As the system gets gamed, the costs will be much, much higher than the CBO is estimating.
Arnold Kling explains his words in more detail. Elsewhere:
If you think of the social cost of this bill it's well below $900 billion. If we could collect in tax revenues all the dollars in savings and new wages that people will get because of this bill, it would bring the cost well below $900 billion.
Jonathan Gruber explains his words in more detail.
Clearly this calls for a bet.
Klein’s 1st two questions focus on cost control. Gruber’s answer is a long-winded “no” or if you’re feeling generous “we’re not sure.” Near the end he basically says that we don’t know how to control cost, but if we cover everyone I’m sure we can figure it out.
I can not figure out how he comes to the conclusion that the cost will be well below $900billion given those answers.
Shouldn’t Brad DeLong be looking at that article and asking “why oh why can’t we have a better press corp?”
The reason costs will come down, and this has not been discussed, is that reimbursement rates for hospitals and some providers have been increased in order to subsidize non-compensated or charity care. This leads to a number of distortions. Hospitals will be reimbursed for tertiary services at a much higher rate because congresspersons need to subsidize rural and inner city hospitals. (These distortions and subsidies lead to such things as high end private ambulatory surgicenters and heart hospitals because the federal subsidy is such a large umbrella.) Now that everyone pays their way via insurance, the indirect subsidies could be removed or lowered. Look for tighter bargaining by the government now that everyone pays.
Gruber is just crazy.
What is the correct level for health spending? We have an aging population that wants to spend more money on health care. Why not just demand that education cost less, or energy, or land prices.
His claim that the Cadillac tax will actually increase income is crazy math. While many employees may switch to taxable income rather then untaxed benefits, that additional income will be taxed. How he can claim that changing the form of compensation, and taxing the change, is an increase in income is crazy math. Not to mention that he first claims no reduction in health care expenditures but then claims that premiums will decline for non-group insurance buyers. That seems to have a conflict.
Then he say he wants price controls on health care. When has that worked?
Then he admits the truth. Once the government controls the system, politicians can dictate, ration, health care as they see fit. He is advocating centralized control, Soviet style, of the health care system.
Gruber is telling the truth, give the government control, give them the power, and they will ration health care as they see fit because, as he says, we treat people too intensely.
Bill is wrong
Cost will not come down.
Reimbursement rates for uncompensated care is a problem, but so is low reimbursement rates for medicaid. Poor people who go to inner city hospitals and rural health centers generally qualify for medicaid if they just apply. But the current reimbursements make it difficult to attract staff or deliver quality care in these communities.
In any case, the money that was sent to providers will now be spent as subsidies for insurance coverage. Net savings are an illusion and create disincentives to work because of high marginal tax rates.
The current system does misallocate resources, because the government is not very good at allocating resources.
With the government cutting costs across the board what incentive will inner city and rural health care providers have? They will still seek subsidies for the same reason they seek subsidies today – low reimbursements.
And what makes you think that potential doctors, nurses and others will not see the tight price controls and just choose other career paths.
Gruber is a “health economist.”
He is not an economist.
Simon,
Yeah, that’s exactly how every other area of government spending works. I mean, look at how the DoD, once confronted with cost overruns, etc. reigned in spending.
Arnold Kling is right. The current solutions offered are complicated and rife with unintended consequences.
We have failed to define the central problem. Instead of insuring based on the probability that something bad like a broken leg or cancer will happen, we prepay for routine medical expenses and get insurance against bad things happening. Employees think they are getting a “good deal” when they can walk out of a doctor’s office with only a $20 co-pay.
Let insurance companies do what they do best, charge premiums based on the probability that the consumer will need expensive future care for some illness. Get them out of the business of negotiating rates for mammary exams and amoxycilin and administering payments for routine procedures. How much cost could be saved by the average doctor practice if they did not have to deal with co-pays and charge paperwork for routine visits?
On a related topic. I have noticed that both the House and the Senate have headlined that insurors will not be allowed to deny coverage to anyone with a pre-existing condition and that because of community rating the obese forty year old diabetic with high blood pressure will be paying the same rate as a forty year old who competes in triathalons. That’s called “fairness”. But insurors are permitted to charge higher rates for people who smoke. So a 25 year old in perfect health will pay a surcharge because of his habit. Sounds “fair” to me.
Bill,
don’t worry about DanC…he has made it abundantly clear from previous posts that he knows absolutely nothing about health care.
what really scares me is that this health care debate is being driven by people like DanC…people who are long on opinion and short on knowledge.
What exactly is it that you experts think needs to be known?
Do the reformers actually know it?
So, only a person with deep knowledge of the medical industry is qualified to debate how they will be required by the government to spend their money on it. Okay.
Here’s a fun game, you guys can come up with a questionnaire that you think a person qualified to discuss the issue should know.
Or we can compare scores on those I find with Google. So far most of them seem to be variations of the CNN quiz. No cheating.
http://www.cnn.com/2009/HEALTH/08/20/health.care.quiz/index.html
8/8
DanH
I agree with you.
However Gruber does imply that he wants wage and price controls when he says “You need someone with the political ability to set rates to controls costs.”
As for an MD, I have no idea who this is. But feel free to attack my points.
As for Bill, he seems to be a very nice man who has ideas that are in sharp contrast with my own. Written words often seem sharper then I intend them but I think Bill has a misplaced faith in government and bureaucracy. I really do think Bill has much to add. Even if it is frustrating to see him constantly say that he is an expert without demonstrating that expertise. Moreover in the past, even when I agreed with him, he disagreed with me. Whatever.
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