What Is It They Say About the Best Laid Plans?


Health care reform advocates are now pointing out that yesterday's CMS report projects that after the initial coverage expansion, the health care cost-curve does begin to bend very slightly. That's true. But that projection relies on some rather unlikely assumptions. The first, as I've noted, is that Congress allows a major reduction in doctor payments at the end of this year, which is not at all likely. Next is that the so-called "Cadillac tax"—an excise tax on expensive health plans—is allowed to go into effect. Given that, under significant union pressure, the law's authors already delayed the start of the provision until near the end of the decade, I'm not sure we can count on that either. It's not impossible, but Congress isn't known for its eagerness to allow new taxes that would negatively affect politically influential constituencies.

It also relies on the assumption that IPAB, the new board responsible for keeping Medicare growth in check, will be effective in its mission. But as James Capretta argued in May, the board is somewhat limited in terms of how it can achieve those cuts:

In the past, to hit budget targets, Congress has always preferred to impose across-the-board payment rate reductions to provisions which would punish or reward providers based on some measure of quality or efficient performance.  Tellingly, that was also true in the bill Congress just passed.  The big savings comes from arbitrary cuts in payment updates for institutional providers of care.

The CBO, in its careful evenhanded way, also thinks there's a reasonably good chance the board won't save money. Last summer, director Doug Elmendorf told Congress that "in CBO's judgment, the probability is high that no savings would be realized…but there is also a chance that substantial savings might be realized." In other words, it's not impossible that some savings could be achieved. But the high probability is that it won't work.  

Even Medicare's chief actuary is skeptical of the board's chances at meeting its optimistic spending targets, writing in April that "in general, limiting cost growth to a level below medical price inflation alone would represent an exceedingly difficult challenge" and noting that "the Board's efforts would be further complicated by provisions that prohibit increases in cost-sharing requirements and that exempt certain categories of Medicare expenditures from consideration."

So fair enough: If the new health care law is implemented without minimal hiccups, and all of the cost-cutting measures work as well as planned, it has a chance to bend the curve very, very slightly during the final half of the upcoming decade. On that, health reform advocates are correct. I can't speak for anyone else, but betting that a decade-long coordination of a trillion-dollar program between bureaucrats in Washington, legislators in Congress, and policymakers in fifty different state governments will somehow go exactly as hoped doesn't seem like a very good wager to me.

NEXT: Someone is 'Sploding in Denmark

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  1. Kudos to you, Peter, on your coverage of the developments of Obamacare. You have been relentless in following this explosion of retard.

  2. Not to mention it's unconstitutional for the government to mandate a citizen buy a product as a condition of citizenship.

    1. But, but...CommerceClauseTehChildrunPenumbraandEmanations!!!

      1. You forgot GeneralWelfareNecessaryAndProper!!!

      2. You forgot about us too.

      3. You forgot about us too.

  3. Kathryn Seblius will not tolerate this kind of sedition.

    President Barack Obama's top health official on Thursday warned the insurance industry that the administration won't tolerate blaming premium hikes on the new health overhaul law.

    "There will be zero tolerance for this type of misinformation and unjustified rate increases," Health and Human Services Secretary Kathleen Sebelius said in a letter to the insurance lobby.

    "Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections," Sebelius said. She warned that bad actors may be excluded from new health insurance markets that will open in 2014 under the law. They'd lose out on a big pool of customers, as many as 30 million people nationwide.


    1. Wooooo, we're scared.

      Mr. President, our lobbyists would appreciate it if you'd have a word with that uppity bitch Ms. Sebelius to ensure that she understands how vital our - contributions - are to enacting your healthcare vision.

      You can take care of that? That's a good boy Thank you, Mr. President.

    2. Of couse, she'll be replaced after 2012. And it will be interesting what the republican shrill says.

      That's the funny thing about putting health care in the hands of partisan politics. It will get kicked around depending on how the political wind blows. The CBO can't really factor that in.

      Health care costs will continue to increase as more providers are required to buy IT services for electronic medical records, and new high tech equipment becomes available.

      I think a major contributor to health care costs is the idea that everyone should be on a new expensive medication for something. Anyone agree?

      1. To some degree yes. And some of those medications are pretty good. In that sense, spending a lot of money on health care is a good thing.

  4. The Wall Street Journal is reporting that the Obama Administration is making feckless threats to exclude health insurers who are raising rates from participating in exchanges come 2014.


    It really doesn't matter whether you want the Obama Administration stickin' it to the insurers--the interesting aspect is the Obama Administration's complete economic illiteracy on this.

    If insurers are raising rates--no matter the cause--the solution is to try and intimidate them?

    That is what Putin would do. That is what Chavez would do. And the reason it's stupid isn't because he's acting like a dictator; the reason it's stupid is because not allowing the markets to adjust to economic reality always and without exception brings disastrous results eventually.

    For anybody out there who was still wondering--the Obama Administration has no idea what it's doing. Obama thought this would be a good idea politically--but economic reality was never something he'd had to contend with before. Economic reality isn't about to change as a result of one of Obama's speeches, and quite frankly, before he became president, I'm not sure he understood that.

    From the looks of it, I'm not sure he understand that now.

    1. You're talking about people for whom the Federal Register is scripture and the halls of Congress their holy place.

      For these people laws have magical powers.

      They believe they are giving people the right to health care, like Moses coming down from the mountain.

      They worship government, and since they are government they worship themselves.

      They could give a fuck less about what you call "economic reality", because to them reality is defined by law and law defines reality.

      They are incapable of understanding anything else.

  5. Man. The thuggishness of these people. Takes your breath away. Still, I suppose Bush did it, too. I just can't think of when, exactly.

    Unfortunately, I doubt any insurance company has the stones to call them on it, and take them to court for making or following through on these threats.

    1. Color me skeptical on threats. There is probably a difference between what they are saying in public, and what they are telling the insurance lobby.

      1. I used to believe that...

        Right up until Obama's banking reforms.

        He did the exact same thing to the financial industry--and he went all the way to the wall with it. First comes the public shellacking, next comes the follow through...

        He'll take this as far as he can.

        If you bet the farm on the common sense and pragmatic self-restraint of the Obama Administration? You will go broke.

        1. """If you bet the farm on the common sense and pragmatic self-restraint of the Obama Administration? You will go broke.""

          I agree, and that applies to most Presidents. They always go as far as they can. No arguement for me on that. But Obama will not be in office when this crap really takes hold. It's going to depend on the incoming republican president.

  6. It might be fun to set up a series of bets, almost like a futures market, for dubious government predictions. People who think that Obama care will turn out like they predict can put their money where their mouths are.

    Hmmm, perhaps we could tie the pay and pensions of elected officials to such predictions. After all, the rest of us have to pay directly for our bad predictions why can't the government?

  7. The odds would be so heavy against the government that the payouts would be crap.

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