James Pethokoukis

Politics and policy from inside Washington

China questions costs of U.S. healthcare reform

Nov 16, 2009 19:13 UTC

Guess what? It turns out the Chinese are kind of curious about how President Barack Obama’s healthcare reform plans would impact America’s huge fiscal deficit. Government officials are using his Asian trip as an opportunity to ask the White House questions. Detailed questions.

Boilerplate assurances that America won’t default on its debt or inflate the shortfall away are apparently not cutting it. Nor should they, when one owns nearly $2 trillion in assets denominated in the currency of a country about to double its national debt over the next decade.

Nothing happening in Washington today should give Beijing any comfort or confidence about what may happen tomorrow. Healthcare reform was originally promoted as a way to “bend the curve” on escalating entitlement costs, the major part of which is financing Medicare and Medicaid. That is looking more and more like an overpromised deliverable.

For instance, a new study from the U.S. government’s Centers for Medicare and Medicaid Services finds that the healthcare reform bill recently passed in the House of Representatives would increase healthcare spending to 21.3 percent of GDP by 2019 compared with 20.8 percent under current law. That’s bending the curve the wrong way. The study also questions the “long-term viability” of the $500 billion in Medicare cuts meant to help pay for expanded insurance coverage.

In addition, the CMS study gives a clearer cost estimate than the one provided by the Congressional Budget Office. According to the CBO, the 10-year cost of PelosiCare is $894 billion. But that analysis includes early years with little government spending, According to the CMS, the House approach would cost $1 trillion from 2013-2019, or some $140 billion a year when fully put into effect.

Few realists in Washington think any of the current reform plans make a significant dent in the long-term healthcare cost to government. Indeed, the Senate Budget Committee recently held hearing about creating a bipartisan commission to find solutions to America’s entitlements problems.

If healthcare reform really bent the curve, there would be a no need for such a commission to do Healthcare Reform 2.0.

The Chinese might want to keep up the questioning.


You got a point there. I never thought about it that way.

Is ObamaCare in trouble in the Senate?

Nov 12, 2009 21:47 UTC

A few thoughts on healthcare reform:

1) Just talked to a very insightful Capitol Hill Watcher who doesn’t think Harry Reid has the votes in the Senate to pass anything resembling comprehensive healthcare reform. You can count out Lieberman, Landrieu, Nelson and maybe even Bayh.

2) First, of course, comes the CBO’s analysis of various proposals. Any of them that boosts the deficit or healthcare premiums are DOA. Remember, healthcare reform was supposed to expand coverage, lower premiums and bend the curve on the long-term deficit.

3) Assuming Reid can get 60 votes to proceed to the floor sometime next week, we are talking December being taken up with debate on amendments concerning the public option, abortion, taxes. As it is, Reid is reworking the Senate bill on the fly. One day it is a new version of a PO trigger, the next a hike in payroll taxes. Reconciliation? “That ship has sailed.”

5) Time does not help.  Once the Congress goes homes, members could be inundated with complains and protests, just like in August. Also, the rising unemployment rate continues to sap public confidence in the Obama agenda and Washington, in general.


My grown kids think that socialism/communism would be okay. What did I do wrong in raising them? I wonder when they start paying more taxes if it will make any difference to them?They do not seem concerned about the U.S. deficit, they are too wrapped up in their own little worlds and watch the propoganda(?) machines every night.

Dem healthcare reform fails to bend the curve

Nov 10, 2009 15:08 UTC

If you care about bending the curve of long-term healthcare costs – downward, I should emphasize – then it is tough not to conclude that Democratic efforts at healthcare reform are a failure. The essential money-sucking structure of US healthcare would remain intact. As the NYTimes finally figures out:

Experts — including some who have consulted closely with the White House, like Dr. Denis A. Cortese, chief executive of the Mayo Clinic — say the measures take only baby steps toward revamping the current fee-for-service system, which drives up costs by paying health providers for each visit or procedure performed. …

Among other innovations being considered is a cost-cutting method known as bundling, in which health providers receive a lump sum to care for a patient with a particular medical condition, say, diabetes or heart disease. The House bill calls for the administration to develop a plan for bundling, while the Senate Finance Committee version of the bill gives it until 2013 to create a pilot program.

