State of the Union

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2012 State of the Union: Healthcare Edition

January 24, 2012 in Current Events, Public Policy | No comments

The full text of the State of the Union is here.  Lots of blogs are analyzing at the State of the Union address, but the Healthcare Economist will examine the President’s health-related remarks.

Healthcare-Related Comments

Medical R&D:“We’ll invest in biomedical research, information technology, and especially clean energy technology -– (applause) — an investment that will strengthen our security, protect our planet, and create countless new jobs for our people.”

Health Reform: “And it’s why we passed reform that finally prevents the health insurance industry from exploiting patients. (Applause.)

Now, I have heard rumors that a few of you still have concerns about our new health care law. (Laughter.) So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses. (Applause.)

What I’m not willing to do — what I’m not willing to do is go back to the days when insurance companies could deny someone coverage because of a preexisting condition. (Applause.)

I’m not willing to tell James Howard, a brain cancer patient from Texas, that his treatment might not be covered. I’m not willing to tell Jim Houser, a small business man from Oregon, that he has to go back to paying $5,000 more to cover his employees. As we speak, this law is making prescription drugs cheaper for seniors and giving uninsured students a chance to stay on their patients’ — parents’ coverage. (Applause.)

So I say to this chamber tonight, instead of re-fighting the battles of the last two years, let’s fix what needs fixing and let’s move forward. (Applause.)”

Cuts to Medicare and Medicaid: “And their conclusion is that the only way to tackle our deficit is to cut excessive spending wherever we find it –- in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes. (Applause.)

This means further reducing health care costs, including programs like Medicare and Medicaid, which are the single biggest contributor to our long-term deficit.  The health insurance law we passed last year will slow these rising costs, which is part of the reason that nonpartisan economists have said that repealing the health care law would add a quarter of a trillion dollars to our deficit.  Still, I’m willing to look at other ideas to bring down costs, including one that Republicans suggested last year — medical malpractice reform to rein in frivolous lawsuits. ”

Health IT:“Veterans can now download their electronic medical records with a click of the mouse.”

The Healthcare Economist’s Take

Your response to these comments are likely, ‘that’s it?!?!’  If you look at the State of the Union address from 2010, you’ll notice that health care reform played a large role in the President’s State of the Union address.  In this address, the President largely avoided the topic. This is not a huge surprise since the President’s Health Reform package (the ACA) is proving unpopular.

Tellingly, the phase “health reform” is never once mentioned in the speech.

He did mention reducing paperwork for small businesses and maintaining the provision to forbid insurers to adjust health insurance premiums based on the patients’ pre-existing conditions. A policy that prohibits rating policyholders based on pre-existing conditions is only tenable with an individual mandate; otherwise healthy people will have no incentive to buy insurance until they are sick. Obama does not mention the individual mandate at all in his speech, however.

The President also says that we need to cut spending for Medicare and Medicaid. He does not, however, offer specifics. In 2010, the President established the bipartisan Fiscal Commission to reduce the cost of Medicare, Medicaid and Social Security. Those efforts largely failed. With so little effort directed towards these cuts in his speech, there is little chance that these cuts materialize or if they do they will be large in magnitude.

In short, on the health care front there is no new news…this would of course change significantly if a Republican takes office in 2013.

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The Republican Response: The Healthcare Economist’s Take

January 28, 2010 in Current Events, Health Insurance, Public Policy | 2 comments

Yesterday I game my evaluation of President Obama’s State of the Union Address.  Today, I analyze the Republican Response.

All Americans agree, we need a health care system that is affordable, accessible, and high quality.  Cheap and high quality, who wouldn’t agree with that proposition?  Figuring out how to get there is the problem.

But most Americans do not want to turn over the best medical care system in the world to the federal government.  Republicans in Congress have offered legislation to reform healthcare, without shifting Medicaid costs to the states, without cutting Medicare, and without raising your taxes.  Republicans don’t want to turn over your medical care to the federal government, except in the cases of Medicare and Medicaid.  The Republican message is philosophically incoherent: we don’t like big government healthcare programs except for one really big, really underfunded healthcare program called Medicare.  This sounds like Bill Clinton in 1994, “I’m not going to let the government mess with your Medicare.”

We will do that by implementing common sense reforms, like letting families and businesses buy health insurance policies across state lines, and ending frivolous lawsuits against doctors and hospitals that drive up the cost of your healthcare.  These policies will do little to significantly change the healthcare system.   The reason Republicans propose allowing people to buy policies across state lines is to allow individuals to buy less regulated insurance products from other states.  If this happens, healthy individuals will buy less expensive products from less regulated states and only sicker individuals will be left to purchase health insurance in the more regulated states.  This will drive premiums up significantly for the sickest people, but decrease premiums for healthy individuals.  This phenomenon is known as adverse selection.  In addition, malpractice reform can help cut costs.  There is evidence that the current malpractice system doesn’t work well. However, malpractice costs are a tiny fraction of overall healthcare costs.  Limiting the malpractice liability of physicians could decrease cost by incentivizing physicians to decrease the use of defensive medicine.  If these caps are implemented, however, patients who are severely injured through a physician’s negligent behavior will not be able to receive the full compensation they are due.

