Price Controls "Pay" for President Obama's Health Care Reforms

Ronald Bailey | June 15, 2009

consumer health care Today in a speech before the American Medical Association, President Barack Obama outlined how he plans to raise the $1 trillion necessary to pay for his proposed health care reform agenda over the next decade. First, the president cited his $635 billion health reserve fund as the famous "down payment" for his reform agenda. About half - $300 billion - of this aspirational reserve fund is "paid for" by capping the tax breaks on charitable deductions of rich Americans to 28 percent. Never mind that this proposed tax hike has yet to pass Congress and that many key Democratic leaders on Capitol Hill oppose it.

Another chunk of the notional Health Reserve Fund will come from reducing payments - $177 billion - to private Medicare Advantage companies that provide insurance coverage for about 10 million Medicare beneficiaries. The president also plans to reduce hospital Medicare reimbursements by $25 billion over the next ten years. Another $30 billion is accounted for by charging wealthier Medicare beneficiaries more for their drugs.

In his weekly radio address and his speech today, President Obama claimed to have found an additional $313 billion in Medicare and Medicaid savings over the next ten years which will help pay for his $1 trillion health care reform agenda. These savings include a cut of $109 billion in payments to physicians based on recalculating the federal government's productivity payment formula.

Another $106 billion will come from cuts in payments to hospitals for treating uninsured people. The argument here is that once the reforms are enacted there won't be many uninsured people seeking uncompensated services at hospitals. This gambit may "save" money for Medicare and Medicaid, but some other agency or enterprise will be paying for the hospital services that the newly insured receive. Isn't this shifting the pots from which $106 billion will come rather than reducing overall spending on hospital care? Isn't it likely that a good part of the $106 billion will have to come from the president's proposed government insurance scheme?

More "savings" of $75 billion that could used to "pay for" President Obama's health care reforms would come from "more efficient purchasing" of prescription drugs. The Medicare Part D prescription drug plan was adopted in 2003 with a non-interference clause that promised that the federal government would not impose price controls on pharmaceuticals. Of course, when Medicare was established in 1965, the government made the same promise to physicians and hospital then. I suspect that "more efficient purchasing" is just a nicer way of saying "price controls." And it should be noted that according to the president, "we can save about one billion more by rooting out waste, abuse, and fraud throughout our health care system." Just a billion?

After parsing the numbers, it looks as though most the "savings" that President Obama wants to use to finance his health care reforms are achieved by imposing price controls.

It must be asked: can federal government "savings" projected over a decade really be credible in any case? Recall that in December 2000, the Clinton administration declared that "the United States can be debt-free this decade. By dedicating the entire budget surplus to debt reduction, the United States can eliminate its publicly held debt by FY 2009."

It is undeniable that health care in America needs massive reform. But the best step toward health care reform would be to begin unwinding our dysfunctional system of third party insurance payments and shifting toward consumer driven health care. But President Obama has made it clear that it not the direction he intends to go.

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Invisible FInger|6.15.09 @ 3:30PM|#

Who voted for this asshole?

Kevin|6.15.09 @ 3:41PM|#

The same idiots who see him spend more than all other presidents combined and triple our national debt, yet believe him when he talks about fiscal responsibility.

|6.15.09 @ 3:44PM|#

We can pay for it all if we just tax the rich! Tax them at 99.5%! It's so simple, I don't know why no one has ever thought of it before!

p.s. The "rich" is anyone who makes more than I do, of course.

Ron voted for this asshole. As did Tim, Chapman, and Weigel.

|6.15.09 @ 3:49PM|#

I suspect he's lying.

The Extispicator|6.15.09 @ 3:53PM|#

All these numbers confuse me. I thought he was just going to make health care free. Wouldn't that be easier?

|6.15.09 @ 3:53PM|#

How can you tell when Obama is lying?

It's put into print by the NY Times.

|6.15.09 @ 4:10PM|#

doom
DoooM
DOOOOM

hammeredHead|6.15.09 @ 4:18PM|#

Ron voted for this asshole. As did Tim, Chapman, and Weigel.

Yes, but most of them are independent contributors and not actual employees of Reason. That was an unbelievably lame excuse from Matt Welch (I think it was him) when pressed on the issue a while back.

Mike Laursen|6.15.09 @ 4:34PM|#

I voted for this asshole, reluctantly, because his major opponent was an even bigger asshole.

|6.15.09 @ 4:35PM|#

It sickens me that any government would do anything to reduce the generosity of Americans when it comes to charitable donations. It's one of our real virtues, and government programs can't substitute for it, either.

|6.15.09 @ 4:36PM|#

Mike,

An asshole of a different party than that controlling Congress. We all should've voted gridlock--it's our only real chance. I voted for a mustache, myself.

