Health Care "Savings" Don't Actually Reduce Spending


Robert Samuelson makes a good point about what many health reform advocates actually mean when they claim that expanding health coverage will produce "savings":

Unfortunately, the word "savings" is used misleadingly. It doesn't mean (as is usual) actual reductions; it signifies smaller future increases. There's a big difference.

Right. Seems to me like there's been a lot of confusion surrounding this issue. But even in the best possible post-reform scenario, expenditures still grow — they just grow at a slower rate. The White House and its defenders are, naturally, arguing that that's exactly the scenario we should expect. But as Samuelson notes, there's good reason not to put much confidence in such predictions.

Even with highly optimistic assumptions, health spending remains out of control. It absorbs more of government, business and family budgets. Higher health spending would put pressure on future budget deficits, already projected to total about $9 trillion over the next decade. If new taxes and Medicare "savings" are real, they could be used exclusively to pay down deficits, not finance new spending.

But many may not be real. Writing in The Wall Street Journal, Dr. Jeffrey Flier, dean of the Harvard Medical School, gave the various health bills a "failing grade" and said they wouldn't "control the growth of costs or raise the quality of care." Quoted in Newsweek, Dr. Delos Cosgrove, head of the Cleveland Clinic, said much the same. Richard Foster, the chief actuary of the federal Centers for Medicare & Medicaid Services, doubts the cost-saving provisions touted by CAP would save much money. He's also skeptical that Congress, facing complaints from hospitals and a squeeze on services, would allow all the Medicare reimbursement cuts to take effect. True, Congress has permitted some reimbursement reductions to occur but has repeatedly blocked the Sustainable Growth Rate adjustment for doctors, which most resembles the new proposals. 


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  1. Any old timers remember Bob Dole, in weird righteous anger screaming during a debate with Clinton, “The only difference between him and me is I want the government to grow at 10% while he wants it to grow at 14%!”

    Worked out good for that guy.

  2. Wrong. That’s simply illogical. Take state governments like New York and California: the more revenue they take in, the more they save in case of budget shortfalls like recently. Or, like preventative care that gets no credit in health care reform: if you can keep someone alive until they are on Medicare, then low cost expenditures like hip replacements and hospital stays save money. Or, if the government allows taxpayers to keep more of their earnings, then they hoard money under their matresses. Or, making production or products more efficient makes people produce and consume less. If you can make a car that gets 100 mpg, then people will naturally drive less, thus reducing congestion. Take persoanl computers – a perfect example. As pc’s have become cheaper to produce, hardly anyone owns one. It’s all logic.

  3. I have read that many developed European countries with nationalized health-care systems spend only about a half of what we spend per person on health care. I’m not aware that there’s any substantial difference in outcomes between their systems and ours. Why does our health care cost so much, and why can’t we actually reduce the cost?

    1. It’s called “rationing”.

      For Example;

      In Great Britain, If you have macular degeneration of the eyes, they will not treat it until you go blind in one eye.

      In Canada, if you are over the age of seventy, you cannot get a hip replacement. You will have to go the U.S. Also, for every American going north to buy cheaper Drugs in Canada,
      two Canadians come South to the U.S. to buy drugs not available in Canada at any price.

      1. Going blind isn’t a substantial difference in outcome?

        Wouldn’t it be more useful to show how those countries (at least the ones we’re likely to follow, like the UK) are, um, “hiding the decline” (in Quality and Quantity of Life).

      2. Miklen “In Canada, if you are over the age of seventy, you cannot get a hip replacement. A few years ago my father had his replaced and he was born in 1925. “Canadians come South to the U.S. to buy drugs not available in Canada at any price.” I am interested in the names of drug(s) that are available only in the US?

  4. skipped this article…too many references to unreliable sources like Newsweek.

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