Matthew Holt

In which I play Obama, answering Michael Cannon

6a00d8341c909d53ef0105371fd47b970b-320wi Last night I was busy spending two hours of my and my business partner’s time buying health insurance for our massive 4 person company. That means doing a multi-factorial equation between premiums, co-pays, deductibles, out of pocket maximums, & in & out of network costs. It’s no wonder that no one understands their health insurance, especially when still doesn’t bother putting half of the important variables on its front page. But no matter, it will be my pleasure to make Wellpoint or Aetna better off—they’re not having such great years and they can use the money.

But then I noticed from the tweets that Obama was doing a primetime townhall about health care. So having failed to find it on my TV (cos I’m on the west coast and we’re not alive at the same time as you east coasters), I looked on the ABC web site. There I didn’t find the TV version , but I did find what I thought was a most amusing article….and as I went all the way through I noticed that it was by my buddy Michael Cannon…the thinking man’s health care libertarian from Cato.

Obama’s too busy talking mush with the townhall to answer…but I thought I might.

So here’s Michael’s questions, and in italics are my answers

Health Care Reform: Questions for the President

Will Health Care Reform Improve Our Health?


June 24, 2009—

“Health care reform is on life support,” says Rep. Jim Cooper of Tennessee. And he’s a Democrat.

MH: Not really!  Or at least not in a sane country unless he has the word “Christian” in front of his party label

President Obama has spent months building momentum for health care reform. But when the Congressional Budget Office put the price tag near $2 trillion, it stopped reform dead in its tracks.

What Senate Finance Committee chairman Max Baucus, D-Mont., once called “nearly inevitable” now seems much less so — and that’s before supporters have confronted the really tough questions.

Before this debate is over, Obama should answer a few questions about his plans for reform, including:

Mr. President, in your inaugural address and elsewhere, you said you are not interested in ideology, only what works. Economists Helen Levy of the University of Michigan and David Meltzer of the University of Chicago, where you used to teach, have researched what works. They conclude there is “no evidence” that universal health insurance coverage is the best way to improve public health. Before enacting universal coverage, shouldn’t you spend at least some of the $1 billion you dedicated to comparative-effectiveness research to determine whether universal coverage is comparatively effective? Absent such evidence, isn’t pursuing universal coverage by definition an ideological crusade?

MH: Sadly Michael, universal coverage is not about improving public health. If you want to do that, go teach some kids age 1–5 and build some sewage systems. Universal care is about making sure that the costs of health care are fairly distributed. Under the systems you prefer and the one we now have they’re distributed to the poor and sick from the healthy and wealthy—many of whom we both know work in the health care system. But apparently there was NOT ONE MENTION from a questioner of the uninsured or sick people bankrupted by the system in the whole hour. (Update Fri: and the only time the moderator Charlie Gibson mentioned it was when he wondered how rich people like him would get access to a doctor with all these newly insured people wanting care–he spent the whole evening appearing to be a selfish git)

A draft congressional report said that comparative-effectiveness research would “yield significant payoffs” because some treatments “will no longer be prescribed.” Who will decide which treatments will get the axe? Since government pays for half of all treatments, is it plausible to suggest that government will not insert itself into medical decisions? Or is it reasonable for patients to fear that government will deny them care?

MH: Why should patients fear it? We know that less intensive care is better, and cheaper primary care is better than more extensive specialty care. As the taxpayer pays for training doctors and funds most medical facilities why shouldn’t they demand that the resources are better spent?

You recently said the United States spends “almost 50 percent more per person than the next most costly nation. And yet … the quality of our care is often lower, and we aren’t any healthier.” Achieving universal coverage could require us to spend an additional $2 trillion over the next 10 years. If America already spends too much on health care, why are you asking Americans to spend even more?

MH: Ah we agree. All the money should come from the current system, even if it means reducing the incomes of pundits, bloggers and those who sponsor them, and a few people in the system. Sadly the politics of the US means that apparently Obama can’t say that

You have said, “Making health care affordable for all Americans will cost somewhere on the order of $1 trillion.” Precise dollar figures aside, isn’t that a contradiction in terms?

