Bam’s Bad Medicine

Health Care Rationing Ahead

Obama’s new budget dedicates $634 billion over the next 10 years to what he calls health reform. He promises – or perhaps threatens – that this vast sum will be a down payment for universal coverage, which could require more than $1 trillion.

Unfortunately, the president intends to spend all this money on the basis of several pernicious myths common in the health-care debate. As a result, his reforms would ultimately hand the health-care system over to the government and lead to rationing.

The president’s budget repeats the popular claim that 45.7 million Americans are uninsured. The figure is taken as proof positive that the current system is failing – and that the government must step in to provide a remedy.

But that misleading number includes millions we can hardly call uninsured. About 18 million of the uninsured make more $50,000 a year – and almost 10 million have yearly incomes over $75,000. More than 10 million aren’t US citizens. And as many as 14 million are already eligible for government programs like Medicare, Medicaid and SCHIP – but haven’t signed up.

For most folks, health insurance is simply too expensive. And ramping up funding for government health programs, as Obama proposes, won’t make insurance cheaper. In fact, it could cause private insurance to become more expensive.

After all, the feds reimburse hospitals and doctors at below-market rates for Medicare and Medicaid patients. So those of us with private health plans have to pay more to fill the gap – and that hidden tax is about 10 percent. In California, for example, private payers paid an extra $45 billion to compensate for unpaid Medicare costs in 2004.

Obama’s budget also takes aim at prescription-drug costs by forcing manufacturers to give Medicaid a bigger discount, probably 20 percent, on brand-name drug purchases (it already gets a 15 percent break). That might help curb Medi caid’s expenses, but it will raise drug prices for everyone else, who will have to make up the difference.

Taken as a whole, Obama’s health plan is predicated upon the misguided notion that government can deliver care more efficiently than the private sector. There’s ample evidence to the contrary.

Just look at the failure of existing government health programs – both here and abroad. Many Medicaid patients have a difficult time finding a doctor. According to a 2003 study by the Medicare Payment Advisory Commission, doctors are five times more likely to turn away Medicaid patients than those with private insurance.

The situation is even worse in countries like Canada and Great Britain – whose government-run systems Obama’s health braintrust has cited approvingly.

More than 725,000 Canadians languish on months-long waiting lists for surgery and other necessary treatments. Doctors are in short supply – thanks largely to the government takeover of the health sector. In the early 1970s, when Canada launched its “universal coverage” system, the country ranked second among 28 developed countries in doctors per thousand people. Today, it’s 24th.

Further, Canadians often lack access to the advanced medical technology that Americans take for granted. Canada ranks 19th among 26 reporting OECD nations in access to CT scanners and 14th out of 25 reporting OECD countries in access to MRI machines.

In the UK, the government-run health system explicitly rations medical treatments through the publicly chartered National Institute for Health and Clinical Excellence. NICE evaluates data from clinical drug trials to decide if newer medical treatments are more effective than older, cheaper alternatives. It then makes recommendations to Britain’s state-run National Health Service about which treatments are worth paying for.

Last summer, British patients with kidney cancer were denied access to four lifesaving drugs. NICE’s clinical and public health director said of the drugs at the time, “Although these treatments are clinically effective, regrettably the cost to the NHS is such that they are not a cost-effective use of NHS resources.”

In other words, the British government admitted that patients would likely die without these treatments – but refused to pay for them anyway.

This could happen here. Obama’s stimulus package includes $1.1 billion for NICE-style comparative-effectiveness studies.

As the costs for his health reforms mount, Obama will be forced to employ the same strategies that Canada and Britain have to cut spending. That means the rationing of care (and significantly higher taxes).

Obama’s budget represents a major effort to transform the US health-care system. Patients should ask themselves whether they’re ready for his medicine.

Sally Pipes is president & CEO of the Pacific Research Institute. Her latest book is “The Top Ten Myths of American Health Care.”

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top