed his tune on taxing health benefits too.
The Obama plan to cut Medicare’s reimbursement rates should be exhibit A in the case against ObamaCare. This is what governments do when they run health-insurance plans. They promise targeted “reforms” to root out waste and inefficiency, but what they actually deliver is indiscriminate, across-the-board price controls that do nothing to change the underlying cost structure of health-care. These cuts won’t “bend the cost-curve”; they will simply further widen the gap between public and private payment rates, thus shifting more of the costs to private premium payers.
President Obama and his aides have talked incessantly about how they want to even out regional disparities in spending that don’t produce better health outcomes. The emphasis should be on quality, not quantity. But their actual proposals make no such distinctions. The highest quality, lowest cost hospitals will get cut just as much as the highest cost, lowest quality hospitals. There’s no purchasing of “value.” It’s reimbursement cuts for everyone, no matter how well or badly they treat patients.
None of this should be surprising, though. The idea that the government could hire a bunch of analysts to run the U.S. health-care system from Washington with precise and painless efficiency was always a fiction. The only reliable and lasting way to drive greater efficiency in health-care is with cost-conscious consumers in a reformed marketplace. Absent that, the government will always resort to arbitrary cost-cutting to meet budget targets, with no distinction made between high-value and low-value care. And with price cuts come waiting lists and queues. Call it ObamaCare.