Mr. Jinal has touched on the real issues that the president and the house speaker should let the debate going, instead of shoveling them aside. Patience pays off.
Wall Street Opinion
JULY 22, 2009, 12:06 A.M. ET
How to Make Health-Care Reform Bipartisan
By BOBBY JINDAL
In Washington, it seems history always repeats itself. That’s what’s happening now with health-care reform. This is an unfortunate turn of events for Americans who are legitimately concerned about the skyrocketing cost of a basic human need.
In 1993 and 1994, Hillary Clinton’s health-care reform proposal failed because it was concocted in secret without the guiding hand of public consensus-building, and because it was a philosophical over-reach. Today President Barack Obama is repeating these mistakes.
The reason is plain: The left in Washington has concluded that honesty will not yield its desired policy result. So it resorts to a fundamentally dishonest approach to reform. I say this because the marketing of the Democrats’ plans as presented in the House of Representatives and endorsed heartily by President Obama rests on three falsehoods.
First, Mr. Obama doggedly promises that if you like your (private) health-care coverage now, you can keep it. That promise is hollow, because the Democrats’ reforms are designed to push an ever-increasing number of Americans into a government-run health-care plan.
If a so-called public option is part of health-care reform, the Lewin Group study estimates over 100 million Americans may leave private plans for government-run health care. Any government plan will benefit from taxpayer subsidies and be able to operate at a financial loss—competing unfairly in the marketplace until private plans are driven out of business. The government plan will become so large that it will set, rather than negotiate, prices. This will inevitably lead to monopoly, with a resulting threat to the quality of our health care.
Second, the Democrats disingenuously argue their reforms will not diminish the quality of our health care even as government involvement in the delivery of that health care increases massively. For all of us who have seen the Federal Emergency Management Agency’s response to hurricanes, this contention is laughable on its face. When government bureaucracies drive the delivery of services—in this case inserting themselves between health-care providers and their patients—quality degradation will surely come. House Democrats seem willing to accept that problem to achieve their philosophical aim—the long-term removal of for-profit entities from the health-care landscape.
Third, Mr. Obama’s rhetoric paints a picture of a massive new benefit that will actually cost average Americans less than what they pay today. The Democrats want middle-class taxpayers to believe they won’t feel the pinch of this initiative, even as their employers are assessed massive new taxes. They might as well try to argue that up is down. The analysis of the Democrats’ proposal by the Congressional Budget Office shows that it will not reduce government spending on health care, and that it will substantially increase the federal deficit—and this despite all the tax increases.
I served in the U.S. House with a majority of the current 435 representatives, and I am confident that if given the proper amount of legislative review, they will not accept the flawed Pelosi plan that is currently stuck in committee. Yet there is general agreement among Republicans and Democrats that we need health-care reform to bring costs down. This agreement can be the basis of a genuine, bipartisan reform, once the current over-reach by Mr. Obama and Mrs. Pelosi fails. Leaders of both parties can then come together behind health-care reform that stresses these seven principles:
•Consumer choice guided by transparency. We need a system where individuals choose an integrated plan that adopts the best disease-management practices, as opposed to fragmented care. Pricing and outcomes data for all tests, treatments and procedures should be posted on the Internet. Portable electronic health-care records can reduce paperwork, duplication and errors, while also empowering consumers to seek the provider that best meets their needs.
•Aligned consumer interests. Consumers should be financially invested in better health decisions through health-savings accounts, lower premiums and reduced cost sharing. If they seek care in cost-effective settings, comply with medical regimens, preventative care, and lifestyles that reduce the likelihood of chronic disease, they should share in the savings.
•Medical lawsuit reform. The practice of defensive medicine costs an estimated $100 billion-plus each year, according to the American Academy of Orthopaedic Surgeons, which used a study by economists Daniel P. Kessler and Mark B. McClellan. No health reform is serious about reducing costs unless it reduces the costs of frivolous lawsuits.
•Insurance reform. Congress should establish simple guidelines to make policies more portable, with more coverage for pre-existing conditions. Reinsurance, high-risk pools, and other mechanisms can reduce the dangers of adverse risk selection and the incentive to avoid covering the sick. Individuals should also be able to keep insurance as they change jobs or states.
