The Leaning Tower of Jello: Why No-one Believes Health Reform will be...

The Leaning Tower of Jello: Why No-one Believes Health Reform will be Deficit Neutral

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President Obama has promised not to sign any health reform legislation that increases the federal deficit. This promise recognized rising public concern about an Argentinean fiscal trend that, unchecked, could leave us with $19 trillion in federal debt in a decade.

Without that pledge, given the current economic climate, health reform would be one dead mackerel.

Some clarifications are essential here. I’m a Democrat and fervent Obama supporter. I voted for him twice (and that was just in the Virginia primary). I’m proud of our President. He has first class economic and healthcare teams. He deserves credit for not postponing health reform. He’s right: it’s simply not tolerable, morally or economically, for a wealthy nation to continue having close to 50 million uninsured people.

The problem is, despite his great personal popularity, the vast majority of Americans do not believe his deficit pledge. A mid November Quinnipiac poll found that only 19% of Americans and 35% of his own political party believe health reform will not add to the deficit. The problem isn’t the President; it’s our sorry fiscal history, and his partnership with an increasingly discredited Congress.

Americans are having trouble understanding how, if it’s unhealthy for their households to have too much debt- the reason why we’re in so much economic trouble- it is prudent to cure our economic and social problems by plunging even more deeply into public debt. It’s kind of hard to swallow that the solution to a terrible economic hangover is drinking another case of Jack Daniels. America is on an epic fiscal bender, and the world’s collective tolerance for our drunkard’s excuses is wearing thin.

The reason almost no one believes health reform will be deficit neutral is our political system’s lavishly demonstrated inability to say no to anyone. American health care is a vast enterprise: we’ll spend more in 2014 on healthcare in the US than the entire GDP of Germany! Powerful political interests intersect in the health benefit: organized labor, capital markets, major manufacturers, doctors, lawyers, hospitals, pharmaceutical companies, health insurers, state governments, employers large and small. Have I left anybody out?

It is, in other words, a not-so-micro-cosm of the whole economy. Logically, if each one of the above named constituencies pitched in a little bit, we could cobble together $900 billion over a decade to accomplish an important social goal. Some have thrown in- pharmaceutical companies and hospitals willingly, insurers reluctantly but still significantly. A lot of other wealthy interests- technology manufacturers, physicians, the plaintiff’s bar and the unions most notably- don’t want to contribute anything and may skate away clean.

Exhibit A for the prosecution’s case about the inability of our political system to demand sacrifice is the so-called Doctor Fix problem. This is a legacy of an otherwise successful effort to balance the federal budget twelve years ago. In the Balanced Budget Act of 1997, Congress imposed what was, in effect, a global budget on the fastest growing part of Medicare- Part B, which covers physician care, home care, hospital outpatient care and a lot of new technology like medical imaging. If Part B spending grew faster than the nation’s economic output, the BBA required both beneficiary premium increases and across the board cuts on doctor fees.

This spending cap was a well meaning but comprehensive failure. After a couple of remarkably docile years, medical costs simply resumed rising as they had for the past thirty plus years. Every year except once (2002), Congress has declined to cut physician fees. The result is a fiscal crater more than $300 billion deep- the equivalent of a huge bad mortgage on the federal balance sheet. To substitute a ten-year fee freeze (an equally absurd solution) for the mandated cuts would “cost” about $318 billion in fictitious savings.

To let fees grow at the rate of medical inflation, a more realistic constraint give past history, would “cost” $439 billion, and to do that, and exempt beneficiaries from increases in their premiums would “cost” a magnificent $556 billion. What we’re doing now with Medicare spending is practicing a public sector form of Enron accounting, booking “savings” that do not exist. There’s an unfortunate amount of Enron accounting in the CBO “deficit neutrality” analyses, because CBO is required blindly to assume in its analyses that laws are, in fact, enforced, politics be damned.

Health reform adds a heap of new cost saving political obligations on Congress. A partial list:

1)that Congress not extend the five-year shelter for states from their share of the cost of a 15 million person Medicaid expansion (e.g. more than a 30% increase). Presently, states are sheltered from Medicaid cost sharing for this expansion until 2014, but then have to find $34 billion in new money to pay their share. States, who are drowning in Medicaid costs already, will press hard to have their existing matching requirements reduced, as they have been for S/CHIP in the two bills.

