Code Red: Two Economists Examine the U.S. Healthcare System

March 30, 2010

Mr. Waxman’s Deception

Filed under: Health Reform,Health spending — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 8:47 am

Henry Waxman is apoplectic. AT&T, Caterpillar, and other big businesses that offer retiree benefits are complaining that the new reform legislation will cost them hundreds of millions of dollars. Mr. Waxman says this flies in the face of independent analysis showing that big business will benefit from reform and he wants these companies to explain themselves, under oath, before Congress. Oh, and President Obama cited this same independent analysis when touting the savings from health reform?

What exactly is this independent analysis? It is a report by the Business Roundtable laying out how much money might be saved by a variety of health reforms. Some of these reforms require government intervention. But other reforms require fundamental changes in how providers deliver care. Importantly, the Roundtable report does not analyze any specific healthcare proposal, let alone the one that the President just signed into law.

Here is what the Roundtable claims might help curb costs:

Delivery system reforms, such as value-based purchasing;
Innovation centers that identify alternative methods of provider reimbursement;
Accountable care organizations that realign financial incentives to improve the quality and the value of the care delivered;
Financial penalties for failing to avoid preventable hospital re-admissions;
Increased individual accountability for health care spending decisions, including health reimbursement arrangements and health savings accounts;
Cost and quality of care data that is easier for patients and providers to access and use;
Elimination of sharp regional variations in practice patterns;
Promote wellness and prevention programs and expand financial incentives to participate in specific programs to reduce lifestyle related illness; and
Insurance market reforms that promote competition and choice.

The new legislation does nothing beyond the status quo to facilitate these important changes. (One exception – the new “Independent Medicare Advisory Council” could impose care guidelines to reduce practice variations)

The report also notes that a number of potential changes threaten to increase health care spending, including:

Increases in the cost of health care to individuals from changes to consumer spending accounts or other actions that discourage consumer-engaged decision making; and
Cost-shifting to the private sector from reductions in federal reimbursements to providers and from a public plan option, if included.

Here at last are two changes that can be tied to the new law. The new law does nothing to encourage consumer-directed health plans and the Medicare and Medicaid provider fee reductions will give providers plenty of reasons to cost-shift.

It seems that it is Mr. Waxman and our President who have some explaining to do. The Business Roundtable report does not say that the new legislation will curb costs in the private sector. The new legislation has missed countless opportunities to save money and, if anything, it is going to drive private insurance costs higher.

Here is what I think is really going on. The left wing of the Democratic party wants a single payer system. The best way to achieve that goal is to totally destroy the market-based system. By focusing on insurance market “reform” and ignoring health care reform, they are well on their way to realizing their dream. And they know it.

Sometimes I would rather we had just skipped all this ugliness and went right to single payer.


  1. They gave themselves a “get out of jail” pass, and are playing with real money as if it is Monopoly money.

    Comment by jd — March 30, 2010 @ 8:54 am

  2. “Sometimes I would rather we had just skipped all this ugliness and went right to single payer.”

    Me too.

    Comment by Don McCanne, MD — April 8, 2010 @ 6:37 pm

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