Mike Laursen|6.15.09 @ 4:37PM|#

Good point, Pro. Gridlock is good. I just found McCain to be a very, very scary crazy person.

|6.15.09 @ 4:41PM|#

What amuses me is his ability to not use the words "tort reform" when discussing the lowering of health care costs.
Just like the news in Chicago can tell you how many people got shot every day without using the words "drug war".

On my Obama vote I explained:

1. Who are you voting for in November? Obama. The Republicans must be punished and punished hard.

The (faint) hope is that defeat would remind the Republicans that they are supposed to be the party of small government and low taxes.

The Angry Optimist|6.15.09 @ 4:42PM|#

It is undeniable that health care in America needs massive reform.

I can deny it. The healthcare system, for all its flaws, is better than any "massive reform" movement I can see realistically controlling that reform.

|6.15.09 @ 4:42PM|#

Yeah, he's a bit of a loon. So maybe we'd have invaded Iran. But I don't think he'd have signed up for neo-socialism to this degree, so at least we might've had an economy after his administration was over.

Mike Laursen|6.15.09 @ 4:47PM|#

The war issue trumped the economy issue for me. Especially, since war also trashes the economy.

Mike Laursen|6.15.09 @ 4:49PM|#

Don't want to give an impression that I have a strong preference here. I dislike McCain and Obama. I didn't agonize over my vote that much, since I know it counts for very little.

The Angry Optimist|6.15.09 @ 4:50PM|#

yeah, that "maybe we would have invaded Iran" thing does it for me, too. *shudder* perish the thought, please.

Mike Laursen|6.15.09 @ 4:54PM|#

Another advantage of Obama as President is that it has freed up the time I used to waste on watching The Daily Show

Russ 2000|6.15.09 @ 5:03PM|#

One wonders what a constitution written by modern Americans would look like if we were to have a constitutional convention today.

Wait. I saw Idiocracy. Never mind.

|6.15.09 @ 5:03PM|#

This is why I don't vote. See also Dougherty, Mangu-Ward, and others for the same attitude.

Mike Laursen|6.15.09 @ 5:06PM|#

I was going to abstain from voting for anybody for President, but then I read Matt Welch's book. So, I'm going to blame him for my little part in electing The Messiah.

|6.15.09 @ 5:06PM|#

An asshole of a different party than that controlling Congress. We all should've voted gridlock--it's our only real chance. I voted for a mustache, myself.

I don't know. My observation is that a Republican in the WH and Democrats controlling congress isn't any better than 100% Dem contol.

The only time, in my observation, that the whole divided control deal worked was when GOPers who took there creed seriously took on a Democratic president who saw a chance to take credit for anything that went right an cast blame for anything that went wrong.

While McCain is pretty good on spending he still jumped on board with the bailouts. And on military and freedom issues the guy's just plain terrifying to me.

Doesn't mean I voted for Obama though. I haven't even though about voting for a major party candidate since I almost voted for Nixon in '68.

|6.15.09 @ 5:12PM|#

I think Obama is actually more likely to stumble into a war than McCain, because he's looking like a complete moron on foreign policy. However, the only reason McCain might be better is that he'd have an opposition Congress. Even with that, he'd mushy enough that bailouts and other stupidity likely would've occurred on his watch, too.

|6.15.09 @ 5:16PM|#

An asshole of a different party than that controlling Congress. We all should've voted gridlock--it's our only real chance. I voted for a mustache, myself.

I dunno about this analysis. In general I think it's valid, but with McCain I dunno.

I think Obama -- even with the majorities he has -- is having his agenda stymied by his own party more so than by the opposition. So far the biggest roadblocks to passing his agenda is the inability of the Dem caucus to overcome the threat filibuster and the Dem's hard on for bi-partisanship and an unwillingness to stand up for something, popular or not.

I don't think the McCain agenda would have had too much opposition from : The GOP, Blue Dogs, and even moderate Dems. And working with McCain would have been the holy grail of "bipartisanship" -- Dems would love nothing better than to be able to work with McCain and campaign on how bipartisan the Dems are. McCain is also hugely popular with the press (they are his biggest supporters after all) and I think Dems would be loathe to cross him for fear of the media.