MH: Well for a start it’s not $1 trillion, it’s $100 billion a year which these days will barely buy you 6 months invasion of a small country. Which we do without debate on a regular basis it seems. And if we take the money from somewhere else we’re spending the money in health care, it shouldn’t cost more. Ah ha, cant be done because well see last answer

Last year, you told a competitiveness summit that rising health care costs are “a major anchor on the ability of American business to compete.” In May, you wrote, “Getting spiraling health care costs under control is essential to … making our businesses more competitive.” The head of your Council of Economic Advisors says such claims are “schlocky.” Who is right: you or your top economist?

MH: Obama is. I just spent 2 hours figuring out a mess of health insurance decisions that not one of my international competitors has to do. Multiply that out by every business in America, and don’t bother adding the fact that what we actually pay for health care is more than double per head what everyone else does. We’re both political scientists so we know that economists don’t know squat.

You recently told an audience, “No matter how we reform health care, we will keep this promise to the American people. … If you like your health care plan, you’ll be able to keep your health care plan, period. No one will take it away, no matter what.” The Associated Press subsequently reported, “White House officials suggest the president’s rhetoric shouldn’t be taken literally.” You then clarified, “What I’m saying is the government is not going to make you change plans under health reform.” Would your reforms encourage employers to drop their health plans?

MH: So? If employers do drop coverage as there are only 3 or 4 health plans in most markets, it would still be the same plan that the citizen would get to buy if they wanted to keep it and the costs would be subsidized for the poor. But don’t worry too much Michael. Americans hate their health plans. For some strange reason though they apparently like their doctors. Of course the AMA tells them they do

You found $600 billion worth of inefficiencies that you want to cut from Medicare and Medicaid. If government health programs generate that much waste, why do you want to create another?

MH: You’re saying all government programs are the same? That means the US Marine Corps and the Iraqi volunteer EDF (or whatever it’s called) are the same. I could start a government program that saved $600b very easily in Medicare & Medicaid. I might make a few enemies

You and your advisors argue that Medicare creates misaligned financial incentives that discourage preventive care, comparative-effectiveness research, electronic medical records, and efforts to reduce medical errors. Medicare’s payment system is the product of the political process. What gives you faith that the political process can devise less-perverse financial incentives this time?

MH: See my above answer, oh and abolish the Senate

You claim a new government program would create “a better range of choices, make the health care market more competitive, and keep insurance companies honest.” Since when is having the government enter a market the remedy for insufficient competition? Should the government have launched its own software company to compete with Microsoft? Are there better ways to create more choices and more competition?

MH: Hmm…the government did launch its own software “company”, which was way better & cheaper than the private sector competition, and made the government agency that used it provide the “best care anywhere”—demonstrably superior to privately provided care.  And it was so good that the monopolists at Microsoft stole its name and never paid compensation! Or did you miss Vista in your health care system and software market analysis?

When government entered the markets for workers compensation insurance, crop and flood insurance, and disaster insurance, it often completely crowded out private options. Do you expect a new government health insurance program would do the same?

MH: I hope so because the current private options are lousy at keeping down health care costs, or satisfying their customers. Oops, Obama can’t say that, can he.

You have said there are “legitimate concerns” that the government might give its new health plan an unfair advantage through taxpayer subsidies or by “printing money.” How do you propose to prevent this Congress and future Congresses from creating any unfair advantages?

MH: I don’t know but I’ll make a deal. I’ll promise my health plan wont have use an unfair advantage if you promise that AHIP’s members will stop lobbying Congress to rip-off the taxpayer. This wonderful chart shows that the likelihood of being against the public plan is directly proportional to the bribes paid to Senators by insurance companies.

President Obama needs to address questions these directly. The health of millions depends on his answers.

MH: No it doesn’t. The health of Americans depends on a bunch of stuff. The wealth of a few millions who get royally screwed by the current system does depend on reform. The current system is aided and abetted by its defenders like Cato and others who advocate “solutions” that are not only unworkable but also politically un-feasible. Their only role is to be spoilers to keep the status quo in place.

Michael F. Cannon is director of health policy studies at the libertarian Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It.

