During the campaign, one of the rare moments of principle of any candidate was Obama’s refusal to take Hillary’s bait and endorse a gas tax holiday. It was the time I stopped seeing him as Candidate Barack Obama and started seeing him as President Barack Obama. Although I have disagreed with some of the decisions his Administration has made, it has been incredibly refreshing to have a President who actually understands the issues in front of him. If he can deliver a great speech about it, so much the better:
A few quibbles with a bravura performance:
If you have health insurance and like it, reform will not change it.
Not exactly. Americans right now get their health insurance through their employer. For the most part, there are few if any options; the sales channel is insurance company to benefits administrator to corporate purchasing agent, with the corporation then telling the employee what he has. Health care reform is going to create a public option that will likely be lower cost, at least for an entire workforce (especially since it seems regulation will push private insurers toward community rating). We would expect – indeed, those of us who support single payer would hope – that companies will begin to drop their private insurance program in favor of the public option. The public plan does not work very well if all healthy, employed people continue to be covered by private insurance – we need these people to avoid adverse selection in the public plan.
If someone’s company drops private insurance to elect the public option, it is highly impractical for that person to continue with the previous private insurance plan. He would now be asked to pay the entire premium out of pocket for the privilege of largely duplicating the coverage provided by the public option. So if someone has an insurance company/plan that he likes, there is a meaningful risk that reform will disrupt this relationship. The Democrats should be so lucky as to have this turn into a referendum between “people who love their existing insurance company” and “people who are frustrated with their existing insurance company”.
We will pay for two thirds of the cost of the plan by cutting down waste.
Peter Orzag is way too brilliant to believe this. It is a staple of American politics that new programs can be paid for by “reducing waste.” It’s the ultimate free lunch – who is opposed to waste in the abstract? But there is no appropriations code entry for “waste.” It goes by other names, such as “commodity food program” and “missile defense”, and the stakeholders in these wasteful programs are maddeningly resistant to change. Sure, it would be great if hospitals ordered a test once instead of five times. How much are you going to spend on the IT system that will track the patient and deliver all previous records to each doctor, flagging the fact that the test being ordered was performed three days ago? How much are you going to spend training the doctor to use the system? What are you going to do about the legal system when a doctor believes a test has already been performed, it turns out it never was done, and he is sitting on the receiving end of a malpractice charge?
Cost should not fall upon middle class.
Since the program is primarily for the benefit of the middle class, why shouldn’ t the middle class pay for it? Taxing incomes over $1mm seems a bit silly – that is the group least likely to want anything to do with the public option. To quote David Brooks, of all people, “the theory of the Democratic bills seems to be that 98 percent of Americans can party on, with the latest and costliest health care imaginable, no matter how ineffective, and the top 2 percent will pay for it all.” To be fair, the second time Obama said this he said that he didn’t want the burden to fall primarily upon the middle class. Since virtually no tax program falls primarily on the middle class, that leaves an awful lot of wiggle room. I suppose it’s his attempt to avoid taxing employee benefits, a perfectly sensible idea that unions hate.
This plan will control costs.
Maybe it will. If so, however, it will only be in terms of second order effects: this plan will so strain the government that a future administration will rein in spending (and, as Obama pointed out, the status quo is dramatically worse for our fiscal health). There is no effective feature to cut expenses, and Obama’s biggest duck of the night was running from the question about end of life care. If Americans continue to consume care in the fashion we do today, we will not make a serious dent in its cost. How could we? Either we need to consume fewer services or providers need to be paid less per service, and both of these options adversely impact the current medical decision-maker. So the plan needs to have a concrete mechanism to push back on the cost structure. End of life care is a massive area, but medical expertise well beyond my level is needed to set the process. I can, however, reiterate my Taunter Drug Plan; Obama seems amazingly well aware of different ideas, and my hope is that if this gets to Baseline or Rorty or some other outlet with, well, I think the technical term is “readers,” perhaps something can come of it:
Most Favored Nation for the United States. Any pharmaceutical company can charge any price it wishes for any drug in the US. However, no drug may cost more in the US than its cost in the lowest-priced other OECD country. If Merck wants to sell a drug in the US for $100/pill, it is welcome to give it a shot. But if it decides to sell it for $5/pill in Germany, the most they can charge in the US is $5. We might as well get the benefit of other nations’ volume discounts.
Given the criticism of the press conference for being too academic, hopefully this will resonate: