Yesterday, at his "health care summit" (is anyone else already tired of these dog & pony show White House meetings where hundreds gather to supposedly come up with solutions to intractable problems in ONE DAY?) President Obama said that rising health care costs were the biggest issue facing the American economy. Some verbatim quotes:
And today, there are those who say we should defer health care reform once again, that at a time of economic crisis, we simply can't afford to fix our health care system as well.
Well, let me be clear. The same soaring costs that are straining families' budgets are sinking our businesses and eating up our government's budget, too. Too many small businesses can't insure their employees. Major American corporations are struggling to compete with their foreign counterparts, and companies of all sizes are shipping their jobs overseas or shutting their doors for good.
Medicare costs are consuming our federal budget. I don't have to tell members of Congress this. Medicaid is overwhelming our state budgets. I don't need to tell governors and state legislatures that.
Medicare and Medicaid--two government programs--are busting state and federal budgets. The fix? More government health care programs.
That's why we cannot delay this discussion any longer. That's why today's forum is so important, because health care reform is no longer just a moral imperative, it's a fiscal imperative. If we want to create jobs and rebuild our economy and get our federal budget under control, then we have to address the crushing costs of health care this year in this administration.
Are rising health care costs really the most pressing economic issue facing most Americans? What about the plummeting stock market? Soaring umemployment rates? The crash in real estate values? Ballooning budget deficits? Or our nearly insolvent financial system?
Now Mr. Obama and other big government health care proponents would argue that health care costs are driving much of the economic pain that we're feeling today. But as Sally Pipes argues in today's WSJ, the facts (as reported by the Congressional Budget Office) simply don't support this claim:
Health care certainly plays a major role in the U.S. economy, and by almost any objective account a highly positive role. It employs 13 million Americans and accounts for one out of 10 jobs. But the assertion that the costs of providing health insurance cripples American corporations in the global economy is simply wrong.
CBO director Douglas W. Elmendorf explained this last week to the Senate Committee on Finance, which is chaired by Max Baucus, a leading proponent of government health care. The point is that for employers, health care is merely a part of total compensation: It reduces cash compensation for employees but it does not increase costs of employment. To argue otherwise is to argue for lower total U.S. compensation -- that is, lower wages for U.S. workers. Said Mr. Elmendorf, "the costs of providing health insurance to their workers are not a competitive disadvantage to U.S.-based firms."
Another common argument for more government insurance is that the uninsured shift costs to private payers when they avail themselves of the health-care safety net -- thus jacking up health-care premiums in the private sector. Many reform advocates make this claim, including Sen. Edward M. Kennedy (D., Mass.) and Sen. Baucus in an op-ed in this newspaper.
This is not the case. In the first place, a recent CBO report ("Key Issues in Analyzing Major Health Insurance Proposals, " December 2008) is clear on one issue: Working to achieve universal coverage through expanding government's role in health care will increase total costs and therefore either increase premiums or taxes, not reduce them. As for the argument that the uninsured shift costs, Mr. Elmendorf was quite direct dispelling this myth in his testimony before Mr. Baucus's committee. "Overall," he said, "the effect of uncompensated care on private-sector payment rates appears to be limited."
In fact, insofar as there is a cost shift, it derives from the government programs Medicare and Medicaid, which reimburse providers at rates roughly 20% to 40% lower than the private providers. This has been detailed by the widely used and quoted health consultant firm, the Lewin Group. But this is conveniently ignored by those who want to expand government health care.
Pipes goes on to note that according to the CBO, most of the growth in health care costs is due to advances in technology and treatments:
"Studies attribute the bulk of the cost of growth to the development of new treatments and other medical technologies," the CBO notes in a report issued last December, later adding, "Given the central role of medical technology in cost growth, reducing or slowing spending over the long term would probably require decreasing the pace of adopting new treatments and procedures or limiting the breadth of their application."
Which boils down to rationing care. Funny, Mr. Obama didn't happen to mention anything about that in his health care chat. Instead he talked about how his reforms will "lower costs for everyone, improve quality for everyone and expand coverage to all Americans." And create jobs, reduce the deficit, and cure cancer.
But there are a lot of people who are desperate. There's a lot of desperation out there. Today, I want them and the people like them across this country to know that I have not forgotten them -- we have not forgotten them. They are why we're here today -- to start delivering the change they demanded at the polls in November, that they have continued to demand since the election. And if we're successful, if we can pass comprehensive reform, these folks will see their costs come down. They'll get the car they need. And we'll help our businesses create jobs again so our economy can grow.
And a car? Who says we can't have it all?
I know that there is broad dissatisfaction with our current health care system. And that a lot of Americans have struggled because of it. Lord knows how many heart tugging personal stories we heard during the campaign about health care related problems.
But again, I question whether rising health care costs are really the primary economic concern facing most American families right now. It isn't for mine or for anyone I know. Like the whole "everyone knows someone who's losing their house" claim, I wonder if I'm the outlier.
In Pipes' piece she cites a December Gallop poll showing that by a 49%-41% margin, Americans favor maintaining the current model. The problem is that no one is going to turn out at a "health care community discussion" to say that they're okay with the way things work now. And no politician is going to call out a citizen from the crowd and say "Joining here today is Jane Smith. While she's got some complaints, she's generally happy with the way her health care plan works today."
I expect that a lot of Americans are going to be in for a rude surprise when they finally realize just what President Obama's ambitious health care reforms really will mean for them and their families. I also fear that by the time they do, it will be too late.
UPDATE: Charles Kratuhammer has an astute analysis of how President Obama has misdiagnosed what truly ails the economy.