This foreign terror suspect was given the same legal rights as a U.S. citizen, and immediately stopped providing critical intelligence.  As Senator-elect Scott Brown says, we should be spending taxpayer dollars to defeat terrorists, not to protect them.  As a nation that believes in the civil rights of all individuals, it is important to give even accused terrorists the right to due process.

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Obama’s State of the Union Address: The Healthcare Economist’s Take

January 27, 2010 in Current Events, Public Policy | 2 comments

Below are healthcare-related excerpts from President’s Obama’s State of the Union Address with my comments afterward.

Now let’s be clear – I did not choose to tackle this issue to get some legislative victory under my belt. And by now it should be fairly obvious that I didn’t take on health care because it was good politics. True.  Support for Obama’s health reform policies are hitting all-time lows.

The approach we’ve taken would protect every American from the worst practices of the insurance industry. Here, Obama may be referring to the fact that he wants to prohibit insurers from denying insurance coverage based on pre-existing conditions.  In many cases this is a good thing.  It is hard for people who have diseases to get insurance coverage, and when they don’t get coverage, they may forego necessary care.  However, when insurance companies don’t deny coverage to individuals with pre-existing conditions, each person has an incentive NOT to buy health insurance until they come down with a serious disease.  This way, you’ll save money on health insurance and when you decide to buy health insurance when you’re sick, it’ll cost the same as it does for healthy people.

It would give small businesses and uninsured Americans a chance to choose an affordable health care plan in a competitive market. The subsidies individuals would get to purchase nongroup insurance would help people purchase insurance for individuals who work for a business that does not offer a group plan.  However, the small businesses generally oppose health reform.

It would require every insurance plan to cover preventive care.  Most already do.

And by the way, I want to acknowledge our First Lady, Michelle Obama, who this year is creating a national movement to tackle the epidemic of childhood obesity and make our kids healthier. Although losing weight will generally improve your health, calling obesity an epidemic is a bit of a hyperbole.

Our approach…would reduce costs and premiums for millions of families and businesses. And according to the Congressional Budget Office – the independent organization that both parties have cited as the official scorekeeper for Congress – our approach would bring down the deficit by as much as $1 trillion over the next two decades.  Cost will decrease for some people.  Those who are newly eligible for Medicaid will see lower health insurance premiums.  Those who receive subsidies to buy health insurance will see lower premiums.  However, the taxpayer will have to cover this cost.  Thus, there will be winners and losers if health reform passes.  The Medicare cost cuts the Obama is proposing are small in comparison with the fast rate of growth of overall Medicare spending.  Further, political pressure will make it difficult to actually enact these cuts.  Although Obama may claim the health reform will decrease federal spending, insurance companies believe health reform will increase health care costs.  I’ve already stated my belief that the cost-cutting measures in the health reform bills are meager.

As temperatures cool, I want everyone to take another look at the plan we’ve proposed. There’s a reason why many doctors, nurses, and health care experts who know our system best consider this approach a vast improvement over the status quo.  Providers should support health reform.  In general it expands the number of people with insurance (i.e., it expands their potential market).  Further, because there is little cost cutting, doctors and nurses should see an increase in profits.  Doctors and nurses may also believe that health reform is good for their patients, but without a doubt it will benefit the provider’s pocketbook.

Do not walk away from reform. Not now. Not when we are so close. Let us find a way to come together and finish the job for the American people.  In other words: “Please pass health reform.  Pretty please!”

Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will.  A spending freeze sounds like a great idea to reduce the debt.  However national security (21%), Medicare & Medicaid (23%), Social Security (21%), other mandatory spending (10%) and interest on the debt (8%) make up most of the federal budget.  This leaves only 17% of the budget which is not under a spending freeze.  That is like saying, “Yeah, I’ll keep living in this house I can’t afford and driving this car I can’t afford, but when I go to Taco Bell I’ll get the regular taco instead of the taco supreme.”  That is not the way to financial security.  Additionally, some of the discretionary programs will be cut but others will receive increased funding.  Obama even campaigned against spending freezes in the election.

More importantly, the cost of Medicare, Medicaid, and Social Security will continue to skyrocket. That’s why I’ve called for a bipartisan, Fiscal Commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad. Read: “I know it’s not a good idea politically to cut Medicare, Medicaid or Social Security.  So instead I’ll call for a commission to write a report that gets ignored a year from now.”

We are helping developing countries to feed themselves, and continuing the fight against HIV/AIDS.  Feeding the poor and helping those with AIDS are important goals.  They are also goals that few people would oppose politically.

Conclusion: Overall, Obama has proposed nothing new on health reform, but has just asked nicely for Congress to pass it.  He has imposed a spending freeze on 17% of federal budget while letting entitlements continue to gobble up more and more of worker’s incomes through taxes.  There is no solution to the impending budget shortfalls for Medicare and Social Security.  To sum up, on the health care front it’s more of the same.

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