At Least We're All Learning About Health Care Costs


July 24, 2009|By Jay Hancock | Jay Hancock,

Herbert Stein, a White House economic adviser in the 1970s, liked to say that if something cannot go on forever, it will stop.

The country might have reached its Herb Stein moment in regard to health care. No, the spiraling growth in medical spending shows no sign of slowing, let alone stopping. But the wrangling over President Barack Obama's plan to extend health coverage is having the salutary effect of educating America about Stein's law.

The moon is not made of cheese. There is no pot of gold over the rainbow. Medical spending, which already hoovers up one dollar of every six that we make, cannot keep growing until everybody has a personal doctor who works for nobody else.

Prediction: Obama's proposal will end up as some kind of law by the end of the year. But no, it won't eliminate wasteful care. It won't extend coverage to everybody. It will increase the budget deficit. That said, it has a fighting chance of improving the status quo, which suggests just how bad the status quo is.

But even if the legislation crashes and produces nothing more than a teachable moment about resources, scarcity and the impossibility of getting everything you wish for, it will have done some good. Thursday's decision by Democratic leaders to delay a final vote on health care until the fall reflects how much is at stake and how botched the process has been so far.

"So let me be clear: If we do not control these costs, we will not be able to control our deficit," Obama said at his Wednesday night news conference. "If we do not reform health care, your premiums and out-of-pocket costs will continue to skyrocket."

But before this week, he let the House of Representatives advance a bill with virtually no cost-control measures. The promises from the drug and hospital industries to cut billions in costs are meaningless without some sort of federal monitor - and I don't mean Congress - to make sure it happens.

Nor do Obama and Congress want to tax health-insurance benefits, which are now exempt. Taxing medical plans would not only accomplish the critical task of raising revenue to pay for expanded coverage; it would encourage cost control by removing a subsidy that disguises the true relative expense of health care.

Likewise, the plans so far contain no statutory limit that would cut off spending if growth got wild. They don't put enough emphasis on wellness and prevention, either. And there is no "public" plan that would compete with private insurers and give a new job to the Woodlawn-based Centers for Medicare and Medicaid Services.

Finally, this week Obama got Congress to agree to an expert panel that would draw guidelines on what kind of spending is medically justified and what's wasteful. That's a critical addition, but it may not be enough.

It's interesting to wonder how Obama would have treated a bill delivered exactly as the House first cobbled it. Based on his speechifying, it would have screamed out for a veto. The Blue Dog Democrats and the Congressional Budget Office, who understand Stein's law, will be largely responsible for any cost control contained in the final measure.

"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," CBO chief Douglas Elmendorf told Congress this month.

In his news conference, Obama endorsed the House's tax on the well-off to help pay for expanded coverage. The proposed tax is breathtaking in its size and its aim at a small minority. If you include all federal, state and local income taxes, the top health surtax of 5.4 percent would compel Marylanders in upper brackets to surrender more than 55 percent of each extra dollar they earn.

(The surtax kicks in at lower percentages on income over $350,000 for couples and maxes out at couples' incomes over $1 million.)

That's not going to stand. If America wants health coverage for all, America as a whole will have to pay for it, not just the rich.

Which brings us to the question Obama and everybody else is asking: What's in this for me? What's in it for you is not exactly what the president would have you believe.

Access to certain kinds of care and procedures will continue to become more difficult. It's easy for Obama to say we'll stop paying only for care that doesn't make us better. It's much harder to identify which care that is. It's even more difficult to convince patients they don't have a right to it even when it's scientifically shown to be cost-ineffective.

Your out-of-pocket medical costs will keep rising. The dirty little secret of the health legislation is that whatever plan is passed will require coverage for only 65 percent or 70 percent of the total costs. Sure, that'll vary depending on your income. But the basic idea is that the plan is not a free lunch. Or a free diabetes treatment.

But you knew that. Families already understand that medical costs have taken over so much of the household budget that in some cases they threaten to crowd out necessities, like food.

Why should the federal budget be any different? Obama is right about one thing: Health costs can't and won't keep growing at this rate. (They've doubled again in the past decade.) If the government can't stop them, there are forces out there that eventually will: the laws of economics and Herb Stein.

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