Full Disclosure: I voted for Babar.

|6.15.09 @ 5:23PM|#

If this passes one can honestly say:

Obama lied,
Patients died.

|6.15.09 @ 5:25PM|#

I'm only lukewarm about the kind of gridlock the Hanoi Candidate would've given us. But at least some of the grid would've been locked. This lovefest in DC right now is going to cause all sorts of long-term damage to this country. And likely to others.

What's funny is that I think the GOP won the White House with even a half-assed candidate. McCain was like Dole--the one guy who guaranteed a defeat.

robc|6.15.09 @ 5:28PM|#

Ron,

You couldnt punish the GOP by voting for the 'stache instead?

robc|6.15.09 @ 5:30PM|#

What's funny is that I think the GOP won the White House with even a half-assed candidate. McCain was like Dole--the one guy who guaranteed a defeat.

Hell, I think Paul wins the primary v Obama. McCain might have had a shot (slim) if he had come out against TARP. The day he rolled on TARP was the day I started preparing for the Obama reign of terror.

s/primary/general/

Damn you preview!!!

Nate|6.15.09 @ 5:52PM|#

I didn't vote, because I thought all the candidates were abhorrent (including, certainly, Bob Barr).

I must say, though, that if McCain took a stand against the bailouts, I might have had to "close my eyes and just try to enjoy it."

|6.15.09 @ 6:01PM|#

I think Obama is actually more likely to stumble into a war than McCain, because he's looking like a complete moron on foreign policy.

I find this gnawing at me as well. But I'm not about to make any predictions about where.

|6.15.09 @ 6:10PM|#

What amuses me is his ability to not use the words "tort reform" when discussing the lowering of health care costs.

No kidding. Much of the waste in our system is unnecessary procedures ordered solely as defensive medicine.

Two more words never mentioned by the Obamatrons in this context: "regulatory reform." Which is especially risible, since much of what they claim they want to see providers do to control costs is actually a violation of the current bloated federal rulebook.

|6.15.09 @ 6:37PM|#

Much of the waste in our system is unnecessary procedures ordered solely as defensive medicine.

Or maybe some doctors/hospitals order lots of unnecessary tests to pad the bottom line as well?

Or are we going to pretend that the medical field doesn't order unnecessary shit because of the profit motive?

|6.15.09 @ 6:57PM|#

Yeah, so ya'll taught the Republicans a real good lesson. Hope we can all still afford luxuries like gasoline and food by 2012.

Meanwhile, he's turned standard Washington corruption into even slimier Chicago style corruption and he will not be called on it, ever, by anyone in the media with a remotely sizeable platform. That's why I didn't vote for the guy - not just b/c I knew he'd rape the treasury, not just b/c I feared he'd be a foreign policy disaster, but b/c the I knew the media would not even think about getting off their knees and wiping their mouths.

You know what? He'll probably be reelected. Good going, dipshits.

I am, however, enjoying my role as biggest told ya so bitch you ever done seen.

Go ahead, tell me McCain would've been worse. I know deep down inside you don't believe it.

Tom: you're dreaming. The media quit luvvin on McCain when Obama showed up.

|6.15.09 @ 7:00PM|#

Two more words never mentioned by the Obamatrons in this context: "regulatory reform.

Hell, you never see the word tort reform either. Both of these areas cover external costs and both are rarely addressed. Why do I need a nurse or a Ph.D to administer a flu shot or suture an external cut? Why can't I sign a waiver saying I won't sue if I get a non-FDA approved drug currently being tested? Why even have FDA approval if you can be sued later because you didn't test it enough? Why can't I get a colonoscopy from an "ass tech" who doesn't know crap about diseases and little about biology but is the complete bomb at "slipping it in" for a fraction of the price?

Deregulation of health care is also linked to drug prohibition. Why do I need to pay a doctor to proscribe me penicillin? Merk can advertise for me to "ask my doctor" and if my doctor refuses to give me the proscription I want I can sue him but we can't cut out the middle man and simply let me buy whatever drugs I wish?

|6.15.09 @ 7:04PM|#

What's funny is that I think the GOP won the White House with even a half-assed candidate. McCain was like Dole--the one guy who guaranteed a defeat.

This is very, very hard to believe. I don't see any way Romney or Huckabee -- let alone Ron Paul! -- defeats the Obama juggernaut in the general. McCain was the candidate with the best chance to defeat Obama, given his appeal to independents, Democrats, and old people, but he totally flubbed it (TARP was a huge part of that, obviously).

|6.15.09 @ 7:06PM|#

The Republicans must be punished and punished hard.

