Obama’s Downsizing
While Obama talks about creating jobs, job-killing bills are at the top of his agenda.


Henry Olsen

President Obama’s speech at the Brookings Institution last Tuesday indicated that he has grasped what everyone else already knew: Americans are more concerned about jobs and unemployment than anything else. What remains puzzling is why an administration that claims to be putting jobs first is still making job-killing bills the top items on its agenda.

This disconnect is starkly shown in the health-care bills before Congress. One can say many things about them, but any fair reading leads to the conclusion that the intended effect is to reduce employment in the health-care sector.

Take the “public option,” which remains in the House bill. Supporters say one reason we need a government-sponsored health-insurance plan is that the current competition among private insurers leads to excess administrative costs. Medicare, they note, has administrative costs of between 3 and 6 percent, while private insurers routinely spend 15 to 20 percent of their revenues on administrative services such as plan administration, marketing, and fraud investigation.

“Administrative costs” sounds quite bloodless and plain vanilla. Who could be against reducing wasteful administrative costs?

But behind every cost is a person. Every “excess” dollar spent on plan administration goes to someone who is judging claims and dealing with the paperwork. That person is likely to be female and without a college degree, the type of person that dominates the support staff in the medical profession.

A successful public option, then, means that many people currently holding administrative jobs at insurance companies and health-care providers will no longer be needed. In a time of 10 percent unemployment — with a further 7 percent of working-age Americans employed part-time because full-time work is unavailable or because they are so discouraged they are not even looking for work — this is an odd priority for the administration to pursue.

But the health-care bills are replete with provisions than can have no other purpose than to reduce medical employment on the notion that these jobs are wasteful.

One section of the bills provides that Medicare payments to doctors will be cut by over 20 percent. And if that provision is not retained, even the CBO’s own scoring would show that the bills would add hundreds of billions of dollars to the deficit over ten years.

It is axiomatic that if doctors get paid 20 percent less, they will try to maintain their own salaries by cutting expenses in their front offices. No business — and doctors’ practices are businesses — reacts to a cut in revenue by keeping expenses constant. The easiest place to find rapid cost reductions is among those employees — again, disproportionately female and without college degrees — you see in the front of any medical establishment.

The bills also contain provisions to discourage primary-care physicians from recommending specialists or prescribing tests. If these provisions work as intended, then clearly employment in these sectors will go down. If you’re an assistant in an oncologist’s office or a person who operates a CAT scanner or MRI machine, you should be worried if the health-care bills pass.

These sections are merely a few examples of how the proposed laws are designed to “bend the cost curve down.” This phrase has captured the imagination of health-care experts and commentators, and the administration’s proposals are increasingly being criticized for not doing more to reduce medical costs. Cost-curve warriors fervently believe that, at 16 percent of GDP, America’s spending on health care is too high, and that we must bring our spending down to levels seen in Canada and Europe — closer to 10 percent of GDP — if we are to have an efficient health-care system.