James Pethokoukis

Politics and policy from inside Washington

Why healthcare co-ops are a political solution, not an economic one

Aug 19, 2009 11:49 UTC

Here is a devastating critique of the idea of healthcare co-ops in place of a true public option (via Tim Foley at Change.org):

We’re guessing at the details, since they haven’t been divulged. How it would work? Does the government give seed money in the form of grants to set these up? Does it give loans? Who, pray tell, does it give this seed money to? How long would it take to get one of these co-ops up and running? How long would it take them to get a network of doctors? Since the co-op would start with no customers and presumably no bargaining power, how long would it take for insurance companies to be quaking in their boots?

That said, we do know a lot about them:

  • We know that we used to have health care co-ops in this country. What happened to most of them? As Professor Timothy Stoltzfus Jost explains, “The Farm Security Administration withdrew support in 1947, and they collapsed. They had a hard time getting going anyway.”
  • We know the ones that have been relatively successful have had their own network of providers, like Kaiser or the VA. However, the best of them took decades to develop – up to 60 years.
  • The GAO looked at health insurance co-ops in 2000. These weren’t the same idea – they would allow small businesses to pool their employees in a co-op to shop for insurance. The GAO’s conclusion? They don’t work very well and did nothing to lower costs.
  • The fact that a health co-op is a non-profit won’t in and of itself yield competition. As I pointed out earlier, “Conrad’s home state of North Dakota has 475,000 people enrolled in the not-for-profit North Dakota Blue Cross Blue Shield. That’s not just competition – it’s a monopoly, 60% of the market. Guess what? It hasn’t helped. Premiums jumped 74% in the past seven years.”
  • Most co-ops won’t be as successful as already-existing Blue Cross plans, which means they won’t have market clout to lower costs or change the game for private insurance. Which is, you know, the whole point.
  • Conrad introduced the co-op in June to solve a political problem – find common ground to allow the Senate Finance Committee to release their bill. So far, the Finance Committee remains at impasse, we’ve seen no bill, and every other committee has been done for weeks now. Great job.
  • By the way, Republicans aren’t biting. They say the co-op is a public option in sheep’s clothing. So they’re against it.
  • And, of course, progressives are furious at even the hint that there won’t be a public option, so they’re against it, too.

I guess Conrad succeeded in uniting the left and the right. Unfortunately, they seem to be united against his idea – the same idea whose sole existence is not to make American health care better but to win votes.


Terrific. Welcome to the greatest nation in the world.

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Why Medicare is a beloved fraud

Aug 18, 2009 14:04 UTC

First a few numbers on U.S. healthcare, courtesy of Ed Yardeni:

1) Federal spending on Medicare combined with Federal and State spending on Medicaid over the 12 months ending July totaled a record $923.5bn.

2) Medicare totaled $439.9bn. Federal spending on Medicaid was $241.8bn. To derive the grand total, we doubled this last number to reflect that Medicaid spending is split roughly evenly between the Federal and State government.

3) Personal consumption expenditures on health care services and prescription drugs totaled a record $1,837bn over the 12 months through June, and the government picked up a record 48.6% of the tab.

4) Medicare outlays per senior citizen totaled a record $11,582 during July, up 50% since July 2000. Over this same period, the CPI rose 24.2%, while the CPI for medical care goods and services (covering urban workers) rose 43.9%. The PCED for medical care goods and services (covering all consumers) was up 31.5% from July 2000 through June 2009.

Yardeni’s bottom line:

Proponents of ObamaCare repeatedly ask senior citizens if they are happy with Medicare. Not surprisingly, they love it. It’s free, and places few restrictions on the services and drugs that are covered by the program. Medicaid works the same way for non-senior citizens who are too poor to pay for health care insurance. So why don’t we all get Medicare? Because it is a fraud.