Talk about cutting off your nose to spite your face.

robc|6.15.09 @ 7:07PM|#

ya'll

Be careful slinging that around here without context. The Obama voters are a large minority.

|6.15.09 @ 7:08PM|#

I was specifically referring to people who explicitly stated that they voted for him.

robc|6.15.09 @ 7:14PM|#

stubby,

Then you should explicitly state that. Ya'll includes the word all. That explicity included me.

|6.15.09 @ 7:18PM|#

Yeah, you're right. I've been hanging out here for so long that sometimes I think we're all sitting around in a room, and everyone can just tell where everyone else is looking. We can't, of course.

EscapedWestOfTheBigMuddy|6.15.09 @ 7:31PM|#

I voted Barr. Not because I liked the man, or thought much of his policy prescriptions, or cared for the Big L platform, but because I don't think that small ls will be taken seriously until the day 11:00pm on election day rolls around and the standing is (poll, not official of course):

RentSeekingPartyCandidate: 39.5% 250 ECV
RegulatoryCaptureCandidate: 40.0% 262 EVC
Oddball: 14.5% 9 EVC
Wierdo: 3.0% 1 EVC
Others: 3.0% 0 ECV

When the parties and pundits have to face the fact that the big enchilada depends on the "fringe elements".

But if y'all (note the spellin', folks) keep not voting for anybody, that's not going to happen.

I was a vote in an election where a sitting, major party state rep couldn't muster 90% of votes cast when running unopposed (not even an official write-in). The local media didn't burn her balls on it, but I'm pretty sure she was embarrassed. As she should have been.

robc|6.15.09 @ 7:47PM|#

The spelling depends on which letters you are dropping.

If dropping the u and a (and slurring the o to an a) then ya'll is correct. If dropping the ou then y'all.

I generally go with the latter myself to stress the ALL, but the other is quite correct too.

alan|6.15.09 @ 8:27PM|#

Episiarch | June 15, 2009, 5:03pm | #

This is why I don't vote. See also Dougherty, Mangu-Ward, and others for the same attitude.

That seemed the right course of action going in for me as well, but I changed my mind and voted for The Mustache, and a Libertarian ticket where it was available. Skipped everything else. For the Libertarian Party to remain on the ballot here in NC, they have to get an x percentage of votes.

BakedPenguin|6.15.09 @ 9:03PM|#

He'll probably be reelected.

Given the opposition to the bailouts, and the mess he's creating on the economy, I really doubt this. The massive expansion in the money supply is huge inflation waiting to happen. If the job situation doesn't get better, he's going to have to answer for that. If it does, we'll be seeing probably something like 20% inflation.

The economy is like Wile E Coyote right now. It ran off the cliff, and it's waiting for gravity to catch up. The only upside to the frikkin mess is going to be that Obama is going to be discredited in a big way.

Mike Laursen|6.15.09 @ 9:48PM|#

Go ahead, tell me McCain would've been worse. I know deep down inside you don't believe it.

I think McCain would have been worse.

DBN|6.15.09 @ 10:07PM|#

Obama bears very little direct responsibility for the current deficit, which is primarily due to decreased tax revenue in the recession, war spending, the TARP program, and to a smaller extent, increased spending on social support programs and the Bush tax cuts. The deficit was in the cards when he was elected.

No kidding. Much of the waste in our system is unnecessary procedures ordered solely as defensive medicine.

This is certainly the case in emergency medicine. It's less so in other fields, where technology is simply advancing, requiring more expertise and increasing the complexity of healthcare delivery.

Why can't I get a colonoscopy from an "ass tech" who doesn't know crap about diseases and little about biology but is the complete bomb at "slipping it in" for a fraction of the price?

This will ultimately happen as colonoscopies become more common than GI docs, just as nurses do a substantial amount of anesthesia now. However, you have to realize that medical billing has these "cash cows" like colonoscopy for a reason - the fact that the gastroenterologist can bill a lot for a colonoscopy makes up for the fact that only one in five of his hepatatis clinic patients actually pays the bill. All aspects of medicine have this asymmetry. The money that a pathologist makes looking at placentas makes up for the fact that he has to do a lot of biopsies for free. The money that a hospital makes selling OR time to a plastics group makes up for the money the hospital loses taking care of trauma patients (i.e. gangbangers) and medicine patients (i.e. homeless alcoholics).

You already have socialized medicine. You just don't know it.

zoltan|6.15.09 @ 11:37PM|#

You already have socialized medicine. You just don't know it.

Well, damn! This guy found our secret conversation threads about how free market Medicare and Medicaid are!!!!!

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