On Thursday, after Senator McCain took President Obama to task for not keeping his campaign promises, the president lectured him. “John, we’re not campaigning any more. The election is over.”
McCain shot back, “I’m reminded of that every day.”
The bipartisan summit at the Blair House produced plenty of substantive disagreements, but was reasoned and respectful, despite the occasional sharp exchanges. A year ago, it might’ve been a useful prelude to real bipartisan discussions.
But it was a failure because President Obama and congressional Democrats signaled on Monday – well before Thursday’s summit – that they’ll likely try to push their legislation through Congress using a Senate budget maneuver known as “reconciliation,” without addressing any serious Republican objections.
That’s a pity, because the legislation remains deeply flawed, spending trillions in taxpayer dollars but doing little to contain costs or solve any of our fundamental health care problems.
Obamacare creates a new entitlement program that we can’t afford. Ostensibly, it does this by slashing reimbursement rates for physicians and hospitals, and then using the “savings” to subsidize insurance for low and middle class uninsured. The expectation is that if we just inflict more price controls on providers, the health care sector will suddenly become much more productive and health care prices will fall.
Price controls never seem to go out of favor, no matter how often they fail. Medicare started out paying physicians and hospitals directly for their costs and that didn’t work. Spending exploded. To try and rein in costs, Medicare shifted to a “diagnosis related group” (DRG) system – a type of price control -- that bundles payments for procedures (like a heart bypass operation). Hospitals learned to game that system by doing more, and more expensive, tests and procedures to make up for lower payments for some services. Spending exploded again.
Price controls don’t control spending, but they do affect access to care. Medicaid pays docs just a fraction of that offered by private insurance; about half of all physicians won’t see Medicaid patients because the payments are so low. Medicare pays more (about 80 cents on the dollar), but the number of doctors who don’t accept Medicare is rising. The Mayo Clinic, which the president which Obama holds up as an example of what he’s trying to achieve, recently declared that it’s no longer accepting Medicare patients at its Glendale, Arizona clinic. (In late December, Mayo reported that it lost $840 million treating Medicare patients in 2008 alone.)
What is the value of insurance if you can’t get access to physicians and hospitals? This will shortly become more than an academic question for the 15 million Americans that the legislation forces into the Medicaid program.
As access problems increase, policymakers will just throw more money at the problem – exploding the deficit and driving up taxes.
The insurance that Democrats will force individuals to buy under their legislation will also be very expensive – particularly for younger, healthier people, since community rating and guaranteed issue regulations will drive up prices. The president’s solution is to create a national insurance review board which will have the power to limit or deny premium increases, or force consumer rebates when rates are deemed – after the fact – too high.
Politics will result in enormous pressure for the review panel to meddle with insurer’s prices and profits. When profits are high, rebates will drain them out. When insurers lose money, regulators will likely let them bleed rather than risk a backlash from voters by approving premium increases. It is the kind of heads-I-win, tails-you-lose, regulation that will eventually strangle the industry and lead to single payer health care.
There were moments of real bipartisan agreement at the summit. Both Republicans and Democrats agreed that we needed to find a way to insure patients with preexisting conditions. Both sides agreed that insurance markets need more competition. The need to control fraud in Medicare and Medicaid got policymakers’ heads nodding in agreement.
In many ways, that was what made the summit so unfortunate. After a year of debating health policy, with the president having invested so much time and effort, we are no closer to really resolving many crucial issues. Even if Obamacare can make it to a Rose Garden signing ceremony, Democrats haven't proposed meaningful reforms. They’ve offered up the public policy equivalent of the placebo pill, and an expensive one at that.
Paul Howard is the Director of the Manhattan Institute's Center for Medical Progress and the Managing Editor of Medical Progress Today.
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Paul Howard is a Manhattan Institute senior fellow and director of the Manhattan Institute's Center for Medical Progress.