Ask doctors and hospital administrators about Medicare and Medicaid and they will tell you that it amounts to a theft of their services because the government doesn’t pay them enough to cover their expenses for the care they provide. So they pass those costs on to patients covered by private health insurance. This is why medical care prices are rising faster in the CPI–which includes workers’ out-of-pocket expenses, but not the government’s costs of coverage–than in the PCED, which includes both. Then the audacious proponents of more government in health care have the audacity to claim that costs are rising too fast because of waste, inefficiencies, and fraud in the privately-run system!


why do you say Medicare is free? We are charged $90.00 each a month. It’s taken from our social security

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A healthcare plan to save Obama’s presidency

Aug 17, 2009 19:22 UTC

President Barack Obama has told Americans to be skeptical of reports of an end to the recession, saying the downturn has “many more months” to run. Given the recent retail sales data, Americans seem to be listening to their economist-in-chief.

Obama may well be right in his dour forecast. Whatever the next quarter or two of GDP numbers say, continuing high unemployment and depleted personal wealth should keep the vibe more recessionary than expansionary. It’s tough to be cheerleader-in-chief, after all, when people’s pocketbooks are telling them a starkly different story.

But another issue is exacerbating Americans’ sour attitudes and raising doubts about the president’s competence: healthcare reform. Indeed, a recent Gallup poll shows identical pluralities of 49 percent disapproving of both Obama’s handling of the overall economy and his handling of healthcare policy.

Healthcare reform poses three problems for Obama. First, it seems to cost way too much in an era of trillion-dollar budget deficits. Americans are now as obsessed with budget deficits as they were in 1992, when fiscal concerns helped make Ross Perot a presidential contender. Second, many Americans are skittish about increased government involvement in the sector. Third, an inability to push healthcare reform through a Democrat-dominated Congress makes both the president and his Congressional allies appear ineffectual (as does the dithering over whether a public option needs to be part of any reform plan).

Now, political historians will note that a healthcare reform fiasco helped sink Democrats in the 1994 midterm elections — despite a fairly strong economy — and forced President Bill Clinton to shift to the right and work with congressional Republicans. Together, Clinton and the Republicans balanced budgets, cut taxes and reformed welfare.

But why wait for a political disaster to change course? If Obama wants to deliver meaningful change to the nation’s healthcare system, why not a grand compromise with Republicans that would also bring along centrist Democrats.

Call it the Purple Plan, one that brings red and blue together. Make health insurance mandatory and subsidize those who can’t afford it. (That’s the blue part.) But at the same time dismantle employer-based health plans, which prevent consumers from understanding the true costs of their healthcare decisions. In any case, employer plans are just an accident of history. (That’s the red part.)

The simplest way of dismantling them, according to an analysis by McKinsey, would be to make the money spent on health insurance by employers available as cash, tax free, to employees. “Insurers would then compete for customers with policies that offer better value for the money,” according to McKinsey. “The combination of invigorated supply and demand is the only healthcare reform plan that will avert the economic disaster that otherwise awaits us.”

A Purple Plan for the centrist – or purple — president many Americans thought they were voting for. It would bolster the president’s popularity, lift American spirits and help restore the economy.


Tubal reversal is process through which women can go for the option of re-pregnancy. As we know that Every woman has right to dream of having a baby. Tubal reversal allows a woman the ability to conceive naturally without any harm. Although tubal ligation is considered a permanent method of birth control,

About those healthcare protests …

Aug 14, 2009 01:38 UTC

(Lightly microblogging from the Great White North)

I think it is hilarious that the protesters get criticized for being uninformed about an uber-compliated plan that has been marketed in talking points and catch phrases. How dare they! This administration loves complicated, only-an-economist-could-love approaches.


1961: Reagan Speaks Out Against Socialized Medicine…

Ronald Reagan Speaks Out Against Socialized Medicine
http://www.youtube.com/watch?v=fRdLpem-A As

From the 1961 Operation Coffee Cup Campaign against Socialized Medicine as proposed by the Democrats, then a private citizen Ronald Reagan Speaks out against socialized medicine. There is no video because this was an LP sent out by the American Medical Association.

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Segway inventor Dean Kamen: Nationalized healthcare will kill innovation

Aug 7, 2009 12:32 UTC

Let’s spend more on healthcare! An interesting chunk from a Popular Mechanics chat with Segway inventor Dean Kamen (via The Health Care Blog):

We now live in a world where technology has triumphed, in many ways, over death. The problem with that is that it’s enormously expensive. And big pharmaceutical giants and big medical products companies have stopped working on stuff that could be extraordinary because they know they won’t be reimbursed, according to the common standards. We’re not only rationing today; we’re rationing our future. “

“If you project forward these horrific costs of treating everybody and you want to assume we are not going to respond to that by making the therapies better, simpler and cheaper and in some cases completely wiping out the [diseases], well you know what? We might actually get to that situation—if we stop investing in technology, if we stop believing that the future ought to be better than the past. “

“If somebody in this country wants to explain to me that we ought to be spending about twice as much supporting sports as on all of our pharmaceuticals, then stop spending.”

