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September 16, 2008

Why Obama's Health Plan is a Disaster and Why His Flacks Need to Get Better Material

Brad DeLong and his wife have a piece in the Wall Street Journal today, "Why Obama's Health Plan is Better". It would more properly be titled "We Took the Healthcare Issues Page from Obama's Website and Condensed it Into an Op-Ed". It is misleading. It is incomplete. And, in fact, Obama's health plan is a disaster of liberal wishes strewn about with little regard for cost or consistency.

Big surprise. The three authors are Brad DeLong, still smarting from his involvement with the crashed-and-burned HillaryCare attempt; Ann Marie Marciarille, his wife; and David Cutler, an adviser to Obama's campaign.

Let's take a look.


I was going to skip the obvious start, "we're dooooooomed!" (paraphrasing), to get to the meat, but the dishonesty begins in the first paragraph with these folks, so:

The big threat to growth in the next decade is not oil or food prices, but the rising cost of health care. The doubling of health insurance premiums since 2000 makes employers choose between cutting benefits and hiring fewer workers.

Rising health costs push total employment costs up and wages and benefits down. The result is lost profits and lost wages, in addition to pointless risk, insecurity and a flood of personal bankruptcies.

This makes it seem like a goal of Obama's healthcare plan is to find ways to lower the burden on employers so that they do not have to cut benefits or hire fewer workers. In fact, Obama's proposal is not nearly so business-friendly. Rather than lower the burden on employers, he simply makes it less of a cost saver for them to cut benefits. Employers who do not make a "meaningful contribution to the cost of quality health coverage" for their employees will be required to fund the "Obama's Plan to Cover Uninsured Americans".

" Obama's Plan" is a new federal health insurance program (think Medicare and Medicaid on steroids) which is available to all Americans and which dubiously purports to achieve something that no health insurance company has ever achieved: guaranteed eligibility and yet low premiums, co-pays and deductibles; comprehensive benefits and yet low premiums, co-pays, and deductibles; quality and efficiency and yet low premiums, co-pays, and deductibles. How can he make such promises? Well, it's going to be paid for by the government, so the program doesn't actually have to be financially sound. Once this multi-billion dollar budget-sink is created, woe to the politician who tries to reform it.

Back to the Obama flacks:

Sen. Obama's proposal will modernize our current system of employer- and government-provided health care, keeping what works well, and making the investments now that will lead to a more efficient medical system. He does this in five ways:

- Learning. One-third of medical costs go for services at best ineffective and at worst harmful. Fifty billion dollars will jump-start the long-overdue information revolution in health care to identify the best providers, treatments and patient management strategies.

The very first thing on the wishlist is to spend money. You're going to find that almost all of Obama's proposals require the federal government to spend ever-increasing amounts of money. The "jump-start", which the writers say will "identify the best providers, treatments, and patient management strategies" is to pay health care providers to move to a standardized paperless system. That's it. Take your files, stick them in a database with a format set and approved by the government (no word on how long that will take to develop), and we will see magically lower costs...hopefully better than fifty billion dollars worth.

Incidentally, where did the writers get the $50 billion dollar figure? From Obama's website, which pledges "$10 billion a year over the next five years." Cute.

- Rewarding. Doctors and hospitals today are paid for performing procedures, not for helping patients. Insurers make money by dumping sick patients, not by keeping people healthy. Mr. Obama proposes to base Medicare and Medicaid reimbursements to hospitals and doctors on patient outcomes (lower cholesterol readings, made and kept follow-up appointments) in a coordinated effort to focus the entire payment system around better health, not just more care.

Repeat after me: insurers are bad guys, insurers are bad guys, insurers are the bad guys. Democrats make a habit of bad-mouthing industries which are involved in important, some would say vital, activities. "Big Pharma" and "Big Oil" have something in common with "Big Health." These industries are so important that (to the Democrat) we can only trust the government to run them. That's why they are repeatedly cast as evil corporate scum and punished for having the audacity to exist.

Obama isn't actually conditioning Medicare and Medicaid reimbursements on patient outcomes. Nor are the reimbursements going to be "based on" patient outcomes as the writers dishonestly, um, lie. Rather, under Obama's proposal, incentives will be awarded over and above the usual reimbursements for Medicare and the universal coverage plan I described above. Now, it's possible that by increasing incentives for doctors and hospitals, patient outcomes will improve. But I doubt it.

