I have converted this post into a memo for easy printing and reading.
The President hosted a health care reform town hall in Portsmouth, New Hampshire on Tuesday August 11, 2009. His remarks were extensive and he took questions.
At this town hall meeting the President said:
THE PRESIDENT: (L)et me just say there’s been a long and vigorous debate about this, and that’s how it should be. That’s what America is about, is we have a vigorous debate. That’s why we have a democracy. But I do hope that we will talk with each other and not over each other … because one of the objectives of democracy and debate is, is that we start refining our own views because maybe other people have different perspectives, things we didn’t think of.
Where we do disagree, let’s disagree over things that are real, not these wild misrepresentations that bear no resemblance to anything that’s actually been proposed.
In the spirit of informed and vigorous debate, let’s look at what the President said about the pending legislation at yesterday’s Portsmouth town hall. This post is a compilation of a series of 20 posts I made beginning Wednesday, August 11th.
1. The President’s overpromise that everyone can keep their health plan
THE PRESIDENT: Now, let me just start by setting the record straight on a few things I’ve been hearing out here … (laughter) … about reform. Under the reform we’re proposing, if you like your doctor, you can keep your doctor. If you like your health care plan, you can keep your health care plan.
And yet here is what CBO said about the House bill:
CBO: In addition, CBO and the JCT staff estimate that nearly 6 million other people who would be covered by an employment-based plan under current law would not have such coverage under the proposal. That figure includes part-time employees, who could receive subsidies via an exchange even though they have an employer’s offer of coverage, and about 3 million people who would not have an employer’s offer of coverage under the proposal. Firms that would choose not to offer coverage as a result of the proposal would tend to be smaller employers and those that predominantly employ lower-wage workers – people who would be eligible for subsidies through the exchanges – although some workers who were not eligible for subsidies through the exchanges also would not have coverage available through their employers. Whether those changes in coverage would represent the dropping of existing coverage or a lack of offers of new coverage is difficult to determine. (p. 5)
According to CBO, the President’s statement is incorrect for a portion of these 6 million people who as a result of the House bill would lose employment-based coverage they would otherwise have under current law. Some of those 6 million people would lose the opportunity to get employment-based coverage, while others would “represent the dropping of existing coverage.” CBO reached similar conclusions. Here is a more detailed explanation of this problem that I wrote for an earlier draft of the Kennedy-Dodd bill, under which 10 million people would not have lost the health plan they would otherwise have under current law. CBO dialed this number down to 3 million for a later draft of Kennedy-Dodd.
This is an inevitable consequence of moving away from a system that is so heavily biased toward higher subsidies for employment-based coverage. My preferred plan would have a similar effect. Nonetheless, the President is overpromising, at least relative to CBO’s view of the House bill.
2. Putting the government in charge of your health insurance
THE PRESIDENT: You will not be waiting in any lines. This is not about putting the government in charge of your health insurance.
And yet section 3103 of the Senate HELP Committee bill would give the Secretary of Health and Human Services authority to appoint a Medical Advisory Council that would determine what items and services are “essential” for a “qualified health plan,” and, by implication, which benefits are not essential. The House bill is parallel but less specific, creating an “independent public/private advisory committee,” in which the members are chosen by the government. In both cases, the recommendations would be packaged together and approved or disapproved en bloc by the Executive Branch and Congress.
These bills would give government officials, or people chosen by the government, authority to determine benefit packages, copayments and deductibles, relative premiums, as well as health plan expenses and profits. They would, in effect, turn health insurance into a utility, run by private companies, but with policies and rates set by the government. While privately-owned firms would be implementing the decisions, the key decisions would be made by government officials or people chosen by government officials.
THE PRESIDENT: I don’t think government bureaucrats should be meddling, but I also don’t think insurance company bureaucrats should be meddling. That’s the health care system I believe in.
Resources are constrained, and so someone has to make the cost-benefit decision, either by creating a rule or making decisions on a case-by-case basis. Many of those decisions are now made by insurers and employers. The House and Senate bills would move some of those decisions into the government. Changing the locus of the decision does not relax the resource constraint. It just changes who has power and control.
The health care system I believe in moves no more decisions into the hands of the government, and instead creates incentives for people to control more of these decisions and make these hard tradeoffs for themselves. Insurance would evolve from pre-paid medical care, as it is today for many, to a more traditional catastrophic protection model, as we now have for other kinds of insurance.
3. Waiting in line
(In response to a gentleman’s question about Medicaid forcing him to take a generic equivalent for Lipitor):
THE PRESIDENT: Now, I want to be absolutely clear here: There are going to be instances where if there is really strong scientific evidence that the generic and the brand name work just as well, and the brand name costs twice as much, that the taxpayer should try to get the best deal possible, as long as if it turns out that the generic doesn’t work as well, you’re able to get the brand name.