Matthew Holt is a vicious blogger who wouldn’t mind being President for a day or two but not without the ability to break Congress to his will in the first ten minutes.

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24 replies »

  1. Hallo alle, ich bin neu in diesem Forum und ich habe eine Frage, die offensichtlich erscheinen wird Ihnen … Wie erstelle ich einen neuen Beitrag oder Themen, die in der New Posts Abschnitt erscheint …? Cauz wenn ich auf neue Beiträge auf, ich habe nicht den neuen Thread Buttons erhältlich …

  2. After a recent doctor’s office visit, I was given a prescription for a high cholesterol condition. The name of the generic (I’m told) brand name for this medication is SINVASTATIN qty. 90. I have used Walgreen’s for filling prescriptions. I heard about cheaper prices for meds at Wal-Mart stores. I called for a price on the above pills and told the price was $14.99. I then called Walgreen’s and was given a price of $179.89 for the same med. WTF? I do believe that this price disparity is just one more problem with our healthcare system. Just follow the money trail and you will see who the REAL TERROISTS in this country are. Those pieces of shit CEO’s of the drug, insurance, & banking corporations raping us citizens. Don’t look for help from congress as they are all being bought by these special interest groups. Hey, you don’t need a paper trail for cash. The constitution says that if the present government is not working, replace it with one that does.

  3. Wow, as a relatively recent observer of health care reform-focused blog sites, I am stunned by what passes for enlightened debate here. With a few notable exceptions, I neither expected the paucity of facts nor the profusion of bumper-sticker insights – of which you, Matthew, seem to be the master purveyor.
    To address the issue of who subsidizes whom, it is not simply a question of the poor subsidizing the rich or vice versa. A large part of my work involves designing benefit plans (both public and private) and doing rate promulgation for insurers and health plans. I can tell you that the truly poor rarely subsidize the rich because, to badly paraphrase Willie Sutton, that’s not where the money is. The truth is that it is mostly the average workers (primarily the middle-age, middle class) who subsidize non-workers (mostly the very young and very old) as a consequence of government’s ever-growing role in the health care marketplace.
    With apologies to my friends on the right who shout warnings about an impending government takeover of health care, they are a few decades too late. It’s already happened. According to the Office of the Actuary, National Health Statistics Group, government spending on public health plans (e.g., Medicare, Medicaid, SCHIP, etc.) accounts for 46.2% of all health care spending while private health care spending (e.g., private health plans, self-insured employers, individual self-pays, etc.) accounts for 53.8%. However, the public share increases to well over 50% when other public-sector entities (e.g., public employee funds, municipalities, school districts, Tri-Care, etc.) are segregated from the true “private sector” employers that actually produce the wealth that government redistributes.
    It has long been understood that these large public programs are perniciously underfunded. Most Americans aren’t aware that this is intentional, as when in 1997 the Congress enacted the Sustainable Growth Rate (“SGR”) formula that capped Medicare’s growth rate (which, at the time, was increasing faster than the private health care industry) and shift an increasing share of this cost increase to the private sector. Current estimates are that Medicare underfunds by between 10.3% and 17.0% and Medicaid by about 42%, although the funding formulas differ from state to state (by the way, according to a recent study by the Hoover Institute at Stanford University, the effect of government cost shifting is almost 8 times the cost of all uncompensated care provided to the uninsured, illegal aliens, etc.). In total, the government (federal and state) shifts approximately $200 to $220 billion to the private sector each year which acts as a “hidden tax” on all private-sector purchasers of health care – and, thanks to mechanisms like the SGR it’s accelerating.
    The consequence of this shift is striking. Not to get too technical, while the General Consumer Price Index (“CPI”) has increased at a modest rate of 2% to 3% each year, the Medical CPI has gone up about twice as fast, roughly 6%. However, the result of this cost shifting by the government forces the effective rate for private sector premiums up by about 10% to 12% each year – a rate that most employers and employees find unsustainable.
    And who pays for this increase? Studies have repeatedly shown it is paid for in a combination of three ways: 1) a decrease in employer profits as they absorb about half the cost themselves; 2) reductions in employer-sponsored benefit plans that increase out-of-pocket expenses and payroll contributions; and, 3) a general stagnation in wages received by American workers (the U.S. Department of Labor reports that, although total compensation has gone up about twice the General CPI, net compensation or “take-home pay” has largely stagnated as most of this increase came in the form of additional employer spending for health insurance benefits.
    Reading through this and other healthcare-related blog sites I am regularly impressed (or, perhaps more accurately, depressed) that most of you who comment spend so much time arguing about trivial aspects of the healthcare reform debate and manage to miss the truly important problems.
    While it would be nice if it were lower, the U.S. economy can sustain a Medical CPI growth rate that is higher than the General CPI. In fact, such increases are largely inevitable as a consequence of the general aging of the population, advances in medical care that dramatically extend life expectancy, and constantly expanding benefits provided through public programs. What we can’t sustain is the huge effect of government’s asymmetrical intrusions into the health care marketplace and the economic distortions these intrusions cause.
    Nor can we afford to tolerate foolish and counterproductive attempts at healthcare reform that fail to recognize the true causes of the problems we face and, instead, seek to reward government with greater control over private-sector healthcare (with all that entails) when it is government’s own misguided actions (not to mention their absolute refusal to tackle the urgent but politically dangerous subject of Medicare and Medicaid reform) that are largely responsible for bringing us to where we are now.

