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Leading with Health-Care Costs


There has been something very odd about the logic of the Democrats’ case on health-care reform the past few months. Rather than focus on access and the uninsured, as they have usually done and as Obama did during the campaign, they’re talking about their massive expansion of the government’s role in American health insurance as a way to save money, and focusing a lot of attention on the (unquestionably pressing) need to control health care costs. The trouble is, they don’t actually have any plan to control health-care costs.

The White House Council of Economic Advisers released a report this morning that offers a good example of this peculiar approach. It’s basically a 50-page explanation of how wonderful it would be if we could reduce the rate of growth of health-care spending. It’s called “The Economic Case for Health Care Reform,” and it makes a strong case. But it’s not a case for Obama-style health-care reform. In fact, the examples it offers of the causes of rising health-care costs are mostly examples of government-driven inefficiency, especially in Medicare, which hardly argues for a government run insurance “option.”

The report talks a good bit about cutting the rate of growth of health-care costs by 1.5 percent (not 1.5 percent per year, as the Obama White House originally claimed to have gotten the doctor and hospital groups to “commit” to), but as the Washington Post puts it:

The report contains few details about how those ambitious goals would be achieved, however, and does not address any increased federal spending needed to implement health reform. And the White House economists acknowledge that shaving 1.5 percentage points off the rate of growth in health spending would be extraordinarily difficult.

It would be especially difficult if you put the federal government in charge of doing it. As we have seen with Medicare for decades, a program that can be constantly “fine-tuned” by HHS and the Congress in response to the various pressures they face is not likely to be a model of efficiency and effectiveness. And without competitive pressures to bring down costs, the only real way to do so is by rationing care, which will likely be too unpopular in practice for politicians to really stomach.

Most bizarre of all, the administration talks about all this as a way to bring the broader entitlement problem under control. How exactly? The notion that entitlement costs will be brought under control by the creation of a vast new entitlement just doesn’t add up. Yet somehow the Democrats are the ones pushing the cost argument.


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