2)that any “public option” health plan be self-supporting after an initial start up investment, which must be repaid. Recent CBO analysis suggested that because it will attract a ton of sick people, public plan premiums may end up costing more than private insurance unless they are either heavily subsidized or else impose Medicare rates unilaterally. Who will sign up if it’s so expensive?

3)that premium subsidies to help support a 21 million-person expansion in private insurance coverage not rise if health insurance premium growth exceeds present estimates. The premium subsidies are a huge new entitlement- $574 billion over a decade in the more generous House bill. Neither Congress nor the CBO have the faintest idea how health insurers’ costs will be affected by all the proposed restrictions on their underwriting practices. The subsidy cost estimates are, therefore, a Jules Verne moon shot. What happens if, as seems likely, they are way too low?

4)that Congress let stand recommendations of the proposed (by the Senate anyway) “independent” Medicare Commission that would reduce spending below a target (and not fiddle with the deficit neutrality rule which requires them to find offsetting revenues if the cuts are not implemented). This Commission was forbidden by Senate charter from affecting hospital payments (45.5% of the program’s cost in 2007!), not an auspicious beginning. The House has thus far predictably refused to let go of Medicare’s reins.

5)that Congress not tamper with the health benefit package employers are mandated to provide or individuals are mandated to carry. In both bills, the relatively restrained “opening” benefit package is left under the (political) control of the Secretary of Health and Human Services. If there is benefit creep (chiropractic, podiatry, in vitro fertilization, massage therapy, reiki, you name it), the required premium subsidies will have to increase apace.

How confident are you that Congress will bite all these bullets and exercise fiscal restraint when confronted with organized advocacy? The CBO kabuki dance on health reform’s deficit neutrality has pivoted around the risible assumption that Congress will actually enforce laws, like the Part B cap, that require, at some future point, fiscal discipline.

So thank you, Thomas Jefferson (the patron saint of the town I live in- Charlottesville)! You wanted to forestall tyranny by designing a weak and divided central government. Little did Jefferson realize that 220 years later, we’d be trying to manage a $14 trillion economy or a $2.5 trillion health system with our founding fathers’ deliberately crippled political system.

Add to the mix a bitterly polarized and poorly informed electorate and weak Congressional leadership and you have a recipe for fiscal incontinence on a grand scale.

Appointing a Deficit Commission, as some have recently advocated, seems like an entirely predictable substitute for actually demanding sacrifice. This is how great civilizations end- not with foreign invasion, but rather creeping internal rot, not with a bang, but with pandering to factions and to the mob.

The capacity to execute a fiscally responsible health reform rests in sweaty, shaky hands. Lyndon Johnson once famously said of the special interests: “If you can’t take their money, drink their liquor, sleep with their women and then vote against them when you need to, you don’t belong in Congress.” No Johnsons or Rayburns, or for that matter, Mitchells or Tip O’Neills presently wield the gavel. The Republicans, of course did no better when they ran things, and have made a truly pathetic contribution to the present health reform debate. It is a bipartisan failure we have here. Against powerful focused economic interests, the American political system is a leaning tower of jello. Let’s hope it’s not strawberry, because the odds are we’re going to be swimming in it!

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42 Comments on "The Leaning Tower of Jello: Why No-one Believes Health Reform will be Deficit Neutral"


Guest
Dec 21, 2009

Hey Jeff, I am a week late on the draw here, but I would like to add some logs to the fire.
1. While it is admirable to be so concerned about the fiscal issues, really, what does the government do when it needs money? It prints more. Federal money is not the same as cash in your pocket, which runs out. Yes the world is flatter than it used to be, but a large portion of the known world still depends on U.S. consumerism. Neither China nor Europe is anywhere close to replacing us as the world’s economic engine.
2. The long-term benefits (long-long-term) of having people be well, of having children develop with pre-natal and pediatric care, of having parents counseled on nutrition and parenting and education, of having illness treated before it becomes acute and requires a LOT more care — these benefits will contribute an incalculable new resource and retro-fit a declining resource — a smarter, healthier workforce. Why should we (taxpayers, country, workers, businessmen) pay for healthcare for them (the poor and their children)??? Because it will give OUR children a much more competitive U.S.
3. Grassroots healthcare reform is taking place all around us. We are doing our small part at Health Care Hiring (http://www.healthcarehiring.com), offering free resources to help people find jobs and careers in the health and medical sector. Others such as Cleveland Clinic, Renaissance Health and Practice Fusion are making major strides to reduce costs, redesign delivery models and provide more efficient care. Extending the healthcare system to the millions now unserved is only a piece of the puzzle — do we really want that swept under the rug again?
Cheers
Mike Clark

