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Wednesday, December 9, 2009

Government-Run Health Care Is Here

Andrea Stone

WASHINGTON (Dec. 8) -- So what if the Senate ditches the public option? Even without so-called "socialized medicine," there still will be plenty of government-run health care to go around.

Never mind that the public debate and advocacy ads depict nightmare scenarios of "government bureaucrats" denying medical care, the recent controversy over breast cancer screening being only the latest. Taxpayers already cover nearly half of the nation's health care spending.

The government paid 46.2 percent of medical bills in 2007, according to the federal Centers for Medicare & Medicaid Services. By 2016, under current law, taxpayers will bear more than half.
Federal, state and local governments combined shell out more than $1 trillion a year for health care. That's an estimated $3,871 this year for every man, woman and child -- regardless of whether they get direct government help.


• Medicare, the federal health insurance program for nearly 43 million seniors and disabled people, will cost the government more than $500 billion this year alone. It remains wildly popular even though government experts say the program is hurtling toward bankruptcy unless premiums or taxes are raised or costs brought under control.

During the height of the public tizzy over "death panels" last summer, President Obama spoke at an AARP town hall about a letter he received from a woman decrying "socialized medicine" and warning, "don't touch my Medicare."
"That's what Medicare is," Obama said with a chuckle. "A government-run health care plan that people are very happy with."

One option being considered in Congress is to allow uninsured people between ages 55 and 65 to buy coverage through Medicare.

And Tuesday, the government announced that for the first time Medicare would cover the cost of HIV screening.

• Medicaid, the state-administered program for low-income people, will cost taxpayers $386 billion this year to provide health care for more than 42 million people. Some of those are poor seniors and people with disabilities who also get Medicare.

Another idea being debated is to allow more people to qualify for Medicaid.
• Other government programs. In 2007, the federal government spent $137 billion to provide health care to veterans, children, Native Americans, active-duty military members and their dependents, and drug users.

Tax dollars also went to fund public health services, federal workers' compensation and maternal and child health programs.

"The government has a pretty substantial role, no doubt," said John Holahan, director of the Urban Institute's Health Policy Center. And most are happy with the care they receive.
"People are very satisfied with Medicare," said Holahan, citing numerous surveys. "If you begin to talk to veterans about giving up (VA health care) and getting private insurance, they go ballistic."

The taxpayer-financed share of health spending is near 60 percent, Steffie Woolhandler and David Himmelstein of Physicians for a National Health Program wrote in a recent paper in the journal Health Affairs. They note that federal estimates don't include health care-related tax subsidies and public employee health benefits.

In the United States, "tax-financed costs exceed total costs in every nation except Switzerland," Woolhandler and Himmelstein wrote. That's hardly a hands-off approach.

Federal income-tax subsidies for health care, including the hotly debated exclusion of employer-provided health insurance from taxes, reached $186 billion last year, Holahan wrote in a paper with Stan Dorn last year. That exemption helped 61 percent of those under 65 pay for their health care.

Indeed, "only 5 percent of the insured population in the United States does not receive some kind of government subsidy, either directly or through a tax benefit," Holahan and Dorn wrote.

No wonder some call ours a "health care nation."

Friday, December 4, 2009

Obama Health Overhaul May Fail to Cut Spending on Medical Care

By Catherine Dodge and Nicole Gaouette

Dec. 4 (Bloomberg) -- White House Budget Director Peter Orszag says the medical-system overhaul now being debated in the Senate puts in place “crucial steps” to help slow the growth of U.S. health-care spending.

As the lawmakers struggle to reach consensus on the nation’s most far-reaching health legislation in four decades, some economists and analysts don’t share that confidence in either the Senate or the House bills.

“None of the bills so far would reduce total health-care costs as a percentage of the economy,” said David Walker, U.S. comptroller general from 1998 to 2008. “If there’s one thing that can bankrupt the country, it’s health-care costs.”

The bills would expand coverage to millions of the uninsured. Yet neither measure definitively moves away from the fee-for-service payment system, which encourages more care, Walker said. While the measures call for a new government entity to compete with insurers and curb costs, the impact is likely to be limited because Democratic leaders scaled back the so-called public option to win over reluctant lawmakers.

And both measures call for hundreds of billions of dollars in savings from Medicare, the federal insurance program for the elderly, an idea some Republicans dismiss.
“We’re going to have to reduce Medicare spending by about $400 billion over a 10-year period to get the math right,” Senator Lindsey Graham, a South Carolina Republican, said on ABC television’s “This Week” on Nov. 29. “We haven’t reduced Medicare spending by 40 cents, so that’s not going to happen.”

18% of GDP

A report last month by the chief actuary at the agency overseeing Medicare found that the $1 trillion bill passed on Nov. 7 by the House would boost spending through 2019 by 0.8 percent more than if no overhaul were carried out.

Unchecked, the money Americans spend on insurance, hospital bills and medicine -- now about 18 percent of the gross domestic product -- will be a third of the economy in 25 years, the Congressional Budget Office says.