Some experts would like to see such changes adopted more quickly, and senators of both parties say they will press for more aggressive cost-cutting measures when the bill comes up for debate. But drastic changes in the health care reimbursement system could cost the White House the support of doctors and hospital groups, who have signed onto the legislation and are lobbying hard to keep the current fee-for-service system from being phased out too quickly.

Experts agree that the Senate Finance bill does more to put systemic changes in place. That is because the bill includes two measures that health economists favor: a tax on high-value “Cadillac” health plans, and an independent commission that would make binding recommendations on how to cut Medicare costs.

Dr. Cortese, of the Mayo Clinic, said the bills could do more to reward quality care over quantity. He said he had met with Mr. Orszag and others at the White House and had proposed legislative language that would give Medicare three years to begin rewarding hospitals that are delivering better care at lower cost.


maybe, but if it turns out anything like this public model then we are in very very good shape. http://cli.gs/23yYaM/

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PelosiCare could be bad news for the dollar

Nov 9, 2009 20:23 UTC

If the Reserve Bank of India’s directors had any doubts about the wisdom of buying 200 tonnes of IMF gold — and likely dumping some U.S. Treasuries in the process — they had only to watch last weekend’s legislative activities on Capitol Hill. The proceedings provided plenty of reassurance that the move was a smart play.

Nothing in the healthcare reform bill that passed the House of Representatives should give investors in dollar-denominated assets any confidence that U.S. policymakers are serious about tackling the government’s structural budget deficit.

And if the dollar’s gradual decline hastens dangerously, deficit fears might well be the catalyst.

Yes, the healthcare plan does slightly trim the 10-year budget deficit from where it would be otherwise. But America’s long-term entitlement problems are such that healthcare reform needs to cut long-term health costs substantially rather than just being “deficit neutral”.

Even worse, to believe in even the modest claims of deficit neutrality, one has to also possess faith that some $500 billion in 10-year Medicare cuts will really happen. That is a monstrously tall order when Congress is working feverishly to restore those cuts in legislative side deals.

Another way the House proposes to pay for reform is through a 5.4 percent income surtax on wealthier Americans and small businesses.

Like America’s alternative minimum tax, this surtax is not indexed for inflation. So every year, the levy will affect more and more taxpayers. Unless, of course, Congress passes a temporary fix every year, as it does with the AMT. Such a move would protect the middle class, but it would also make expanded healthcare coverage a fiscal fiasco.

The House plan will surely be altered by whatever the Senate passes, assuming the Senate is able to pass anything. But the House bill is still a disturbing sign that fiscal rectitude is a low priority for at least half of the legislative branch.

Higher gold prices seem to go hand in hand with bad U.S. economic policy, be it the higher inflation of the Carter years or the budget busting of the Bush II years. And surging gold prices may be giving a thumbs down to Washington economic policy this time as well


what happens to Medicare, and I can not afford health Insurance for my wife

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Obama’s lost year

Nov 5, 2009 17:10 UTC

Rahm Emanuel famously said that you “never want a serious crisis to go to waste.”  And certainly the sense of crisis earlier in the year helped the White House pass the $787 billion stimulus package. But where stands the rest of the Obama legislative agenda?

Healthcare. The House will likely pass a bill this weekend, but big difference remain with the Senate, including paying for the plan and what to do about a public option.

Cap-and-trade. Kerry-Boxer is going nowhere which is why Kerry and Graham are working on a a dual-track approach.

Financial regulatory reform. The House and the Senate have completely different notions about what to do about system risk regulation. Plus there may be new efforts to try and “shrink” the banks and limit the scope of future activities.