  4. The quote is from Triumph The Insult Comic Dog’s appearance at the Star Wars Premier. Probably the funniest 9 minutes in television history.

  5. Fun with HSAs;
    There are some really attractive annuities available right now. I was looking at one that guarantees minimum 7% return a year, your principal at the start of each year is guaranteed. So you always keep what ever profit you have earned to date. In a great year you can make 15 to 20% in a bad year you still make minimum 7%. You can move your HSA to a self directed custodian like Equity Trust. Purchase one of these annuities and sit 25 years. Guaranteed to compound at a minimum 7%.

  6. Whoops. Mark thanks for proof reading my piece!! It should of course be “TO the sick and poor FROM the healthy and wealthy”. I’ve changed it in the piece and hope it makes more sense now

  7. “Sadly Michael, universal coverage is not about improving public health. If you want to do that, go teach some kids age 1–5 and build some sewage systems.”
    I am on Cannon’s side in this, generally. This is a tremendous concession you are making. You’re saying that there is no net utility to be had, just distributional issues involved. That’s a great position for Cannon’s side, believe me!
    “Universal care is about making sure that the costs of health care are fairly distributed. Under the systems you prefer and the one we now have they’re distributed from the poor and sick to the healthy and wealthy—many of whom we both know work in the health care system.”
    This is a really weird statement. You seem to imply that the current system is unfair as to distribution of costs, but then you say it distributes the costs FROM the sick and poor TO the healthy and wealthy. If that were true wouldn’t you be happy? You’re saying the costs are moving to those more able to pay and that is unfair. Hard to grasp. Perhaps some clearer thinking is in order. For those of us who don’t know you, how can you hope to persuade us with the clarity of your analysis if you get all mixed up like this.

  8. Why didn’t you make your purchase into a series of post? It would have been a great opportunity to show exactly what a small business goes through. The majority of your readers never experience purchasing insurance at the group level, oddly this doesn’t prevent them from holding very strong opinions about what is wrong or right about it. What were your rates last year, what was the renewal offer, what were the HDHP quotes, are HDHPs really such a bad deal.
    This would seem to be the perfect opportunity to show a real world example of what goes on. And you would have recieved a ton of free advise.

  9. Who are you using as your custodian? Legally you don’t need to keep it with the custodian your carrier uses. I use HSA Bank and it is all free. I further transfered my available funds to TD Ameritrade and invested my HSA funds in mutual funds to get higher returns. If your healthy and in it for another 25 years now is an excellent time to get into the market with an index fund or something large and stable.

  10. I’d rather see rates for office visits remain at commercial market levels and drop rates for overused procedures to Medicare levels. Too much of the focus is on rates, when I think more of our problem is a volume issue. A public option, all other things equal, does not do anything to address the volume issue.

