Saturday, April 10, 2010

Finally, Greg Mankiw Grows Some Balls...

Well, at least he links to someone who has some. Here's what is going on.

Recently, I took Harvard's Greg Mankiw to task for couching the Obamacare debate as simply a budget problem. I wrote:
Mankiw throws in the words libertarian versus communitarian, but couches most of his critique in terms of the fiscal problems. True enough, the fiscal problems will be gigantic, but what exactly Mankiw "understands" from proponents of the bill is a little hard to see.

This is far more than a fiscal problem. It is about creating disincentives for innovation in medicine. It is about price controls that will limit service. It is about government decision making on diagnosis and treatments--influenced by lobbyists. It will limit quality care, create unwanted care. It will eat away at life expectancy. This is basic stuff that Mankiw, as an economist, should understand.

There is really something disturbingly wrong with an economist such as Mankiw couching it in terms of simply a debate on the budget consequences of the bill, and to soft pedal the other major problems.
Today, at his blog, Mankiw links to a column by James C. Capretta, Fellow at Ethics and Public Policy Center, who takes the the case one step closer to the understanding that Obamacare is going to be about limited service and eventual declining life expectancy in the U.S. Here's Capretta:

Now that the year-long debate in Congress over health care legislation has come to a close, it’s reasonable to ask: What’s next?

Some think that enactment will quickly lead to widespread and generally quiet acquiescence to the terms of the new law, even by those who were strongly against its passage by Congress. Perhaps.

But most of the law’s major provisions don’t get implemented until 2014. Indeed, though President Barack Obama is now daring his adversaries to try to repeal the law’s protections and benefits, hardly anyone will see benefits for more than three years. In the meantime, there will be two federal election cycles and plenty of Medicare cuts, tax increases, and insurance premium hikes to inflame passions.

Moreover, the manner by which the legislation was enacted virtually guarantees that the mid-term election this November, as well as the presidential contest in 2012, will become de facto referenda on the health care plan. Put another way, the last words in this debate were not uttered at the law’s signing ceremony. Those will be reserved for the voters, when they make their voices heard at the ballot box...

But, assuming for the moment that implementation proceeds as scheduled, what will the future hold?

The president himself has said that the national plan contains many of the features of the Massachusetts program, now operating in its third year. He is right. There are striking similarities between the reform plans, which is why what’s happening in Massachusetts today is very instructive.

When Massachusetts rolled out its coverage program in 2007, many more people signed up for the new heavily subsidized insurance than was originally predicted by budget officials. Almost immediately, costs far exceeded what had been budgeted, forcing state officials to scramble to find cuts elsewhere in government and other sources of revenue.

After three years, no real progress has been made on rising costs. The program remains well over budget, with no end in sight. Further, state residents who now must buy state-sanctioned coverage are bristling at their rising premiums and the inability to find coverage which covers less and thus costs less.

State politicians are responding to the cost crisis the only way they know how: by promising to impose arbitrary caps on premiums and price controls for medical services. The governor and state regulators have disallowed 90 percent of the premium increases insurers --all of whom are not-for-profit--submitted for their enrollees for the upcoming plan year. The state says premium increases above eight percent are too high and unacceptable, though they themselves don’t have a plan to make health care more efficient in Massachusetts. They just want lower premiums. The insurers have responded by refusing to sell any coverage at the rates the state wants to impose.

The way out of this stand-off is predictable: more price controls. To hold premiums down, Massachusetts officials are already laying the groundwork to impose government-set payment rate schedules for services beyond the realm of public insurance.

The risk of cost overruns is even higher at the federal level than in Massachusetts. The Congressional Budget Office projects just 17 million people will be getting subsidized insurance through the state-based exchanges in 2016. But the population with incomes between 100 and 400 percent of the federal poverty line--roughly the group targeted for subsidized coverage--is more like 130 million people. CBO assumes the vast majority of low- and moderate-wage families will stay in job-based plans with no additional federal help. But what if they are wrong? Employers are already looking for ways to shed as much of their health care bill as they possibly can onto taxpayers. If 30 or even 50 million Americans end up in the exchanges, federal costs will soar.

The federal government is already running up debt at an unprecedented pace even before the new health care entitlement has been rolled out. If the health bill’s costs exceed projections, the same pressures which have led Massachusetts officials to impose premium caps and price controls as the solution to costs would lead some politicians at the federal level to call for the same approach nationwide. Indeed, the administration has already laid the predicate for just such steps with its proposal to establish a federal insurance rate authority to oversee insurers’ premium submissions. That idea did not make the final legislative cut, but it could easily be resurrected in a budget crisis.

And that’s the real danger of what’s just been enacted. There are only two ways to slow the pace of rising costs: with a functioning marketplace or with government-imposed cost controls. The new health law adopted neither approach in any significant way. But when push comes to shove, it’s clear which direction the Obama administration will go to really slow the pace of rising costs, which is the same direction Massachusetts is already heading today--toward heavy-handed price controls. Such controls, however, do not make health care delivery more efficient. They cut costs only by driving out willing suppliers of services. In other words, it’s cost control through restricted access to care.
Got that, "restricted access"? Restricted access means only one thing, less care, more pain, more inconvenience and falling life expectancy.

1 comment:

  1. I cannot understand the thinking that the answer to price controls is more price controls.

    Hell, that the answer to anything is price controls in this day and age is outrageous.