“I think this debate shows a fundamental lack of vision, a lack of confidence, a lack of understanding of what’s possible.


King George Obama and the Health Care Tories
(A Call to Arms, Legs, Heads, and Hearts)
By Thomas Paign

The President and his loyalists in the Congress are trying to force a new threat to our Liberty upon us. Universal Health Care is being sold as progressive, high minded, and beneficial to all. However, the road to hell is paved with good intentions. While I do believe that some of the loyalists have good, but misguided intentions; the real goal of King George Obama and his Tory leadership is simple, yet hidden from view. Their real goal is to create a new bureaucracy to reward and employ their minions, and to ensure their total control of the government for as long as we can foresee.

Does King George Obama really care about the little people? The disenfranchised? Those without adequate health care? A look at recent political events in his home state of Illinois offers clues to the answer. The State of Illinois cannot pay its own bills, however it recently passed an enormous Capital Spending bill which relies upon borrowing even more money and legalizing video poker to finance the Capital Bill’s obligations. The State of Illinois cannot pay its own bills, yet the Capital Bill is loaded with lavish rewards for politically connected organizations. The State of Illinois cannot pay its own bills, yet the Capital Bill is not limited solely to needed infrastructure items like road repairs and school construction. This is Chicago Politics as usual, and as usual, the little people, along with the rest of the citizens of Illinois, are being led down the road to hell.

Who will be dumping their income into the video poker machines, across the State of Illinois, to pay for this mess? Those that can least afford it. Those that are presently buying groceries with food stamps. Those that rely upon their political slave masters for their subsistence and shelter. The Illinois politicians fully understand and are relying upon this. Do you really think that the politicians truly care about the little people, the disenfranchised, and those without health care? Or are these voters simply a means for attaining power, luxury, and position?

The same people who want government controlled health care are also proclaiming “the age of small, limited government is over!” They say this as if it were universally agreed to. They say this to justify their desire to feed and grow the leviathan known as the United States Government.

This is our call to arms, legs, heads and hearts. Our arms must make and carry signs, wherever and whenever we can, to interrupt their staged events and town hall meetings. Our legs must support us as we stand up for our rights as individuals. Our legs must carry us to wherever the Health Care Tories appear, as they try to sell their ambitions to the masses. Our heads must be clear and focused upon the defeat of their efforts. Our voices and letters must convey the danger that King George Obama’s agenda represents. Our hearts must guide us with courage, love for liberty, and the respect for all of those that fought similar battles for freedom before ours.

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Will healthcare reform create trillion-dollar budget deficits?

Aug 6, 2009 14:34 UTC

That is the contention of former White House budget official James Capretta who does the math:

CBO expects the spending in the bill would grow at a rate of least 8 percent annually into the indefinite future, while the revenue to pay for it will only grow at about 5 per cent per year. Hence the “substantial increases” in federal budget deficits beyond 2019.

Although CBO declined to specify any actual deficit numbers beyond 2019, they can be easily calculated, in rough terms, from the information provided in Elmendorf’s letter.

By 2030, if the spending associated with the coverage provisions rises 8 percent per year after 2019 and the revenue rises by 5 percent, the bill would add more than $200 billion per year to currently projected budget deficits. By 2048, the annual deficit increase would top $1 trillion — and only go up from there.


As a practical matter, this country lacks the ability to address healthcare (and for that matter ANY problem), in a focused, direct, and coordinated fashion. It is also incapable of really planning much of anything of real value, at least not at this point in time. That type of activity does not fit within our governance model.

What you see here is an example of what happens when ANY entity is run by committee. We’ve known that as a society for a long time.

Our governance model is a “herding cats” governance model, where we let people and the entities they form have the freedom to do most of what they consider to be in their best interests, and we hope that it will also be in society’s best interests.

