On June 15th, the Congressional Budget Office issued a crushing blow to President Barack Obama’s health care plan, placing a $1 trillion price tag on the Senate Health, Education, Labor and Pensions (HELP) committee’s draft legislation. And what did Americans get for their $1 trillion in new debt? A measly 16 million net decrease in the number of people uninsured. Liberals in Washington decried the CBO’s findings, complaining that they had scored an incomplete version of the bill.
So this past Friday the CBO released a fuller scoring of HELP’s legislation, and indeed, the overall impact on our nation’s debt is lower: a mere $597 billion would be added to federal budget deficits over the 2010-2019 period.
How did HELP lower the bill’s budget busting total? Did they “bend the curve” on health care costs? Did they weed out administrative costs? Eliminate waste? Nope. The Washington Post reports:
Committee staffers reworked the bill — and added a new provision requiring most employers to contribute to the cost of health insurance — to arrive at the lower estimate. Under the new proposal, any business with more than 25 workers would be required to offer coverage or pay a $750 penalty per employee.
In other words, the HELP committee wants to pay for their health care plan in classic “tax-and-spend” liberal fashion: by instituting a crippling new tax on our nation’s businesses. And not just any new tax. A tax directed like a heat seeking missile at job creation: an employer mandate. But don’t take our word for it. President Obama’s White House National Economic Council Director Larry Summers wrote in 1989:
Mandated benefits are like public programs financed by benefit taxes… There is no sense in which benefits become ‘free’ just because the government mandates that employers offer them to workers. … [Minimum] wages cannot fall to offset employers’ cost of providing a mandated benefit, so it is likely to create unemployment.
And the HELP committee bill is still incomplete. Even its most current incarnation still would cover just 39% of uninsured Americans. So the Obama administration is also pushing for a further expansion of Medicaid. Add those costs into the mix and the final price tag shoots back up to $1.3 trillion. Wonder who the administration plans to tax to make up for that final trillion?
Defending his administration’s economic performance on ABC’s This Week, Vice President Joe Biden told George Stephanopolos: “There was a misreading of just how bad an economy we inherited.” The Obama administration can not blame President Bush forever. They can’t run around threatening to enact a $400 billion tax on employment and then blame others for double-digit unemployment rates. There is an alternative to government run budget busting health care. Some of which the Obama Administration even supports like removing the tax benefit of employer-sponsored health care coverage which will untie Americans health care coverage from their employers and help move the country towards a truly market based consumer driven health care model. Health care coverage can be expanded in a cost-efficient manner, but only by empowering Americans to make health care decisions with their doctors.
The Truth About Medicare’s Administrative Costs
Now that Al Franken has been seated in the Senate, Sen. Chuck Schumer (D-NY) is now telling reporters he sees no need for the left to compromise on their demands for a government run “public option” health care plan. Proponents of the public plan, like Schumer, believe government run health care is needed “to keep the insurance companies honest” because they believe private insurance companies have higher administrative costs than a government run health care would. The explanations for why liberals believe this are as numerous as they are erroneous: government is more efficient than the private sector; private insurance companies spend too much on marketing; executive compensation is too high, private firms fight too many claims, and, of course, private health care seeks too much profit.
But like many core beliefs of the left, the claim that government run health care has lower administrative costs than private care is just plain false. New York Times columnist Paul Krugman, for example, likes to cite data showing that Medicare only spends 3% of its total outlays on administrative costs compared to 14-22% for private care. The numbers themselves are correct, but measuring administrative efficiency by a percentage of total costs is completely useless. Heritage fellow Robert Book explains:
Imagine, for a moment, that Fred and Jane each have a credit card from a different bank. Fred charges $5,000 a month, and Jane charges $1,000 a month. Suppose it costs each bank $5 to produce and send a plastic credit card when the account is opened. That $5 “administrative cost” is a much lower percentage of Fred’s monthly charges than it is of Jane’s, but that does not mean Fred’s bank is more efficient. It is purely a mathematical artifact of Fred’s charging pattern, and it would be silly to compare the efficiency of bank operations on that basis. Yet that is how many analysts compare Medicare with private insurance.
A much more accurate way of capturing each system’s true administrative costs is by a per patient basis. When this is done, government run health care’s administrative costs are routinely higher than private care. In the years from 2000 to 2005, Medicare’s administrative costs per beneficiary were consistently higher than that for private insurance, ranging from 5 to 48 percent higher, depending on the year. This is despite the fact that private-sector “administrative” costs include state health insurance premium taxes of up to 4 percent (averaging around 2 percent, depending on the state)–an expense from which Medicare is exempt–as well as the cost of non-claim health care expenses, such as disease management and on-call nurse consultation services.
Without their lower administrative cost talking point, the left knows their justification for government run health care in a time of dangerously high deficits evaporates. That is why Paul Krugman has now attacked Book’s findings twice on his personal blog. In neither effort does Krugman ever refute that per patient is the better metric nor does he cite any data to refute Book’s per patient conclusions. Read both posts. And read Book’s responses. This is one liberal myth we can put to bed.
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