Several Perspectives on Healthcare Reform

The recent discussions of healthcare reform have never been more interesting.  This article briefly examines positions taken by several newspapers and their readers with respect to healthcare reform.

1. Healthcare Reform - A Practical Alternative.  Perhaps the best and simplest commentary that we have seen on healthcare reform comes from a conservative reader quoting a democratic leader.  

The letter to the Wall Street Journal summarizes many people’s thoughts on healthcare reform fairly well.  The writer notes Al From’s op-ed piece and says:

“I (a conservative) am shocked to read Al From’s (founder of the Democratic Leadership Council) “Democrats Don’t Need the Public Option” op-ed, Oct. 16, which makes more sense than anything I’ve heard from any of the Washington’s blowhards.  His advice to drop the public option, require everyone to buy coverage, cut the pre-existing condition trap and tax Cadillac health-care plans would get most people's support.  Pass a bill like this, sign it into law and let's move on.”

The Wall Street Journal, October 21, 2009, “Letters to the Editor”, Jack Wissner, Atlanta

2. New York Times and Wall Street Journal Criticize Efforts to Squelch Freedom of Speech.  Over the past few weeks, the insurance industry has become increasingly vocal and concerned over the potential for passing and the reemergence of a public option.  Interesting enough, each the New York Times and the Wall Street Journal  — two papers that usually take diametrically different views —  each criticize President Obama for trying to stop the efforts of the insurance lobby to speak out against the public option.  Specifically, the New York Times stated:

“The Obama administration has dropped its ham-handed attempt to stop health insurers from warning buyers of private Medicare Advantage plans that their extra benefits might be cut under pending health care legislation.  The administration modified an order that relies on technicalities to stop those companies from joining in the vigorous and necessary national debate.”

The New York Times, Tuesday, October 20, 2009, “Debate is Good for Your Health”

The Wall Street Journal on the same issue stated:

“During his weekly radio address last Saturday, President Obama attacked health insurers for allegedly making excessive profits and paying excessive bonuses, for spreading “bogus” misinformation about the impact of Democrats’ reform agenda on the cost of health insurance, and for “figuring out how to avoid covering people.”  He opined that health insurers are “earning these profits and bonuses while enjoying a privileged exemption from our antitrust laws, a matter that Congress is rightfully reviewing.”

The Wall Street Journal, October 21, 2009, “Competition and Health Insurance”, By Scott Harrington

3. Healthcare Cost Estimates are Usually Hugely Understated. A well-written piece in the Wall Street Journal articulates how costs of healthcare programs are generally understated and sometimes by dramatic amounts.  The following are a few paragraphs from this article.

“Next let’s examine the record of Congressional forecasters in predicting costs.  Start with Medicaid, the joint state-federal program for the poor.  ‘The House Ways and Means Committee estimated that its first-year costs would be $238 million.  Instead it hit more than $1 billion and costs have kept climbing.

Thanks in part to expansions promoted by California’s Henry Waxman, a principal author of the current House bill, Medicaid now costs 37 times more than it did when it was launched – after adjusting for inflation.  Its current cost is $251 billion, up 24.7% or $50 billion in fiscal 2009 alone, and that’s before the health-care bill covers millions of new beneficiaries.

Medicare has a similar record.  In 1965, Congressional budgeters said that it would cost $12 billion in 1990.  Its actual cost that year was $90 billion.  Whoops.  The hospitalization program alone was supposed to cost $9 billion but wound up costing $67 billion.  The rate of increase in Medicare spending has outpaced overall inflation in early every year (up 9.8% in 2009), so a program that began at $4 billion now costs $428 billion.

The Medicare program for renal disease was originally estimated in 1973 to cover 1,000 participants.  Today it covers 395,000, at a cost of $22 billion.  The 1988 Medicare home-care benefit was supposed to cost $4 billion by 1993, but the actual cost was $10 billion, because many more people participated than expected.  This is nearly always the case with government programs because their entitlement nature – accepting everyone who meets the age or income limits – means there’s no fixed annual budget.”

The Wall Street Journal, October 20, 2009, “Review & Outlook – Health Costs and History”

4. The Public Option Reemerges. Over the past few weeks, there have been efforts to resurrect a strong public option in the Senate.  The Wall Street Journal has taken a very negative view on this issue.  A few of the comments from a Wall Street Journal op-ed are as follows:

“The public option’s renewed momentum is mostly the product of the raw, ideological willfulness of the progressive left.  Led by Speaker Nancy Pelosi, they’re not about to let a once-in-a-generation opportunity pass without a fight, and they view the public option as a down payment on single-payer health care.  They’re right to think so; a public option will quickly blow up the private insurance market.

In particular, Mrs. Pelosi believes she’s found a political trump card.  A so-called “robust” public option will cost the government less than other plans, since it will pay doctors and hospitals fees pegged to Medicare’s price controls on thousands of services.  The Congressional Budget Office has reportedly found that these below-market payments would result in “savings”: of $110 billion, compared to requiring a public option to negotiate rates with providers like a private company would.

The real problem is that government pays so much below costs.  A 2006 study in the Journal of Health Affairs found that for each dollar of cost hospitals incurred, they received $1.22 from private payers and only 95 cents from Medicare.  Analysts Allen Dobson and Joan DaVanzo argue that this puts hospitals “in the unenviable position of playing the role of private-sector tax collectors, to maintain their financial solvency.”

The Wall Street Journal, October 22, 2009, “Review & Outlook – The Public Option Comeback”

We hope that people find this informative interesting.  Healthcare reform should include the elimination of pre existing conditions as a bar to coverage, the requirement that everybody buy health insurance and some kind of subsidies for those that are working poor. It also ought to standardize Medicaid eligibility.  However, it need not be something that transforms the United States healthcare system.