See you in 2010, Obama Agenda!


Everyone talks about how smart this president is. He is as dumb as a post. Bush didn’t pretend to be the smartest guy on the block. However, this guy Obama does pretend, but only fools people dumber than him like most of the people who elected him and the the DemoRat congress. He is just a hack that parrots things he has learned from his leftist mentors. This man does not have any principles or any original thoughts.

As a black man in America, I hoped that this guy would moderate and succeed. It seems that he is on the way to being a presidential failure because his welfare-state mentality and his weakness on foreign and military policy. He is someone that this black person will not ever respect unless he changes his leftist ways. (Which ain’t going to happen!)

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Political reality makes it unlikely ObamaCare will cut deficits

Nov 4, 2009 21:36 UTC

Here is OMB Director Peter Orszag at NYU yesterday:

Our fiscal future is so dominated by health care that if we can slow the rate of cost growth by just 15 basis points per year (that is, 0.15 percentage points per year), the savings on Medicare and Medicaid would equal the impact from eliminating Social Security’s entire 75-year shortfall.

Right now, we are further along toward our goal of fiscally responsible health reform than ever before. I believe that in the weeks to come, the President will sign a bill that gives those with health insurance stability and expands coverage, and does so while boosting quality and reducing long-term deficits.

But there is mounting evidence that ObamaCare won’t do enough to reduce deficits. The Peterson Foundation just released a study on the Baucus bill that it commissioned from the Lewin Group. The findings:

1) The impact on the Federal budget deficit is positive only if the reductions to reimbursement levels are maintained. More than half of the $404 billion in savings over the 2010 through 2019 period is attributed to reductions in the rate of growth in payments to providers for health services, plus reductions in hospital DSH payments.

2)  Without providing new measures to control the growth in costs, the study estimates that total health spending would rise from about 17 percent of gross domestic product (GDP) in 2010 to 25 percent in 2029.

3) The federal government’s health spending would increase by almost $400 billion over the next 10 years and $1.6 trillion over the 20-year period.

Me: The context here, of course, is that Congress just tried an end-around to make sure doctor reimbursements aren’t cut. Actually, if the cuts were actually made, you would save enough that you would not have to raise taxes to pay for reform — though the goal is to make sure reform actually results in less red ink.

Healthcare Reform: The Day After

Oct 27, 2009 16:34 UTC

Paul Krugman takes a look at the impact of  healthcare reform:

Like the bill that will probably emerge from Congress, the Massachusetts reform mainly relies on a combination of regulation and subsidies to chivy a mostly private system into providing near-universal coverage. It is, to be frank, a bit of a Rube Goldberg device — a complicated way of achieving something that could have been done much more simply with a Medicare-type program. Yet it has gone a long way toward achieving the goal of health insurance for all, although it’s not quite there: according to state estimates, only 2.6 percent of residents remain uninsured.

There are, of course, major problems remaining in Massachusetts. In particular, while employers are required to provide a minimum standard of coverage, in a number of cases this standard seems to be too low, with lower-income workers still unable to afford necessary care. And the Massachusetts plan hasn’t yet done anything significant to contain costs.

Me: What? What was that last part? Oh, right. ObamaCare probably won’t do much to stop the explosive rise in healthcare costs. Indeed, the Massachusetts plan didn’t really try to reign in healthcare costs, putting the carrot in front of the stick. So now the system is running out of money, forcing service cuts. Some might even call that rationing. ObamaCare creates the illusion of cost control, but likely will be more carrot than stick in practice.


CBO reports that the House health reform bill will reduce the budget deficit by $100 billion over the next ten years. That sounds like cost containment to me.

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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.


well OBAMACARE past…
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.

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.


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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How the Baucus bill pays for healthcare reform

Oct 22, 2009 17:55 UTC

If those Medicare cuts don’t happen, forget about it, gang (via the Tax Foundation):