Guest
Gary Lampman
Dec 13, 2009

Oh, Nate, are we ranting about what. The fact I Don’t Consider writing off Debt because the debt is no longer collectible; is any where near a agreement struck between the Doctor and Patient. Rather it is a business choice to be decided by the business Manager and /or Doctor. In this case it is not a negotiable Instrument but rather a business practice for debts that are Non Collectible.
Well Nate you got me on a portion of this argument, but these doctors who give services for the uninsured , I would think are subsidized in some manner.However,You are not going to convince me a write off is a Negotiable Instrument for the Patient after the fact. The power of persuasion has nothing to do with Insults and abusive behavior that appears to be your personality. Even if you were right on all counts.Your demeanor grates against that very principle of persuasion . How to influence people and Win friends by Dale Carnagie would be a terrific Book for You.
So what is your carear; Doctor , Nurse , RT and or Insurance agent? I’ will take a guess Insurance agent.If this is your true nature, then I would Have concerns for welfare of those around you. Tell me who you represent in the Field of Health Care or insurance,so I can choose otherwise. Well kid , I bid you farewell on this subject that brings out your primal animal and verbal hostility. May God Bless You and Keep You.

Guest
Nate
Dec 12, 2009

Hey Moron, came across this on another blog, really just wanted to point out again how wring you are…
Two, investigate a company called Simplecare. The SimpleCare story has appeared in U.S. News & World Report, in Forbes, and on NBC News. SimpleCare , a fee-for-service organization, accepts money for medical treatment without the bother and hassle of insurance forms, co-payments, and other third-party payment related procedures. SimpleCare has an alliance of doctors offering cash discounts. Itsmembership includes 38,000 patient members working with 1,500 doctors nationwide. Discounts range from 15 percent to 50 percent for patients paying in cash.
well looky there an entire company that according to Gary doesn’t exist doing things Gary says are impossible. Is that a 50% discount I see, but Gary you said….

Guest
Nate
Dec 12, 2009

Gary you just don’t know when to shut up and admit your wrong,
“It is not a Standard Practices to give 50 to 80 percent discounts for Hospitals or Doctors Services.”
Actually it is, everyone that treats Medicaid patients gives that discount and most major metro facilities give 50-70 discounts. I see the bills every day, you just make things up in your head.
“Doctors are not going to get caught in Bidding wars when Health Care is competition Free.”
Again your an idiot. Cosmetic, dental, and other services primarily paid by the patient are full of competition and doctors big aginst each other. There are also now companies that big out surgeries to facilities to see who gives the best price.
wow you are clueless Gary
I have flyers, brochures, cashed checks, and real world experience with all this for thousands of people. Your one person that apparetently isn’t very succesful at solving problems. just becuase you failed doesn’t mean everyone else did.
every day doctors agree to write off portions of their bill both pre and post service. It’s a common pratice and takes very little inteligence to do.

Guest
Gary Lampman
Dec 11, 2009

Well, God Almighty,I see you are a pompous Anal Pore.Who apparently works directly for Insurance or not? It is not a Standard Practices to give 50 to 80 percent discounts for Hospitals or Doctors Services.Doctors are not going to get caught in Bidding wars when Health Care is competition Free. The write off as you speak of it is the decision of the Doctor. The Patient does NOT CHOOSE TO RIGHT OFF THEIR BILL!!!! Who are you calling a Idiot Nate!!!! How many are in Collections because they missed a payment! I’m NOT Buying the write off is a form of Negotiation! To negotiate is a up front Agreement and not a last resort! I have tried to get a rate that reflected my doctors actual Cost and he claimed that the Insurance rate is firm and non negotiable. Hey, if your getting 80 percent off for paying Cash.Good for You! By the Way, I don’t rate dentist as medical Doctors and some of the others you speak of are superficial elective surgeries that most people would not need and some insurance policies would not pay to have. So back it up with some life experiences that take your random assumptions out of the equation. Certainly, no snot nosed kid is going to impress me with his condescending, arrogant and abusive behavior.

