Health care spending is $2.4 trillion and today accounts for one out of six dollars in the American economy. What separates health care from every other sector of the American economy is that there is little or no consumer control over the flow of health care dollars. In fact, consumers control only about 16 cents out of every dollar that is spent on health care. Employers, managed-care executives and government officials control the vast bulk of health care spending. So when you hear that health care is different from other goods and services in the economy, that’s an unpleasant fact, rooted in stupid and outdated government policies.
Government spending accounts for half of all health care spending, and the Obama administration and Democrats in Congress aim to make that large government share much bigger. This would be done through the expansion of government health programs, Medicaid and SCHIP, already underway through the stimulus and other legislation, as well as the health care reform program that Obama and congressional Democrats will unveil on Capitol Hill later this month. That will be the first time that Americans will get a chance to see the crucial details of health reform, and be able to get an understanding of how the various financing and delivery reforms will affect them.
Meanwhile, the giants of the health care industry — the trade associations representing doctors, hospitals, pharmaceutical and medical technology companies, as well as organized labor — are jockeying for position in the coming national health care debate. Joining with President Obama, the chiefs of the American Medical Association, the American Hospital Association, the Advanced Medical Technology Association, America’s Health Insurance Plans, as well as the Service Employees International Union, say that they will cooperate with the President in reducing health care spending by 1.5% annually, amounting to a $2 trillion reduction in health care spending over ten years. Sounds impressive.
Phony Savings Predictions
The health care chiefs say that they can achieve this ambitious goal by adopting a variety of now fashionable health care “delivery reforms”: administrative simplification and standardization of insurance, the adoption and widespread use of health care information technology, various “quality initiatives,” care coordination and disease management, “evidence based medicine,” new payment reforms, and downright good things like health care promotion, wellness and disease prevention.
Federal Control Not Inevitable
The savings that are supposed to emerge from the adoption of these initiatives are similar to the “delivery reform” savings the President is promoting. There is one little problem with all of this. There is no way to secure a reliable savings estimate of these kinds of initiatives unless one knows the measurable details of how these initiatives are to be implemented. Nobody yet knows any of this. Faster transactions through the adoption of information technology, for example, could end up as just another way to speed up inefficient transactions driven by the perverse incentives that pervade the health care sector of the economy. Concerning Obama’s vaunted health budget savings, the editors of the Washington Post on April 15, denounced them as “phony” and likely to cover only a “fraction” of the true cost of health care reform. Taxpayers take note: The true cost of the Obama reform is expected to be well in excess of $1 trillion over the next ten years.
Whatever one thinks of the specifics of the Obama health care agenda regarding such issues as the cost of health care, access to coverage, and the quality of care, there is one fact that is indisputable: It would centralize power and control in Washington over the financing and delivery of medical care for all Americans. This debate, at the end of the day, is about power and control. Those who do not understand that do not understand the current debate or its changing political dynamics. A new public health plan, like Medicare, now facing fiscal collapse by the way, would displace the private coverage of millions of Americans, and Washington would make key decisions over health insurance and its regulation, as well as health benefits and the ways in which care would be delivered and financed.
Perhaps the giants of the health care industry believe that federal control of the system is inevitable, and they are trying to strike an early deal with the Obama administration and liberals in Congress to limit whatever damage they think is inevitable. But nothing is inevitable, and they don’t represent the American people. Much depends upon how the American people will react to the details of the reform, and what exactly it means for them, their health plan, their relationship with their doctor, and their pocketbook.
Remember that the enactment of the Clinton health plan was considered by the Washington cognoscenti, including the high powered business types on K Street, inevitable in 1993. But the details, as former Senator Tom Daschle said, were fatal. Likewise all of the high-powered lobbyists in Washington backed the Medicare Catastrophic Act of 1988, but it was repealed one year later. The Washington establishment was wrong then, and vigilant and well-informed individuals and families, the ordinary taxpayers, can prove them wrong again.