•Pooling for small businesses, the self-employed, and others. All consumers should have equal opportunity to buy the lowest-cost, highest-quality insurance available. Individuals should benefit from the economies of scale currently available to those working for large employers. They should be free to purchase their health coverage without tax penalty through their employer, church, union, etc.
•Pay for performance, not activity. Roughly 75% of health-care spending is for the care of chronic conditions such as heart disease, cancer and diabetes—and there is little coordination of this care. We can save money and improve outcomes by using integrated networks of care with rigorous, transparent outcome measures emphasizing prevention and disease management.
•Refundable tax credits. Low-income working Americans without health insurance should get help in buying private coverage through a refundable tax credit. This is preferable to building a separate, government-run health-care plan.
These steps would bring down health-care costs. They would not bankrupt our nation or increase taxes in the midst of a recession. They are achievable reforms with bipartisan consensus and public support. All they require is a willingness by the president to slow down and have an honest discussion with Americans about the real downstream consequences of his ideas. Let’s start there.
Mr. Jindal is governor of Louisiana
Wednesday, July 22, 2009
Wednesday, July 01, 2009
Parsing the Health Reform Arguments
Newman really knows what he is talking about on this hot topic, of which so many hypes have really hidden out the true issues that everyone should have a good knowledge about.
Parsing the Health Reform Arguments
Some of the shibboleths we've heard in recent weeks don't make much sense.
By GEORGE NEWMAN
The Wall Street Journal
The health-care debate continues. We have now heard from nearly all the politicians, experts and interested parties: doctors, drug makers, hospitals, insurance companies, even constitutional lawyers (though not, significantly, from trial lawyers, who know full well "change" is not coming to their practices). Here is how one humble economist sees some of the main arguments, which I have paraphrased below:
- "The American people overwhelmingly favor reform."
If you ask whether people would be happier if somebody else paid their medical bills, they generally say yes. But surveys on consumers' satisfaction with their quality of care show overwhelming support for the continuation of the present arrangement. The best proof of this is the belated recognition by the proponents of health-care reform that they need to promise people that they can keep what they have now.
- "The cost of health care rises two to three times as fast as inflation."
That's like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation. Or the price of a 19-inch, black-and-white TV 30 years ago with the price of a 50-inch HDTV today. The improvements in medical care are even more dramatic, leading to longer life, less pain, fewer exploratory surgeries and miracle drugs. Of course the research, the equipment and the training that produce these improvements don't come cheap.
Corbis
- "Health care represents a rising proportion of our income."
That's not only true but perfectly natural. Quality health care is a discretionary, income-elastic expense -- i.e. the richer a society, the larger the proportion of income that is spent on it. (Poor societies have to spend income gains on food and other necessities.) Consider the alternatives. Would we feel better about ourselves if we skimped on our family's health care and spent the money on liquor, gambling, night clubs or a third television set?
- "Shifting funds from health care to education would make for a better society."
These two services have a lot in common, including steadily rising cost. What is curious is that this rise in education costs is deemed by the liberal establishment smart and farsighted while the rise in health-care costs is a curse to be stopped at any cost. What is curiouser still is that in education, where they always advocate more "investment," past increases have gone hand-in-hand with demonstrably deteriorating outcomes. The rising cost in health care has been accompanied by clearly superior results. Thus we would shift dollars from where they do a lot of good to an area where they don't.
- "Forty-five million people in the U.S. are uninsured."
Even if this were true (many dispute it) should we risk destroying a system that works for the vast majority to help 15% of our population?
- "The cost of treating the 45 million uninsured is shifted to the rest of us."
So on Monday, Wednesday and Friday we are harangued about the 45 million people lacking medical care, and on Tuesday and Thursday we are told we already pay for that care. Left-wing reformers think that if they split the two arguments we are too stupid to notice the contradiction. Furthermore, if cost shifting is bad, wait for the Mother of all Cost Shifting when suppliers have to overcharge the private plans to compensate for the depressed prices forced on them by the public plan.
- "A universal plan will reduce the cost of health care."
Think a moment. Suppose you are in an apple market with 100 buyers and 100 sellers every day and apples sell for $1 a pound. Suddenly one day 120 buyers show up. Will the price of the apples go up or down?