Guest
Dec 11, 2009

nobama

Guest
Nate
Dec 7, 2009

no idiot, er lampman the answer is every day. I see sales on lazik surgey EVERY day, cosometic surgery every day. Eye exams and dental cleanings on sale every day.
How do I and millions of people get a lower price for a procedure. Doctor #2 I called Dr #1 and he said he can do it for $x can you match that as I really don’t want to change doctors.
Example number 2, Hey doc I don’t have insuance, if I paid cash could you give me a discount.
It happens hundreds of thousands of times a week.
LOL Gary you really are stupid, before I thought maybe you just weren’t very brite but no I almost feel bad, you have a seriously low inteligence.
Health Insurance conracts do not allow you to make payments or set out of pocket expenses. Your utilizatrion and choices determine your out of pocket expense, contracts only limit what one plan will pay towards your decisions.
small discount? For someone that didn’t even know you could call and get a discount how do you know the size? I have seen providers offer 50-80% discounts for cash, not what most people would call small.
LOL Individuals have all the leverage, if you don’t like the deal your provider offers go to another provider….how mush easier can that be?
LOL Gary Gary if the doctor wanted to collect he could take them to court and firce the issue, most write offs are the doctor agreeing to not pursue collection which is a mutual agreement between patient and provider.
Good luck to you Gary, your going to have a long hard life.

Guest
Gary Lampman
Dec 6, 2009

Well Nate, your arrogance proceeds you and so does your ignorance. Explain to me how you can claim that you can negotiate lower cost for a procedure? Explain to me Why the cost of any given procedure is not provided by any given provider? Tell me why,we are unable to shop for lower costs by comparison shopping by phone. When in your lifetime have you seen a sale on medical procedures?
The answer to all above is Never! Health Insurance Contracts set your premiums and out of pocket expenses.Its true they will allow you to make payments on out of pocket,and give a small discount if your uninsured. However, Individuals are not the negotiators and have no Leverage to cut expenses with Insurance or providers. If I’m uninsured at the time of the office visit. I pay $125.00 dollars because of insurance anti trust waivers. When insured my Co pay is 30 dollars and the insurance pays 25 dollars based on their rate of Inflation. Charge $125.00 to collect $55.00. Retarded!
You also should be careful of arbitrarily putting words in my mouth. I never said that ” By your theory Lampman all these doctors would be in jail”Its not the Doctors that I’m pressing. Rather it is Health Insurance that exploits and manipulates markets.
Write offs for noncollectable debt doesn’t qualify as being negotiable.This is between the doctor and his accountant. Not between the doctor and patient! These are Debts that are noncollectable because for the most part , you have priced yourselves out of the Market.However,under no circumstance that this argument should be construed as a negotiable instrument.
Private industry in the real free market often project far larger losses because of negotiation and failure to Pay. The difference between private industry and Health Providers are that private business are accountable to their clients.
To sum it up in your twisted understanding of negotiation and the ability to lower cost of the individuals. Is erroneous and misleading.I would thank you for taking the time to search the internet yourself.Certainly, you are conflicted in understanding the rudimentary principles of negotiation.

Guest
Margalit Gur-Arie
Dec 6, 2009

I’m a very slow typist, Nate.
I don’t know, being a liberal and such, but our previous excellent President of these United States told us to go shopping after 9-11. It was supposed to be the patriotic thing to do then, and I assume it still must be. I don’t think he meant that we should go shopping at the hospital.
Shortage of shoppers may very well hurt China, and we shouldn’t be doing that right now either, but it will also hurt Walmart and Amazon and GM and all other true blue purveyors of cheap imported goods. This of course translates into less jobs and smaller salaries for your potential health insurance shoppers and probably more mental disease. The world is very flat nowadays.

Guest
Nate
Dec 5, 2009

it’s like the left never learned to use the internet for basic research, if Maggie or Ezra or some other agenda driven liberal doesn;t hand it to them they have no idea how to find it themselves let alone if it is correct.
By your theory Lampman all these doctors would be in jail;
Write-offs for uncollectible accounts (including contractual write-offs) on private-pay patients can be 5 percent to 15 percent in some affluent communities and 75 percent or more in some poorer communities.
The changes cut the write-offs from 5.5 percent to 0.65
If “by law” they can’t negotate then they couldn’t be writing off bills now could they……

Guest
Nate
Dec 5, 2009

Marglit easy place is go to yahoo finance enter any insurance company and see what their annual profit margin is.
Health Insurance doesn’t need to cost $1200 a month, not every family needs to have a Cadalic plan. Their are plenty of options for far less cost. Further if they spent half as much time learing their insurance policy as they did their new cell phone they could substantially drive down cost.
I think China would be in a world of trouble and the US would be much better off. Domestic consumption of services, like healthcare, are far mroe beneficial to our economy then buying cheap china goods. I hope you know this and where just typing faster then you where thinking.
Lampman your an idiot, every hospital in the country negotates with patients and most providers do as well. You have no clue what your talking about.

