Health Care Cost Confusion

There are a couple of recent columns on the cost of health care. Paul Krugman, in a NYT op-ed yesterday, says the current proposals for legislation are going to reduce the cost of legislation wonderfully. Bloomberg, in an article today citing mostly the Congressional Budget Office, says the currently proposed legislation largely fails to offer hope for reduction in overall health care spending.

Supporters of reform are, of course, linking furiously to Paul Krugman and are treating Bloomberg like it had some sort of dread disease. They are quoting the CBO with great frequency, of course, but only the part where the CBO says low income people will pay less for health insurance, not the part where the CBO says that the reason for that is that the government will be picking up part of the tab and not because premiums decreased.

Let me say that I want us to provide for people who don’t have health insurance to have it, so I want legislation to pass, but this "bending the cost curve" nonsense continues to drive me up a wall.

Paul Krugman is not exactly noted for being critical of the Obama Administration, though he has been at times, so I take his cheerleading on progressive matters with a grain of salt, but I do respect his opinions. In this op-ed, though, he seems to have a little trouble differentiating between “health care costs” and “federal deficit,” and seems to believe that lowering the latter is, all by itself and automatically, going to lower the former.

Krugman does mention in his column that the legislation includes “efforts to improve incentives for cost-effective care, the use of medical research to guide doctors toward treatments that actually work, and more,” which he regards as “the first really serious attempt to control health care costs” that we’ve seen.

Except that the things he mentions are “suggestions” in the legislation, and when you “suggest” that a business conduct itself in a manner that reduces its profits you are not really being “serious” about controlling that business. The items in the legislation which require the insurance companies to pay for more medical services are mandates, so more medical services will be performed and no controls are placed on prices charged for those services.

Bloomberg, of course, quotes Republicans and is to that extent nonsensical, but it also relies on quotes from a former US Comptroller General and the CBO. It mentions that the legislation does nothing to move us away from the "fee for service" delivery model, which is a significant part of the reason for high costs.

It gives a turn to the Peter Orzag, White House Budget Director, but he falls prey to such ideas as the “raising taxes on insurance policies is going to lower health care costs” concept. The idea is that the tax will result in people no longer buying high-priced health insurance and, with cheaper plans, they will no longer get as sick. I know that if I’d had a lesser insurance policy I certainly would have called off that most recent damned stroke that I had.

Unlike the New York Times, which sort of obfuscated the CBO report with abstruse language, Bloomberg states it quite plainly,

Days later, a CBO study concluded that while Americans in the nongroup-insurance market -- the one most affected by the overhaul -- would see premiums rise, those increases would be largely offset by government subsidies.

And Bloomberg adds,

The CBO study doesn’t allay concern over rising medical spending, said Uwe Reinhardt, an economics professor at Princeton University, who backs the legislation. While the Senate bill lays the groundwork to slow spending growth, Congress would need to make many more tough decisions that could take years to have an impact, Reinhardt said.

“They are a bunch of gutless wonders,” he said. “They can’t cut any spending.”

The bottom line is all that Congress, and probably Obama, really want to do is get insurance extended to people who presently cannot afford insurance, but legislation which purported to do nothing other than that would be immensely unpopular with the public. It would be too expensive and affect too few people. It was, in fact, the original plan, but it met with a very cool response; too many people already “have insurance that they like” and simply weren’t willing to get involved with a health insurance movement.

Health care cost reform was added to lend momentum to the legislation, but it cannot actually be done without offending the corporate sponsors of the legislators themselves, and that is the source of all of the playacting and controversy. Congress needs to get something passed that looks like cost reform but is not actually cost reform.

Trust me, they will do precisely that.