Orszag and Nancy-Ann DeParle, the White House health-reform coordinator, last week sought to blunt the criticism, in a conference call with reporters. DeParle said the Senate bill “will have a big impact on the growth of health spending.”

Orszag cited a proposal in the $848 billion Senate bill to tax high-end insurance plans, which may encourage companies to offer less-expensive policies. He singled out studies to determine the most effective drugs, devices and treatments, as well as incentives to promote quality care over more care.

‘Aggressive Pilot Projects’

“What the legislation reflects is an aggressive set of pilot projects to emphasize quality,” he said.

Both bills fulfill Obama’s promise not to raise the federal deficit. The CBO said the House and Senate measures would each reduce the budget gap by more than $100 billion.

A Nov. 27 analysis by economist Jonathan Gruber of the Massachusetts Institute of Technology found that families would save at least $500 a year on insurance premiums in the non-group market under the Senate bill.

Days later, a CBO study concluded that while Americans in the nongroup-insurance market -- the one most affected by the overhaul -- would see premiums rise, those increases would be largely offset by government subsidies.

That bolstered President Barack Obama’s vow in a Sept. 9 address to Congress that his plan “will slow the growth of health-care costs for our families.”

Still, there’s a difference between lowering individual insurance expenses and curbing the growth in health-care spending, said Robert L. Laszewski, an Alexandria, Virginia- based consultant to the insurance industry.

‘Gutless Wonders’

The CBO study doesn’t allay concern over rising medical spending, said Uwe Reinhardt, an economics professor at Princeton University, who backs the legislation. While the Senate bill lays the groundwork to slow spending growth, Congress would need to make many more tough decisions that could take years to have an impact, Reinhardt said.

“They are a bunch of gutless wonders,” he said. “They can’t cut any spending.”
The Senate bill is better at controlling spending, economists say, and that sets up a clash when House and Senate lawmakers meld their legislation.

House Democrats rejected the excise tax on pricey insurance plans, saying consumers would end up paying. They opted for a surtax on millionaires, which is unlikely to curtail health spending.

Cost-Cutting Commission

The Senate version also gives more power to a Medicare commission to limit costs. If Medicare spending exceeds target growth rates, the board would propose ways to scale it down. The health and human services secretary would implement the proposals unless Congress passed legislation reducing growth to the target rate.

Victor Fuchs, a Stanford University economist, said much of the congressional legislation shifts spending from one group to another. Prohibiting insurance companies from excluding those who are already sick increases premiums for healthy people, said Fuchs. Mandating that businesses offer coverage, as the House bill does, will shift costs to workers.

Reinhardt said the battle to contain costs will continue.

To “get that growth curve down in my view is a decade-long fierce campaign that may not be winnable,” he said.

To contact the reporters on this story: Catherine Dodge in Washington at; Nicole Gaouette in Washington at

Tuesday, December 1, 2009

Opinion: Health Care Reform's Lowered Expectations

John Merline

Posted: 12/1/09

Dec. 1) -- Perhaps it's a sign of how far health care reform has drifted off course. Or of how worried Democrats are about getting health care reform passed.

How else to explain the Senate leadership's joyful response to a Congressional Budget Office report that finds that their reform plan will do little to lower insurance costs for millions of Americans, will raise premiums for millions more, and will cut costs for others only through heavy government subsidies?

That's not exactly what the public was promised when the health care reform train got rolling.

Consider: When President Barack Obama was campaigning last year, he rightly focused on the rising burden of health care costs. As he put it then: "Skyrocketing health care costs are making it increasingly difficult for employers, particularly small businesses, to provide health insurance to their employees."

And he made a very clear promise to voters: Elect me, and I will cut your premiums by $2,500.

"If you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500 per year," he said.

So what did the CBO find in its review of the Senate plan?

By 2016, employees in small firms (fewer than 50 workers) could actually see their premiums climb 1 percent higher if the Senate reform bill is enacted than if it isn't. At best, the CBO figures, they could see premiums that are 2 percent lower than they would be without reform.

Employees of large companies, meanwhile, would either see no effect, or a slight 3 percent drop in premiums in 2016 compared with no reform.

But keep in mind that already sky-high employee premiums are set to climb rapidly for the next several years. A recent Commonwealth Fund study says they will nearly double by 2020 without reform. So, at best, the Senate plan would make a very small dent in a very large premium increase.

And individual buyers, who already have the hardest time getting affordable coverage, could see premiums climb as much as 13 percent higher as a result of the reform – mainly because of new insurance regulations and government-mandated benefits. About half (18 million) would be spared these extra costs because of new federal subsidies included in the plan.

As Urban Institute scholars noted here Monday, one problem with both the Senate and House reform plans is the lack of an aggressive public option that would inject meaningful competition and lower premiums. But the bigger problem appears to be a lack of concentrated focus on what reformers used to call "bending the cost curve." Now it's considered a success that reform won't cause "insurance costs [to] go up across the board as a result of this legislation," as Sen. Evan Bayh, D-Ind., put it.

Admittedly, cost cutting is far more politically challenging than extending new government benefits. But with insurance premiums already too high and rising fast, why should the public be expected to celebrate a plan that fails to provide meaningful relief to so many?