James Pethokoukis

Politics and policy from inside Washington

The internal contradictions of ObamaCare

Oct 26, 2009 18:54 UTC

At the heart of the economic case for U.S. healthcare reform is a simple comparison: Whereas America spends 16 percent of GDP on healthcare, the average across OECD countries was 8.9 percent, as of 2007.

So what do these frugal healthcare systems look like from the ground? T.R. Reid tries to find out in his book “The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care.”

In this health-policy travelogue, Reid visits a number of nations and interacts with their healthcare systems as he seeks help for a bum shoulder.

The main commonality is far from revelatory: lots more government. In one country, government determines the prices for medical treatment, in another it’s running the hospitals and employing the doctors.

So, too, would various Democratic plans for U.S. healthcare reform increase government intervention. Greater subsidies for the purchase of private insurance, new regulations on insurance companies, and, most likely, some sort of new government-run health plan.

But when one imagines what a post-reform American healthcare system might look like, there are two notable aspects in which it would still differ greatly from other OECD nations.

First, American doctors may pay as much as a hundred times more for malpractice insurance than their foreign counterparts, and will likely be sued several times during a career. Democratic healthcare reform would mostly leave this system in place.

But there is reason to believe that medical-liability reform could produce big cost savings. The Congressional Budget Office pegs the savings in overall healthcare spending at $110 billion over 10 years.

Some private estimates are far higher. A new study by the healthcare analytics unit of Thomson Reuters (http://r.reuters.com/nuc85f ) finds that defensive medicine — such as overuse of antibiotics and lab tests — by malpractice-jittery doctors costs the United States as much as $300 billion a year.

Another important difference is in what healthcare providers are paid. Reid’s book is full of examples of spartan medical facilities and doctors compensated more like high-end New York Times reporters than low-end Manhattan hedge fund managers.

Yet seeking to appease the doctors lobby, Democrats recently tried and failed to shield physicians from $250 billion in Medicare reimbursement cuts over the next decade. Expect them to try again.

Can ObamaCare “bend the curve” of rising healthcare costs? Not if it attempts to pay for reform more through higher taxes than by cutting compensation for doctors and trial attorneys.

COMMENT

well OBAMACARE past…
THE BLACK HOLE IS BEGINNING
WONDER when they are going to go after the nurses salaries
to see so many strikes, wonder how soon the other
contry nurses will come in and take the jobs for
min wage…
come to the U>S>A and get citizen ship
just have to be a nurse and work for peon wages…

Does anyone know the second country that pays the most
for nurses besides U.S.A.

The deficit’s risk to the dollar

Oct 26, 2009 18:02 UTC

Allan Meltzer on deficits and the dollar:

The administration admits to about $1 trillion budget deficits per year, on average, for the next 10 years. That’s clearly an underestimate, because it counts on the projected $200 billion to $300 billion of projected reductions in Medicare spending that will not be realized. And who can believe that the projected increase in state spending for Medicaid can be paid by the states, or that payments to doctors will be reduced by about 25%?

While Chinese government purchases of U.S. debt may delay a dollar and debt crisis, they also delay any effective program to reduce the size of that crisis. It is far better to begin containing the problem before the U.S. blows a hole in the dollar and starts another downturn.

A weak economy is a poor time to reduce current government spending or raise tax rates, but we don’t require draconian immediate changes. We do need a fully specified, multi-year program to restore fiscal probity by reducing spending, and a budget rule that limits the size and frequency of deficits. The plan should be announced in a rousing speech by the president. The emphasis should be on reducing government spending.

Me: This could be just like in 2004 when President Bush ordered the Marines to take Fallujah right after the election. Maybe right after the 2010 midterms, Obama will announced a VAT.

Scary unemployment in metro areas

Oct 26, 2009 14:50 UTC

An analysis by IHS Global Insight looks at unemployment in major metro areas:

Looking ahead, payrolls will be rising in most metros for consecutive quarters a year from now, but the unemployment rate will have shown little improvement, as employment gains will not be sufficient to absorb enough job seekers.  A third of metro areas will have jobless rates in double digits in the fourth quarter of 2010, with 16 exceeding 15%.  … By the end of 2012, the jobless rate will still be above historic norms, but it will finally slip below 8% in more than half of metro areas.

102609ubranunemployment

Oil prices, inflation and a double-dip recession

Oct 26, 2009 14:24 UTC

Andy Xie paints a dire scenario:

Central banks around the world have released massive amounts of money in response to the current financial crisis … But the proposition that a weak economy means low inflation is false. The stagflation of the 1970s proves it.

This round of monetary growth has mainly fed speculation, not credit demand for consumption or investment. Speculation has reached a dangerous point with the oil price threatening to reach triple digits again. Its implications for inflation may spook the central banks to raise interest rates quickly and trigger another crash.The excess money supply has created a new liquidity bubble.

The resulting asset inflation (stocks and bonds in developed markets and everything in emerging markets) has stabilised the global economy. The current equilibrium is one on a pinhead. The hope for strong economic recovery led by emerging economies raises investor optimism – and asset prices. This eases pressure on corporate balance sheets, spurs property production and boosts consumption through the wealth effect, making the hope self-fulfilling in the short term.

A rising oil price threatens to derail this recovery. It can trigger a surge in inflation expectation and a major crash of bond markets. The resulting high bond yields may force the central banks to raise interest rates to cool inflation fears. Another major downturn in asset prices would reignite fears about the balance sheets of global financial institutions, leading to new chaos.

Study: US healthcare system wastes $800 billion a year

Oct 26, 2009 14:11 UTC

This study from the healthcare analysis unit of Thomson Reuters has a high degree of truthiness, it seems to confirm what many Americans intuitively think and believe:

One example — a paper-based system that discourages sharing of medical records accounts for 6 percent of annual overspending.

“It is waste when caregivers duplicate tests because results recorded in a patient’s record with one provider are not available to another or when medical staff provides inappropriate treatment because relevant history of previous treatment cannot be accessed,” the report reads.

Some other findings in the report from Thomson Reuters, the parent company of Reuters:

* Unnecessary care such as the overuse of antibiotics and lab tests to protect against malpractice exposure makes up 37 percent of healthcare waste or $200 to $300 a year.

* Fraud makes up 22 percent of healthcare waste, or up to $200 billion a year in fraudulent Medicare claims, kickbacks for referrals for unnecessary services and other scams.

* Administrative inefficiency and redundant paperwork account for 18 percent of healthcare waste.

* Medical mistakes account for $50 billion to $100 billion in unnecessary spending each year, or 11 percent of the total.

* Preventable conditions such as uncontrolled diabetes cost $30 billion to $50 billion a year.

Me:  In one way this does confirm what Democrats have been saying, that it is possible to cut spending without hurting quality.  Getting at the waste and inefficiency is tough, though. Obamacrats seems to have scant interest in tort reform. And one reason that Medicare has low administrative costs is that it doesn’t make the same effort as private insurance companies to go after fraud. And doing IT reform over such a large and complex system is already proving difficult and is some cases making patient care worse.

COMMENT

On the contrary, the current Health Care legislation does not address the “waste” problems. In fact, these reforms have more potential to acerbate the problems. Tort reform would go a long way towards reducing unnecessary care, if in fact this is about malpractice exposure. How is (current) reform going to change the fraud aspect. Fraud and government programs go hand-in-hand. By adding more government, it will not only increase the fraud, but it will add to the third item, administrative inefficiency and overhead. There are things that can be done to attack these problems, but the “democrats” just want bigger government–not better.

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