Guest
Gary Lampman
Dec 5, 2009

I have never heard of such BS Barry.Profit driven Medicine certainly drains resources,takes risks and subjects patients to excessive testing to produce Profits and the dividend returns to investors.
Its easy to make the math fit your ideals .Just cook the Books and that is just what providers are doing. All this information is proprietary and it would take a team of accountants to unravel.
Bill Frist,the same one who said what is wrong with Health Care is Individuals do not Negotiate for Lower Prices? It is illegal for providers negotate with patients! Did I not tell you he is delusional and lacking the understanding from a middle class point of View. He is also Wrong about the Doctors Pen as Health Care is Dictated by insurance!

Guest
Barry Carol
Dec 5, 2009

Margalit,
The 1%-2% figure refers to the non-profit sector including companies like Kaiser, Harvard-Pilgrim and the Blues other than the 14 Blues plans owned by Wellpoint. You might be able to access the annual reports for Kaiser and Harvard Pilgrim from their websites. The Blue Cross and Blue Shield Association may have data on the non-profit Blues. There are 39 Blues plans altogether of which 25 are non-profit or member owned. The largest of those is Healthcare Services Corporation (HCSC) which insurers people in IL, TX, NM, and OK. There is also an analyst who used to be at Bear Stearns and is now at J.P. Morgan Chase who publishes a compendium of managed care insurer data based on state regulatory filings.
The bottom line is that insurer profits and executive compensation are not material contributors to high healthcare costs. At the end of day, according to former Tennessee Senator and heart transplant surgeon, Bill Frist, the biggest driver of healthcare costs in the U.S. is the doctor’s pen.

Guest
Margalit Gur-Arie
Dec 5, 2009

Nate,
families that make $75K to $100K cannot afford $1200 per month for health insurance, unless as you say, the stop consuming products like TVs, cars, phones, etc.
Please tell me what you think will happen to the economy if the entire middle class, and all others below, were to drastically reduce purchases of goods and services?
Barry,
I am aware of single digit NET profits for most insurers, but I haven’t seen 1% – 2% anywhere. Is there a good source I could look at?
I know Senator Rockefeller and his committee are trying very hard to get some real numbers from these folks and it’s not as easy as it should be.

Guest
Nate
Dec 5, 2009

see key fact at the end, even back in 1965 you liberals where dishonest snake oil salesman.
Another important underpinning of the “avoiding dependency” rationale was the widely trumpeted portrait of elderly Americans as an impoverished group whose plight made them a sympathetic object of tax-supported medical insurance. Misrepresentation of the financial condition of the elderly helped to paint this portrait, as government officials advocating Medicare repeatedly cited statistics showing lower incomes received by the elderly in comparison with other age groups. Yet the income statistics by themselves were misleading because they did not include asset ownership, and the elderly as a group had more substantial assets than other segments of the populace. Rep. Thomas B. Curtis (R., Mo.) repeatedly challenged HEW officials regarding the “incompleteness of the income statistic,” noting that “just as they have relatively low incomes as a group because they are on retirement, so they have more wealth than any other age group” since “they have been saving longer” (U.S. House Hearings 1963-64: 96).
Notice how th eleft ignored the opportunity to actually help the 15-20% that needed it and instead decided to destory the whole sytsem
However, data submitted for the record from a 1960 University of Michigan study showed that “87 percent of all spending units headed by persons aged 65 or older” had assets whose median value matched asset ownership of people aged 45-64 and exceeded the asset ownership of people under age 45 (U.S. House Hearings 1963-64: 242-43). While HEW Secretary Celebrezze waxed eloquent about the necessity to furnish protection “as a right and in a way which fully safeguards the dignity and independence of our older people,” Rep. Curtis questioned whether it was appropriate to “change the basic system” when 80 to 85 percent of the aged were able to take care of themselves under the existing system, recommending instead that we “direct our attention to the problems of the 15 percent, rather than this compulsory program that would cover everybody” (U.S. House Hearings 1963-64: 31, 392).