Politics & Policy

Medicaid and Medicare for All

How Obama would ration health care for all Americans.

National-health-insurance schemes always start by promising health care for everyone. But they always end up establishing powerful bureaucracies whose purpose is to deny people health care through rationing. That is because in a government-run health system, centralized rationing is the only way to control costs.

Enough is known about the details of the health-care bills taking shape in Congress, with Obama’s support, to give a clear picture of how the president’s national-health-care system would work. Indeed, a revealing report from Obama’s Council of Economic Advisors (CEA), The Economic Case for Health Care Reform, which Obama has touted as showing how he would reduce costs, specifies in detail how thoroughly the new system would be government-run and how it would ration health care for all Americans.

We can start by looking at the mega health-care programs already run by government, Medicaid and Medicare. Medicaid has long severely underpaid doctors and hospitals for the care they provide under the program. As a result, 40 percent of doctors and hospitals will no longer accept Medicaid patients. This restricts access to health care for the poor, as they have to scramble for short and hurried appointments with available doctors, or wait for available hospital care. The result is worse health outcomes for the poor, including more and earlier deaths from heart disease and cancer.

#ad#Medicare is headed in the same direction, with lower and lower payments to doctors and hospitals. Doctors are already dropping out of Medicare, and government bureaucrats are already restricting what drugs doctors can prescribe under the program. Average face time with a doctor for a Medicare appointment is now down to a mere 13 minutes. Payments to doctors and hospitals are scheduled to be reduced again next year, by more than 20 percent, which would greatly worsen the problem.

Any new “public option” government health-insurance program of the type Obama vigorously supports would undoubtedly follow these same policies of sharply restricted payments to doctors and hospitals. This is exactly how Obama would follow through on his promises to reduce health-care costs through his reforms. That would result in cost-shifting to patients with private insurance, as has already occurred because of Medicaid and Medicare underpayments, raising private premiums even more sharply.

Obama has said over and over that if you like your current health insurance, you can keep it under his plan. But in the case of employer-provided insurance, it won’t be your choice. It will be up to your employer, who will likely choose to dump you into the public plan, which will cost less because of the restricted doctor and hospital payments — not to mention possible taxpayer subsidies — while private premiums soar because of the cost-shifting. Indeed, even those paying for their insurance themselves may be seduced into the public system because of the savings resulting from its greater power to stiff doctors and hospitals. Private insurers may well adopt the same compensation policies as the government in order to survive. Consequently, doctors, hospitals, and other health-care providers will see themselves subject across the board to the same restricted compensation they receive from Medicaid and Medicare today.

This reduced compensation in turn is going to reduce the supply of health-care services. In this environment, investors are not going to pony up the funds for health clinics and hospitals; new ones will not be built, and existing ones will just deteriorate over time. Investors will not be interested in funding the development and adoption of high-tech medical equipment like MRIs and CAT scans, or the development of biotech or genetic therapies. Drug companies will sharply cut back on investment in the development of new, cutting-edge miracle drugs.

Along with financial capital, human capital will flee health care. Experienced doctors will retire early and seek more remunerative post-retirement employment. Young talent will seek other, more promising professions. Some clinics and hospitals will just go out of business. It is not by accident that Great Britain’s socialized health-care system has such a high proportion of doctors coming from developing countries like India and Pakistan.

#page#All of this is why patients under national health plans end up on long waiting lists to see their own doctor or a specialist, or for access to diagnostic equipment, or for hospital space for surgery. This is why socialized-medicine systems end up with deteriorated, outdated facilities. This is how Canada got to the point where a hospital room could not be found in British Columbia for a mother experiencing accelerating birth contractions; she had to be flown over the Rockies to the next province, Alberta, in the midst of giving birth.

In other words, a reduced supply of health care in response to reduced compensation means rationing. Indeed, former Senate Majority Leader Tom Daschle, whom Obama originally picked as Health and Human Services secretary because he liked Daschle’s policies, explains the new rationing system in great detail in his book Critical: What We Can Do about the Health-Care Crisis. In that book, Daschle expressly advocates the severe rationing of the British socialized-medicine plan as the model for America.

#ad#The CEA report says 30 percent of American health care is waste, which will be eliminated under Obama’s health reforms. What is the difference between waste and health care you want? Answer: a government bureaucrat.

The CEA explains exactly how this is going to work. Under Obama’s health reforms, the government is going to sharply reduce health costs by

Looking systematically at what works and what doesn’t in order to provide more high-value care and less care that is of low value. For many types of medical conditions, a patient may have a choice of several methods or treatments, each having different benefits or risks. Systematic examinations of the merits of different treatments and dissemination of the results of these examinations to patients and providers is one mechanism for promoting high value care.

