In my last blog, we examined how the current health-care legislative proposals violate both the sprit and the letter of the Constitution. Now lets look at this issue beyond the Constitution, in terms of practicality and it’s supposed ability to reduce overall health-care cost. The common rhetoric, whether it is quipped by the House, the Senate, or President Obama, is that this legislation will “bend the cost curve.” Both Congress and the President rushed to announce their claim had been vindicated by the Congressional Budget Office (CBO), which stated:” CBO and JCT now estimate that the legislation would yield a net reduction in deficits of $138 billion over the 10-year period.” This sounds encouraging, until you read the literal fine print, and discover several gaping holes in this projection.
For starters, the report parenthetically states, “The program’s cash flows would show net receipts for a number of years, followed by net outlays in subsequent decades.” In other words, the government is taxing for a full five years before they start paying out, giving them a revenue cushion that will eventually deflate as the true cost of the legislation kicks in. Moreover, the CBO report states, “The changes in revenues include effects on Social Security revenues, which are classified as off-budget.” Does this mean we are gong to use Social Security as a hedge, one again, to defray the cost of another program? That’s why Social Security is in trouble already! To rub salt in the wound, the CBO report adds that “The 10-year figure of $574 billion includes $560 billion in revenues from tax provisions (estimated by Joint Commission on Taxation) and $13 billion in additional revenues from certain provisions affecting Medicare, Medicaid, and other programs.” Translation, we are going to rob Peter (Medicare and Medicaid, both already in trouble) to pay Paul (new health care legislation). Taxpayers deserve more transparency than this kind of tax and revenue shell game.
History bears this analysis. When Medicare Part A was enacted in 1965,costs were projected to rise to $9 billion by 1990, but actual costs reached $67 billion by 1990. Or consider that when the Medicaid special hospitals subsidy was added in1987, annual costs were projected to be $100 million. By1992 costs had risen to $11 billion annually. This game has been played over and over again, and each time the government promises and the taxpayer loses. As Amitabh Chandra, a professor of public policy at Harvard University's John F. Kennedy School of Government observes, "The problem is that historically, Congress has not been able to keep its word on constraining costs." Others, including experts in health-care reform, also share these reservations. Dr. Jeffrey Flier, the dean of the Harvard Medical School, wrote in The Wall Street Journal on Nov. 18: "In discussions with dozens of health care leaders and economists, I find near unanimity of opinion that, whatever its shape, the final legislation that will emerge from Congress will markedly accelerate national health care spending rather than restrain it." And when the wealthy start pushing back at Congress via lobbyist, whom do you think will be left holding the bill? The middle class, of course. The bottom line is that the federal government cannot contain cost because they have no incentive to do so. With an never-ending revenue stream of tax-payers, what would compel them to change their behavior?
If we use lens of history to further our examination of government meddling in the free market, we find even uglier truths lurking beneath the surface of lies and pretenses. In the 1970s, it was Congress, once again, that warned us about the escalating costs of health care and the absolute need to contain these costs. Their answer: HMOs. The HMO act of 1973 forced small business to offer HMOs to their employees. Now that HMOs have turned out to not be the salve to heal the imaginary wound concocted by our legislature, Congress has vilified them as the culprit, pointing out how they exclude people form coverage, and do not address actual underlying health issues. As Donald W. Moran, former Legislative Assistant to Congressman David A. Stockman, points out: “In the 1970s, the push for cost containment was used to whitewash all manner of otherwise antisocial behavior on part of the government and the various provider groups scrambling for the federal health-care dollar.” What Congress created through legislative efforts, whether intended or unintended, is co-dependent relationship in which private enterprise and Congress collude to create the illness and then induce an unwitting public to admit themselves to their care.
To get a better understanding of why health-care cost have escalated, however, we have to get at the psychology behind it all. Whether it’s HMOs, Medicare, Medicaid, or the current legislation being pushed in D.C., the underlying dynamic is to separate the consumer from point of transaction. This dynamic is known as a ‘health-care wedge,” because it creates a “wedge” between the consumer and the provider. According to economist and author Arthur Laffer: “The health care wedge diminishes consumers’ incentives to monitor costs. Consumers bear only a fraction of the costs from any additional health care service. On the supplier side, doctors and other medical providers receive no incentive to provide higher quality services for less cost. No positive benefit accrues to those who do so.” Moreover, the more government intrudes, the more the free market is distorted, thereby decreasing competition, which necessarily increases costs. Additionally, because the rate of fraud in government programs, any “savings” realized would be ultimately abrogated. According to Malcolm Sparrow of Harvard University, a top specialist in health care fraud, “as much as 20 percent of federal health program budgets are consumed by fraud and abuse, which would be about $85 billion a year for Medicare.” Do you hear the sound, the sound of “savings” being washed down the drain of corruption, not to mention the stealthy, silent sucking of cash out of wallets in the form of escalating costs, fines, regulations, and ultimately, taxes? That’s the history, and that’s future reality if we are forced into accepting this latest power play by Congress and the President. Our federal government can help with the cost of health care if they act within the bounds of the free market. This will be the topic of Part III of my blog.