- "U.S. companies are at a disadvantage against foreign competitors who don't have to pay their employees' health insurance."
This would be true if the funds for health care in those countries fell from the sky. As it is, employees in those countries pay for their health care in much higher income taxes, sales or value-added taxes, gasoline taxes (think $8 a gallon at the pump) and in many other ways, effectively reducing their take-home pay and living standards. And isn't it odd that the same people who want to lift this burden from businesses that provide health benefits also (again, on alternate days) want to impose this burden on the other firms that do not offer this benefit. What about the international competitiveness of these companies?
- "If you like your current plan you can keep it."
In other words, you can keep your current plan if it (and the company offering it) is still around. This is not a trivial qualification. Proponents have clearly learned from the HillaryCare debacle in the 1990s that radical transformation does not sell. What we have instead is what came to be dubbed "salami tactics" in postwar Eastern Europe where Communist leaders took away freedoms one at a time to minimize resistance and obscure the ultimate goal. If nothing else, a century of vain attempts to break the Post Office monopoly should teach us how welcoming Congress is to competition to one of its high-cost, inefficient wards.
- "Congress will be strictly neutral between the public and private plans."
Nonsense. Congress has a hundred ways to help its creation hide costs, from squeezing suppliers to hidden subsidies (think Amtrak). And it has even more ways to bankrupt private plans. One way is to mandate ever more exotic and expensive coverage (think hair transplants or sex-change operations). Another is by limiting and averaging premiums and outlawing advertising. And if all else fails Congress can always resort to tax audits and public harassment of executives -- all in the name of "leveling the playing field." Then, in the end, the triumphal announcement: "The private system has failed."
- "Decisions will still be made by doctors and patients and the system won't be politicized."
Fat chance. Funding conflicts between mental health and gynecology will be based on which pressure group offers the richer bribe or appears more politically correct. The closing (or opening) of a hospital will be based not on need but which subcommittee chairman's district the hospital is in. Imagine the centralization of all medical research in the country in the brand new Robert Byrd Medical Center in Morgantown, W.Va. You get the idea.
- "We need a public plan to keep the private plans honest."
The 1,500 or so private plans don't produce enough competition? Making it 1,501 will do the trick? But then why stop there? Eating is even more important than health care, so shouldn't we have government-run supermarkets "to keep the private ones honest"? After all, supermarkets clearly put profits ahead of feeding people. And we can't run around naked, so we should have government-run clothing stores to keep the private ones honest. And shelter is just as important, so we should start public housing to keep private builders honest. Oops, we already have that. And that is exactly the point. Think of everything you know about public housing, the image the term conjures up in your mind. If you like public housing you will love public health care.
Mr. Newman is an economist and retired business executive. Printed in The Wall Street Journal, page A13
Parsing the Health Reform Arguments
Some of the shibboleths we've heard in recent weeks don't make much sense.
By GEORGE NEWMAN
The Wall Street Journal
The health-care debate continues. We have now heard from nearly all the politicians, experts and interested parties: doctors, drug makers, hospitals, insurance companies, even constitutional lawyers (though not, significantly, from trial lawyers, who know full well "change" is not coming to their practices). Here is how one humble economist sees some of the main arguments, which I have paraphrased below:
- "The American people overwhelmingly favor reform."
If you ask whether people would be happier if somebody else paid their medical bills, they generally say yes. But surveys on consumers' satisfaction with their quality of care show overwhelming support for the continuation of the present arrangement. The best proof of this is the belated recognition by the proponents of health-care reform that they need to promise people that they can keep what they have now.
- "The cost of health care rises two to three times as fast as inflation."
That's like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation. Or the price of a 19-inch, black-and-white TV 30 years ago with the price of a 50-inch HDTV today. The improvements in medical care are even more dramatic, leading to longer life, less pain, fewer exploratory surgeries and miracle drugs. Of course the research, the equipment and the training that produce these improvements don't come cheap.
Corbis
- "Health care represents a rising proportion of our income."
That's not only true but perfectly natural. Quality health care is a discretionary, income-elastic expense -- i.e. the richer a society, the larger the proportion of income that is spent on it. (Poor societies have to spend income gains on food and other necessities.) Consider the alternatives. Would we feel better about ourselves if we skimped on our family's health care and spent the money on liquor, gambling, night clubs or a third television set?