  11. Nate, surely a group of 3 in a regulated market like Calif small group isn’t worth your time!
    And I have a personal HSA. but now have regular coverage from my wife. And I cant spend the HSA or contribute to it.
    The joke is that the monthly fees EXCEED the interest on the account….so when my HSA converts in 25 years or whenever they wont be anything in it to pay for all those out of pocket costs I have to look forward to. Hope the Brits let me back in then!

  12. I’m really hurt Matt, we may argue here and there and on the rare occasion escalate to a spat but you didn’t even tell me you where shopping your insurance let alone ask for my help:(
    Don’t discount the HSAs that is where the smart money is going!

  13. I can’t even fathom the amounts of money these boys are tossing around. From now on we can just use play money for everything, even to pay back the Chinese. Big government = big control = big problems. Never worked and never will, especially in the land of the free. I am fine with my health coverage and so is illegal Jose, for whom I, and you, and you, will flip the bill when he needs to have his finger reattached after Under-the-table Jim-Bob drops him off at the emergency room doors. Now, he gets universal coverage and for some reason nothing has changed for Jose, same great coverage and same set of rules to play by. Studies are great and so is living in a fantasy world, especially when you’re all things to all people depending on which way the wind blows, so let’s just turn in the stars and stripes and opt for what has failed so wenderfully in the UK and Canada. Come on, who wouldn’t love to wait 3+ months for a routine doctor’s visit when you needed to see him yesterday and I hope you don’t need a new heart past 60 yo cause you ain’t getting once since it’ll probably be wasted on you. We’ll give it to Jose when his ticker gives out because he’s been partying all night with the OR nurse.

  14. From a cost of plan perspective one would presume that in a fully insured nation three things would occur, disproportinate share/low income pool funding (over a billion dollars in Fla alone) should disappear, second property tax millage levies in certain parts of this country to fund the unfunded should be reduced, and third the hidden plus up that hospitals now negotiate with third party payors to cover bad debt should be reduced and in a fairy tale world these reductions should be passed on to consumers as premium reductions. Assuming i am sort of correct we are then talking about health reform as a cost shift to fund broader care, rather than truly new dollars. I believe this is an accurate way to look at this since as a general rule care is being provided in this country, albeit for the moment in a suboptimal setting called the emergency room. I am hoping that even economists (or preferably actuaries) who are far better than I am at calculating this are doing the math. The real challenge then is going to be for the safety net hospitals and academic medical centers to retain their patient population which moves from indigent to insured and suddenly have more options for care rather than less. But if nothing else it would be nice to leave emergency rooms for emergencies rather than serving as a default primary care provider.

  15. It’s hard for me to see how the Public Plan will be able to drive costs down with a parallel private market running in tandem. Sure, patients may flock to the public plan if cost savings are large enough, but will providers be there to serve them if reimbursements are lower? Who will go to the back of the line? I think something needs to be there to attract providers other than a continuation of charges and utilizations as usual. Who in the Obama camp is explaining to providers that it will be good for them, and how?

  16. tcoyote, I think Michael and I would have lots of fun, but sadly “reality and the demands for a normal sex life” mean that I can’t go join the Washington DC think tank bun fight. (Bonus if you get the quote, hint: not from a human). Michael did tell me that he was looking forward to me writing a book because he knew the review would be one word long “Wrong”
    And nothing wrong with Cooper believing what he believes but he & the Blue Dogs would not be conventional European Social Democrats. They’d be Christian Democrats or Conservatives. I’m not sure the same wasn’t true about Bill Clinton…given that his economic policy was run by Goldman Sachs. But that’s America for ya, and I wont go into a long discourse about how poor people are politically excluded here. But equating Cooper with Maxine Waters shows you that the Democratic party here has to be about 3 parties because of the lunacy from the Republicans (mostly on social issues)
    Meanwhile, I actually agree with Enthoven writing in the NY Times today, we should get employers to move to the cheapest plan–by only paying employees a voucher for the cost of the cheapest plan. I was just saying that in all likelihood the plan would have the same name 🙂
    And you’re right about local hospital cartels….but when I’m King and abolish the Senate they’d be in trouble. Of course I said I’d make a few enemies on the way….
    But if we put everyone in Medicare and paid all providers Medicare rates, you’re convinced that every doctor and hospital in America would quit and find something else to do. I was unaware that their talents are so fungible? And if they’re all so rich that they’re just going to retire, well either my Stalinist tendencies, or the houses of Wall Street will or have cured that problem. I’m sure at least some would stick around and figure out how to live in the new world.