Sometimes that works for us, and other times it doesn’t. It will never yield consistency in approach, effort, and results. For us to think so is delusional in nature.

We (as a nation) lack the ability to rally around anything, unless it is perceived as An imminent threat to virtually all of us, and that’s not going to happen often. And so we become self-absorbed in thinking about our own personal, close to home minutiae.

There are some positive and negative ramifications associated with ANY alternate approach we might pursue, and the yelling and screaming will always loud and raucous.

As George Will often says, there is the “inertia” which is Washington. There is also the “inertia” which is the U.S. and its constituent parts.

Although this approach has served us well for most of the last 110 years, from a theoretical perspective, one has to wonder how long we can govern ourselves using the “herding cats” governance model, in light of our increase in size and complexity of our citizens.

If the US were run like a business, then every single day, its management team would assess whether its goals are being attained, bust their butts to achieve those goals, ensure that it was getting the maximum value and productivity out of those working for it, and make on the dime changes to most effectively and efficiently reach those goals. In other words, be nimble.

This country is not nimble, and can not be.

I’m not advocating a particular change, either left or right; just the recognition that EVERY governance model has its limitations, and this one is no different. However, for us to think that we can continue to use it and not have negative periods and poor, inappropriate responses to problems, is not reasonable. A country needs to know its limitations.

Obama’s problematic surtax on the rich

Jul 31, 2009 20:10 UTC

Bruce Bartlett makes several good points about slapping a surtax on wealthier Americans to pay for expanding healthcare coverage: 1) breaks the linkage between the taxes people pay and the benefits they receive; 2) won’t actually generate enough dough to pay for reform; 3) ignores the vast tax subsidy for high-end health plans. Other than that, it is a super idea.


Exactly, this surtax that Obama is doing on people, will be his downfall.

To punish sucess is just stupid wont last.

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The declining odds of a public plan

Jul 31, 2009 18:52 UTC

A handy way of summing up what a rough patch the Obamacrats have been going through, (via Intrade and Baseline Scenario):


One-way health reform from Washington

Jul 30, 2009 13:57 UTC

Arnold Kling rightly notes that only left-of-center ideas are being considered for healthcare reform. I find this particularly weird since I’ve read about company after company coming up with interesting healthcare innovations.  Here is Kling:

The basic problem that the Democrats have with health care reform is that when it comes to taking our system away from free markets, there is just not that much farther we can go. We already regulate the practice of medicine and allied health services with licensing cartels. We already regulate individual health insurance practically out of existence, particularly in states that require “community rating” and “must-carry,” which force insurance companies to charge the same price to all comers, which means that the only price they can safely charge is the price that assumes you are only asking for insurance because you just came down with a really expensive illness. We already have government insuring the poor and the elderly.

In contrast, there is a lot of room to move health care in the other direction–toward free markets. The only real health care reformers are those of us on the libertarian fringe. The two major parties are just posturing. That’s why I haven’t written much about the day-to-day debate on “reform.” It is not clear to me that defeating the Democrats’ legislation is something I should root for. We’re still nowhere near considering real reform.

Why ObamaCare is morphing into RomneyCare

Jul 30, 2009 02:20 UTC

Time for a political reality check. Government-run public health insurance that competes with private plans — a Democratic dream since President Truman suggested it in 1945 — may not be dead for now on Capitol Hill, but its vital signs are awfully faint.

[Find out how healthcare taxes would affect you]

Of course, many proponents are hoping to use the congressional August recess to rally the grassroots and the netroots for one final push come September. And maybe that will work.

But it’s more likely that Democratic leaders in Washington will use the break to tell the outside-the-Beltway crowd the cold truth: If they want something that can be legitimately called “healthcare reform” to pass in 2009, they need to quit wasting time, energy and money on the fading dream of a public plan and instead work to get other key elements passed.

[See why Obama's big economic gamble isn't paying off]

And what might those elements be?

Analyst Daniel Clifton of Strategas Research makes an educated guess. He thinks President Obama may get the chance to sign an $800 billion (over 10 years) bill that would contain features such an individual mandate to buy health insurance, subsidies up to 300 percent of the poverty limit to purchase a regulated plan through a health insurance “exchange”, and an expansion of Medicaid.

