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NRO’s health-care blog.

The Loneliest Voice in the Wilderness: The Council of Economic Advisers



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Adrift amongst hostile forces, including the Congressional Budget Office (CBO) and the Chief Actuary of the Centers for Medicare & Medicaid Services (CMS), the President’s Council of Economic Advisers (CEA) continues to desperately insist that the so-called health reform will reduce the rate of growth of health spending.

Yesterday’s report trucks out, yet again, claims which few find credible anymore. There’s the ever-present argument that the government can shave off some dollars by focusing on “waste, fraud, and abuse.” Okay: What’s stopping them from doing that right now?

Health-information technology comes in for a boost, even though recent analysis concludes that computerization in hospitals in the real world has not resulted in increased administrative efficiency or lower costs. (And this is from the Physicians for A National Health Plan, which advocates for government monopoly control over access to medical services!) A non-partisan real-world analysis, published in 2006, reviewed 257 scholarly articles concerning the effect of health IT. It found that investments in health IT resulted in improved quality of care in four academic medical centers! And that’s in the entire English-speaking world, not just the U.S.

The CEA shamelessly traffics the myth that “prevention” (vaguely defined) will reduce health spending, whereas the evidence is solidly to the contrary. It also concludes that the “reform” will increase employment (by a relatively few 320,000 additional jobs) whereas other credible analysis concludes that millions will lose their jobs due to this growth in government.

The CEA report also attacks the CBO’s credibility, relying on an op-ed by Prof. Jon Gabel, who has previously announced that the CBO “has underestimated savings and overestimated costs from health policy changes.” Over the almost half-century history of federal health-care entitlements, Professor Gabel was able to identify precisely three cases where the CBO “underestimated savings and overestimated costs.” (His third example is the Medicare Part D Prescription Drug Benefit, which could hardly have “saved” any money, because it was a brand-new entitlement!)

Even more shockingly, the CEA disingenuously asserts that the CMS’ Chief Actuary has blessed the Senate bill with a finding that it extends the solvency of the Medicare hospital trust fund by nine years. In fact, the Chief Actuary makes very clear that the “estimated savings . . . may be unrealistic” because they are based on crudely cutting payments to providers, which might “end their participation in the program (possibly jeopardizing access to care for beneficiaries)” (pp. 8-9).

However, the strangest conclusion of all is that if the “reform” reduces the rate of growth of health spending, GDP will be 4 percent higher in 2030 than otherwise. This flips causation on its head: Most health-policy types surely believe that higher GDP per capita drives higher health spending (because richer people demand more medical care), not that lower health spending will increase GDP. I doubt that anyone has observed such a relationship in any country. Indeed, America’s extremely high productivity is likely the most significant reason for its high health spending.

This is not “Organizing for America,” MoveOn.org, or even the Democratic National Committee, but the President’s Council of Economic Advisors pushing out raw propaganda. The majority’s push for health “reform” is truly desperate.



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