- "Shifting funds from health care to education would make for a better society."
These two services have a lot in common, including steadily rising cost. What is curious is that this rise in education costs is deemed by the liberal establishment smart and farsighted while the rise in health-care costs is a curse to be stopped at any cost. What is curiouser still is that in education, where they always advocate more "investment," past increases have gone hand-in-hand with demonstrably deteriorating outcomes. The rising cost in health care has been accompanied by clearly superior results. Thus we would shift dollars from where they do a lot of good to an area where they don't.
- "Forty-five million people in the U.S. are uninsured."
Even if this were true (many dispute it) should we risk destroying a system that works for the vast majority to help 15% of our population?
- "The cost of treating the 45 million uninsured is shifted to the rest of us."
So on Monday, Wednesday and Friday we are harangued about the 45 million people lacking medical care, and on Tuesday and Thursday we are told we already pay for that care. Left-wing reformers think that if they split the two arguments we are too stupid to notice the contradiction. Furthermore, if cost shifting is bad, wait for the Mother of all Cost Shifting when suppliers have to overcharge the private plans to compensate for the depressed prices forced on them by the public plan.
- "A universal plan will reduce the cost of health care."
Think a moment. Suppose you are in an apple market with 100 buyers and 100 sellers every day and apples sell for $1 a pound. Suddenly one day 120 buyers show up. Will the price of the apples go up or down?
- "U.S. companies are at a disadvantage against foreign competitors who don't have to pay their employees' health insurance."
This would be true if the funds for health care in those countries fell from the sky. As it is, employees in those countries pay for their health care in much higher income taxes, sales or value-added taxes, gasoline taxes (think $8 a gallon at the pump) and in many other ways, effectively reducing their take-home pay and living standards. And isn't it odd that the same people who want to lift this burden from businesses that provide health benefits also (again, on alternate days) want to impose this burden on the other firms that do not offer this benefit. What about the international competitiveness of these companies?
- "If you like your current plan you can keep it."
In other words, you can keep your current plan if it (and the company offering it) is still around. This is not a trivial qualification. Proponents have clearly learned from the HillaryCare debacle in the 1990s that radical transformation does not sell. What we have instead is what came to be dubbed "salami tactics" in postwar Eastern Europe where Communist leaders took away freedoms one at a time to minimize resistance and obscure the ultimate goal. If nothing else, a century of vain attempts to break the Post Office monopoly should teach us how welcoming Congress is to competition to one of its high-cost, inefficient wards.
- "Congress will be strictly neutral between the public and private plans."
Nonsense. Congress has a hundred ways to help its creation hide costs, from squeezing suppliers to hidden subsidies (think Amtrak). And it has even more ways to bankrupt private plans. One way is to mandate ever more exotic and expensive coverage (think hair transplants or sex-change operations). Another is by limiting and averaging premiums and outlawing advertising. And if all else fails Congress can always resort to tax audits and public harassment of executives -- all in the name of "leveling the playing field." Then, in the end, the triumphal announcement: "The private system has failed."
- "Decisions will still be made by doctors and patients and the system won't be politicized."
Fat chance. Funding conflicts between mental health and gynecology will be based on which pressure group offers the richer bribe or appears more politically correct. The closing (or opening) of a hospital will be based not on need but which subcommittee chairman's district the hospital is in. Imagine the centralization of all medical research in the country in the brand new Robert Byrd Medical Center in Morgantown, W.Va. You get the idea.
- "We need a public plan to keep the private plans honest."
The 1,500 or so private plans don't produce enough competition? Making it 1,501 will do the trick? But then why stop there? Eating is even more important than health care, so shouldn't we have government-run supermarkets "to keep the private ones honest"? After all, supermarkets clearly put profits ahead of feeding people. And we can't run around naked, so we should have government-run clothing stores to keep the private ones honest. And shelter is just as important, so we should start public housing to keep private builders honest. Oops, we already have that. And that is exactly the point. Think of everything you know about public housing, the image the term conjures up in your mind. If you like public housing you will love public health care.
Mr. Newman is an economist and retired business executive. Printed in The Wall Street Journal, page A13
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