  17. Sorry, HPV (?!), I think that’s just rubbish.
    The new public plan getting below current market prices from providers through “size and clout” isn’t going to change anything for the private plans, just increase the cost shift. It isn’t going to generate any more purchasing power for private plans, just shrink their share of the market.
    Something no-one is talking about: It’s also going to generate a wave of boomer docs nearing retirement finally saying, “Fuck Medicare and the New Public Plan and the Horse You Rode In on” and drop out of all of them, going private, which will be accelerated if, as expected, other parts of health reform drop Part B payment rates for procedure oriented docs.
    Maybe I really am missing something.

  18. As a prelude to reform, stop paying for patient satisfaction surveys. Under reform there will be no patient satisfaction. Right now everyone should simply drop their insurance; stop paying premiums. No one in America right now is denied necessary care. Wellness is not a mater of healthcare access, so why whould the well fund the sick? Just wait until you are sick. EMTALA mandates you will get care. Free care. And good care at that.

  19. tcoyote is missing perhaps the key element of why a strong national public plan would be effective in cost control. It would have the size and clout to effectively drive cartelized health care provider reimbursement rates closer to “efficient” market levels. John Kenneth Galbraith would love the Obama approach here.

  20. I hope president succeesds. I tried to make some sense of Kennedy’s bill but have not had yet patience to read 615 pages.
    They are trying to make it too complext…the logic and correction of logic, then some more addition, you cannot even figure out what is end goal.
    The current proposals are still a band-aid type and I am not sure if it will be successful.
    Afterall you ought to be nut to think you need to spend more money to solve healthcare and IT is the savior!

  21. Wow is this interesting!
    Having met both of you, I can tell you, Matthew, that you’d have your hands full with this Cannon fellow. He’s really smart and really plugged in, even if he worked for Larry Craig once. Someone ought to arrange this at once: you might get your head handed to you (like those Spaniards did yesterday!).
    The gratuitous swipe at Cooper reflects great ignorance. He’s a really good guy who understands our health system as well or better than you do. If the Clintons had listened to him, instead of “demonizing” him, we’d have had health reform in 1994, at a far lower price than the stratospheric numbers people are now choking on. Is it OK with you for someone to be a moderate Democrat, or do they all have to be like your beloved Barbara Boxer or Maxine Waters?
    The “you can keep your own health plan if you like it” is, unfortunately, a bald faced lie. Most peoples’ health plans are selected FOR THEM by their employer.
    If someone comes along and offers your employer a Medicare-like public plan that is 30% cheaper than what you have now, because they’ve crammed down Medicare rates on your doctor and hospital, your employer is gone in sixty seconds, and you have a new health plan, and a really pissed off doctor and hospital. More about this later.
    Could it be that the reason your current health plan, despite all those profit incentives to pay providers less, is expensive because their local providers all organized themselves into cartels, like Sutter or Partners, precisely to resist giving up discounts? Having someone come in with “cheaper” rates isn’t going to change a cartelized provider market structure, and Medicare cannot do anything about the inappropriate care (like all that stuff in Miami). The “public plan” types are barking up the wrong tree.
    Washington DC is, unfortunately, another country . . .

  22. In my opinion Obama did well on ABC’s “Rx for America” last night.
    Reality is that we will ALL have to compromise. Biggest losers will be Big PhRMA, Big Insurance, the Hospital Industry and the excesses of high tech-high cost medicine.
    Biggest winners will be primary care, chronic disease managent,prevention and public health,palliative end- of life-medicine and,finally, THE AVERAGE AMERICAN HEALTH CARE CONSUMER!
    Also the overall US economy will be a necessary winner.
    Dr. Rick Lippin

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