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Obama Reform Sidesteps Health Costs

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By Robert J. Samuelson
Monday, July 27, 2009

The most misused word in the health care debate is "reform." Everyone wants "reform," but what constitutes "reform" is another matter. If you listen to President Obama, his "reform" will satisfy almost everyone. It will insure the uninsured, control runaway health spending, subdue future budget deficits, preserve choice for patients and improve quality of care. These claims are self-serving exaggerations and political fantasies. They have destroyed what should be a serious national discussion of health care.

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The health-care conundrum involves a contradiction that the administration steadfastly obscures: In the short run -- meaning four to eight years -- government cannot both insure the uninsured and rein in health spending. Here's why. The notion that the uninsured get little or no care is a myth: They now receive about 50 to 70 percent as much health care as the insured. If they become insured, they would use more health care, possibly as much as today's insured. That would increase both government and private health spending, depending on how the insurance is provided.

Until health-care costs are better controlled, expanding insurance coverage will be expensive. The president talks endlessly about the need to limit spending and eliminate waste. These are worthy goals. But changing the way medical care is delivered and paid for would take years and involve disruptive and unpopular measures. Patient co-payments might increase; networks of doctors and hospitals might displace individual practices; the tax exclusion for employer-paid health insurance might be curbed. Obama downplays the obstacles. His "reform" isn't likely to compel needed changes, partly because it's not clear what will work.

Evaluations of proposals reflect this reality. The Congressional Budget Office judges that the legislation in the House would, through expanded Medicaid and subsidies for private insurance, reduce the uninsured from 46 million in 2007 to 17 million in 2019. But the cost would be $1 trillion over a decade; of that, $239 billion would add to the budget deficit. Worse, the costs would rise faster than the sources of financing, including a tax on the wealthy. In 2019, the projection's last year, the deficit would be $65 billion. Assuming that the deficit rises 4 percent a year, the cumulative shortfall in the second decade would total about $800 billion.

But Obama sees all blue sky. "Here's what reform will mean for you," he said at a recent rally. "It will mean lower costs and more choices and coverage you can count on. Health insurance reform will save you and your family money," he said. (Note: Except for subsidies, it's doubtful families will experience savings anytime soon.) And later: "We'll also change incentives so that our doctors and our nurses can finally start providing patients with the best care and not just the most expensive care. And if we do that, then reform . . . will lower our deficits in the long run."

Contrast Obama's reassuring rhetoric with this exchange at a congressional hearing between Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, and Douglas Elmendorf, head of the CBO.

Conrad: "From what you have seen from the product of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?"

Elmendorf: "No, Mr. Chairman. In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health care costs. . . . The (cost) curve is being raised."

Judged objectively, "reform" may do exactly the opposite of what Obama says. But because the president is so well-spoken, he has the ability to make misleading statements sound reasonable or sophisticated. Still, they're misleading.

The administration had to make choices; it could emphasize expanded insurance coverage ("access") or cost control, but not both. It chose coverage, embracing the long-standing liberal grail of "universal" insurance. Millions of Americans would receive more health care, though how much their health would improve is uncertain (the administration can't logically argue that much health care is wasteful and also that the uninsured will automatically benefit from more of it). Many with insurance would gain the peace of mind that they won't lose it.

But what helps many Americans as individuals may hurt society as a whole. That's the paradox. Unchecked health spending is depressing take-home pay, squeezing other government programs -- state and local programs as well as federal -- and driving up taxes and budget deficits. The president has said all of this; he simply isn't doing much about it. He offers the illusion of "reform" while perpetuating the status quo of four decades: expand benefits, talk about controlling costs. The press should put "reform" in quote marks, because this is one "reform" that might leave the country worse off.


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