Obama might even get his commission that would try to determine what Medicare pays doctors and hospitals — now that the Congressional Budget Office has determined it would pretty much be powerless.

As one lobbyist put it: “I would see this as mostly a symbolic victory (for Republicans), as the Dems can get most of what they want without calling it a public option. Frankly. it’s pretty close to the Massachusetts model.”

[See five ways to boost the economy and create jobs]

Ah yes, the Massachusetts model. The state passed sweeping reform in 2006 under Governor Mitt Romney. What would a similar approach mean for America?

Well, there would be a lot fewer uninsured people. Massachusetts has halved the number of people without health insurance, with just 2.6 percent not currently covered.

But the reform has been far less successful bringing down costs. For starters, original cost estimates for Commonwealth Care projected the program would cost $400 million in 2008 and $725 million in 2009. The actual numbers were $628 million in 2008 and $869 billion for this year (with some costs estimates of $1 billion or more).

Moreover, health insurance premium costs continue to rise at a rapid clip of 9.4 percent a year, compared with 7.7 percent for the United States on average. As the Urban Institute found: “Health spending in Massachusetts is higher than the United States on average and is growing at a faster rate. Furthermore, health insurance premiums are growing even faster than health care costs in the state.”

So America might find itself in 2012 with lots more people covered, but in an ever more expensive system. And President Obama might find himself doing what Romney’s Democratic successor, Governor Deval Patrick, is doing: cutting back the subsidies that allow poorer residents to buy insurance.

The state is also considering moving away from fee-for-service medicine, where doctors are incentives to perform lots of pricey procedures rather than focusing on results.

But Obama and Democrats might also make this argument: We expanded coverage and now it’s time to finish the job by getting costs under control. And the only way of doing that is … a public insurance option!

Indeed, the Urban Institute makes the same argument that Team Obama surely would: that the presence of a national plan would force insurers to compete with a plan with strong bargaining power and, as an arm of government, a powerful financial interest in containing costs.

What’s happening in Washington isn’t the end of healthcare reform, it’s merely the end of the beginning.


It’s absolutely fascinating how quickly big pharma and Fox News can whip up a frenzy-fest of people who fight against their own best interests:

How providing cost reducing OPTIONS can be twisted into —> “a government take-over of health care”.

How providing free LIVING WILL CONSULTATIONS, can be twisted into —> “Obama’s death panels”.

How providing PREVENTATIVE CARE INCENTIVE for doctors, can be twisted into “government coming in between you and your health care provider”.


I have one simple request for anyone reading this:
Think for one moment what will occur if the insurance lobby wins and real reform is NOT passed:

Carefully think about this and ask yourself if you are happy with your health insurance cost going up by 200% the rate of inflation year, after year, after year.

Ask yourself if you are happy with millions of jobs being shipped overseas due to high health costs in the U.S.

Ask yourself if you will be happy as the U.S. health system continues to spend a higher portion of its gross domestic product than any other country, but also continues to rank WORST in preventable deaths among industrialized nations. WORST!!!

If this really is a Christian nation, as most would claim, I am seeing fewer and fewer signs of it every day. What ever happened to, ‘Amen, I say to you, whatever you did for one of these least brothers of mine, you did for me.’?

I can’t help but to wonder why those angry mobs at the town hall meetings are not fighting FOR the PUBLIC OPTION rather than against it? Why they are not picketing the insurance industry that is financially incentivized to DENY your coverage (based on pre-existing conditions, etc. etc. etc.). Why medical payments are STOPPED, after a fixed period of time EVEN THOUGH YOU HAVE MADE INSURANCE PAYMENTS LIKE CLOCKWORK YOUR ENTIRE ADULT LIFE.

You want to see a REAL death panel at work? Just look into the current practices of even the most popular health insurance providers.

Get the facts, and then get real folks. If you assist in blowing THIS CHANCE for high quality health care that EVERYONE can afford, then there may never be another opportunity to once-and-for-all get this one right.

http://www.americashealthrankings.org/20 08/index.html
http://www.who.int/whr/2000/media_centre  /press_release/en/index.html
http://www.reuters.com/article/healthNew s/idUSN0765165020080108
Matthew 25:40

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