The proxy for the taxpayer is the government bureaucrat running the program. At least for this Medicaid patient, he President is in effect saying that, “if there is really strong scientific evidence” of medical equivalence, then a government official, on behalf of the taxpayer, should make the decision for you “to get the best deal possible.”
It’s hard to square this with his earlier statement that “This is not about putting the government in charge of your health insurance.”
Continuing with this same case, the President said:
THE PRESIDENT: So the basic principle that we want to set up here is that … if you’re in private insurance, first of all, your private insurance can do whatever you want. If you’re under a government program, then it makes sense for us to make sure that we’re getting the best deal possible and not just giving drug makers or insurers more money than they should be getting. But ultimately, you’ve got to be able to get the best care based on what the doctor says.
And it sounds like that is eventually what happened. It may be that it wasn’t as efficient … it wasn’t as smooth as it should have been, but that result is actually a good one.
The questioner said “And I had to go through two different trials of other kinds of drugs before it was deemed that I was able to go back on the Lipitor through the New Hampshire Medicaid system.” The President responded, “It may be that it wasn’t as efficient … it wasn’t as smooth as it should have been, but the result is a good one.”
This man had to wait in a line. Earlier the President said about reform, “You will not be waiting in any lines,” and yet in this case, “The result is a good one.”
4. Government-mandated benefits
THE PRESIDENT: And finally – this is important – we will require insurance companies to cover routine checkups and preventive care, like mammograms and colonoscopies …
(later) And I would like to see a mental health component as part of a package that people are covered under, under our plan.
In this case, “we” and “our plan” mean “the government.” I can’t see how he squares that with “This is not about putting the government in charge of your health insurance.” And yet the President is talking about the government mandating specific benefits.
5. Preventive care does not save money (in the aggregate)
THE PRESIDENT: … because there’s no reason we shouldn’t be catching diseases like breast cancer and prostate cancer on the front end. That makes sense, it saves lives; it also saves money … and we need to save money in this health care system.
Here is the key sentence from CBO Director Dr. Douglas Elmendorf in a letter he sent to Rep. Nathan Deal last Friday:
CBO: Although different types of preventive care have different effects on spending, the evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall.
Dr. Elmendorf eloquently explains why:
CBO: But when analyzing the effects of preventive care on total spending for health care, it is important to recognize that doctors do not know beforehand which patients are going to develop costly illnesses. To avert one case of acute illness, it is usually necessary to provide preventive care to many patients, most of whom would not have suffered that illness anyway. Even when the unit cost of a particular preventive service is low, costs can accumulate quickly when a large number of patients are treated preventively. Judging the overall effect on medical spending requires analysts to calculate not just the savings from the relatively few individuals who would avoid more expensive treatment later, but also the costs for the many who would make greater use of preventive care. As a result, preventive care can have the largest benefits relative to costs when it is targeted at people who are most likely to suffer from a particular medical problem; however, such targeting can be difficult because preventive services are generally provided to patients who have the potential to contract a given disease but have not yet shown symptoms of having it.
Finally, Dr. Elmendorf makes a key point (also on his blog):
CBO: Of course, just because a preventive service adds to total spending does not mean that it is a bad investment.
The President could have correctly said, “Preventive care saves lives. It increases spending, but I think it’s worth it.” He was incorrect when he said “It also saves money … and we need to save money in this health care system.”
6. The House bill would increase short-term, 10th year, and long-term budget deficits.
THE PRESIDENT: And we will do this without adding to our deficit over the next decade, largely by cutting out the waste and insurance company giveaways in Medicare that aren’t making any of our seniors healthier.
(later) First of all, I said I won’t sign a bill that adds to the deficit or the national debt. Okay? So this will have to be paid for.
- CBO says the House bill would increase federal deficits by $239 B over the next ten years.
- CBO says the House bill would increase the deficit in 2019 by $65 B, meaning the bill fails the President’s “10th year test.”
- CBO says the House bill would result in increasing deficits beyond 2019, because the new spending would grow faster than 8% per year, while the offsets would grow only about 5% per year.
- The House bill would not just slow Medicare growth, but would also raise taxes on high-income individuals and small business owners.
7. The President was incorrect – AARP opposes the bill.
THE PRESIDENT: We have the AARP on board because they know this is a good deal for our seniors.
(later) AARP would not be endorsing a bill if it was undermining Medicare, okay?
After the town hall, AARP issued a statement including the following sentence:
AARP: While the President was correct that AARP will not endorse a health care reform bill that would reduce Medicare benefits, indications that we have endorsed any of the major health care reform bills currently under consideration in Congress are inaccurate.
A political observation: With this statement AARP embarrassed the President. It is a huge deal for a left-leaning interest group like AARP to directly and immediately contradict the President on his top policy priority. I infer that AARP’s leadership is more afraid of their members attacking them for perceived support of these bills than they are of infuriating the President and his staff.
8. The bills would take Medicare savings needed for solvency and spend them on a new entitlement.