In other words, it will no longer be you and your doctor who decide what health care works and what doesn’t, and what is high-value care and low-value care. It will be a centralized bureaucracy in Washington. Of course, this bureaucracy will not even know you or your medical condition the way your doctor does. But like all good socialist central planners, the CEA and Obama effectively assume that the government is omniscient.

The CEA also explains how the government will enforce these decisions:

Reorienting the financial incentives of providers toward value rather than volume. Payment systems . . . should reward providers who deliver care that adheres to evidence based guidelines and should not pay for preventable medical errors.

This is supposed to solve a problem identified earlier in the report as

Provider incentives. Most provider payment systems are fee-for-service, which creates financial incentives for doctors and hospitals to focus on the volume of services that they deliver rather than the quality, cost, or efficiency of care delivery. In general, payment systems do not reward higher quality and value.

In other words, the government will enforce its decisions as to what works and what doesn’t through the payment system for doctors and hospitals. Those who follow the government’s decisions get paid well, and those who don’t don’t. They will be lucky to get paid at all.

But a remote, centralized government bureaucracy in Washington doesn’t, can’t, and won’t know what works and what doesn’t for every individual in the country; what are the right prices for each that will provide exactly the right incentives to eliminate precisely and only the 30 percent of health care spending that is waste; and what exactly is waste, rather than the health-care services you need and want. And this is all before politics gets involved, and the bureaucrats start answering the phone calls from congressmen who want an explanation as to the pitiful payments the government is providing to such-and-such doctors and hospitals in their districts.

Nevertheless, despite the government’s severe lack of knowledge, those doctors and hospitals that don’t follow the government’s decisions will get formally labeled as “lower quality,” losing out to those who win high-quality labels by slavishly following the government’s health-care diktats. This is found in another CEA cost-control measure:

Expanding performance measurement and provider feedbacks. Performance measurement includes collecting and summarizing information about clinical quality, consumer satisfaction, and resource use of provider practices. . . . One potential way to increase efficiency is to facilitate the development of a set of performance measures that all providers would adopt and report. . . . Additionally, new efforts could be made to generate risk-adjusted provider performance profiles to encourage quality improvement and to inform consumer decision-making around quality. [Emphasis added.]

#page#The omniscient central health-care bureaucracy, of course, will know exactly how to measure the performance of every doctor and every hospital in the country for every health-care service. And there won’t be any politics in this, either.

But the CEA has still more bright cost-control ideas:

Rewarding high-value technology creation that reduces morbidity, mortality, and total spending over the lifetime. In most fields, technological progress is generally cost-reducing as individuals discover more effective ways of accomplishing things that were already being done. In medicine, however, technological progress in recent decades has been almost exclusively cost-increasing, without generating a commensurate increase in value. Undoubtedly, provider incentives, which largely reward finding an expensive way of treating a previously untreated condition rather than finding a less costly alternative to an existing treatment, contribute to this trend.

#ad#This is meant to address a problem earlier identified in the report as:

Providers also have strong financial incentives to compete on the basis of technology adoption rather than price, leading to an excess supply of high technology equipment and services (for example, MRI machines and minimally invasive vascular diagnostic and procedure suites) and accelerated replacement of hospital beds in local markets. In turn, this can lead to higher rates of utilization and costs.

Obama’s budget czar, Peter Orszag, spills the beans even more obviously in saying, “Future increases in spending could be moderated if costly new medical services were adopted more selectively in the future than they have been in the past, and if the diffusion of existing costly services was slowed.” In other words, the government is going to reduce costs by delaying implementation of technological innovations, discouraging investment in the development of new technology, and leaving patients suffering as they wait for the latest diagnostics and treatment. This will only further discourage investment in the development and adoption of new, advanced medical technologies and drugs, as discussed above.

Implementing all of these cost-control measures will involve the government’s controlling our health care in great detail. Remote government bureaucrats, rather than you and your doctor, will be deciding what health care you will get and when. They will be deciding what health-care advances will be adopted and when. All of this involves pervasive and detailed central economic planning, which experience teaches us will not work. In other words, Obama’s cost controls involve government rationing of your health care, just as in all those foreign countries with socialized medicine that the CEA admires in its report.

Peter Ferrara serves as director of entitlement and budget policy for the Institute for Policy Innovation, and general counsel of the American Civil Rights Union. He formerly served in the administrations of President Reagan and the first President Bush.

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