Consider: the three examples that the writers provide (lower cholesterol readings, made and kept follow-up appointments) are things that are almost entirely in the patients' hands. In fact, much of medical care, especially of the preventive kind (which we will get to in a minute) is almost entirely the patients' responsibility. Patients are already pretty motivated to increase their health. Paying theirdoctors more if they somehow bring about better health outcomes misses the mark.

One also has to wonder why--if they need more incentives--doctors, hospitals, and insurers don't just raise the prices of procedures... What's that you say? Obama and his followers want health care providers to charge less, but be paid more? Uh huh. Pardon the profanity, but these people are the dumbest fuckers who ever did live.

- Preventing. In today's health-care market, less than one dollar in 25 goes for prevention, even though preventive services -- regular screenings and healthy lifestyle information -- are among the most cost-effective medical services around. Guaranteeing access to preventive services will improve health and in many cases save money.

What exactly is being promised here? "Guaranteeing access to preventive services." I don't know what that means and it's not spelled out on Obama's website or in any of his speeches about healthcare. But the writers thought it sounded good and so did Obama. Where did they get the one in twenty-five dollars figure? Here's how it was phrased on Obama's website: "less than 4 cents of every health care dollar is spent on prevention and public health." Clever.

- Covering. Controlling long-run health-care costs requires removing the hidden expenses of the uninsured. The reforms described above will lower premiums by $2,500 for the typical family, allowing millions previously priced out of the market to afford insurance.

In addition, tax credits for those still unable to afford private coverage, and the option to buy in to the federal government's benefits system, will ensure that all individuals have access to an affordable, portable alternative at a price they can afford.

Where does the $2,500 number for the "typical family" come from? The well-regarded statistics and health journal, The 2008 Democratic Party Platform (PDF).

We know these savings are attainable: other countries have them today. We spend 40% more than other countries such as Canada and Switzeraland on health care -- nearly $1 trillion -- but our health outcomes are no better.

Health outcomes may be "no better" than other Western nations (it's an unsettled question given different ways of measuring national average lifespans and quality of life), but health procedures in the U.S. are far better than in other countries. We spend more on health care, not because we are forced to, but because we want to.

Many diagnostic procedures are very expensive and yet screen for very low probability risks. In other words, they are not always cost effective. But the peace of mind represented by an MRI, CT scan, or a colonoscopy make these procedures worthwhile for many patients. Most patients therefore expect and demand these procedures. Similarly, American medicine uses specialists like no other country in the world. This has also led to increased costs. It's a trade-off. Do you want to forgo consultation with an oncologist, or an ENT physician, or any of the other -ists? Hey, it's your life, pal.

Skipping a little, there's one last thing:

The immediate consequences of the McCain plan are even worse. The McCain plan is a big tax increase on employers and workers. With the economy in recession, that's the last thing America's businesses need.

First, two economics professors and a law professor should know that we aren't in a recession at least according to the actual definition of recession. Democrats are very interested in claiming our country is in a nosedive, facts be damned. It's shameful when the recession canard is repeated by Democratic politicians. But it's simply nefarious when it's coming out of the mouths of supposed-economists (not to mention embarrassing for their respective academic institutions).

Also, a bit of unsolicited advice for the writers: you really don't want to open this door. Obama vs. McCain on proposed tax increases for businesses is not a game that you can win as Fred Thompson most amusingly illustrated at the Republican convention. No one is falling for it.

More: Arnold Kling, economist extraodinaire and health policy expert catches DeLong in a flip-flop:

The authors' main point is that the Obama health policy is better than McCain's. They write,
Sen. McCain, who constantly repeats his no-new-taxes promise on the campaign trail, proposes a big tax hike as the solution to our health-care crisis. His plan would raise taxes on workers who receive health benefits, with the idea of encouraging their employers to drop coverage.

They are referring to a proposal to end the tax deduction for employer-provided health benefits and replace it with an individual deduction. At least one of the authors was for this idea before he was against it. In his often-cited utopian health care plan, DeLong wrote,

No deduction for employer-paid health expenses.

Perhaps DeLong's cowriters insisted on the change. More likely, DeLong simply goes with whatever his latest Messiah wants.

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posted by Gabriel Malor at 12:32 PM

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