Health ‘Reformers’ Ignore Facts

Debunking the Democratic argument for government-run health care

The Democrats’ case to expand government health care is so full of holes that passing it quickly is their only hope. If Americans slow down and ask questions, they will be hard-put to come up with answers.

In fact, if members of Congress slow down long enough to read the detailed reports of their own Congressional Budget Office (CBO) — or even its director’s recent Senate testimony — they will understand that many of the slogans they use to justify government intervention are false.

Statist health-care reform, for example, is said to be needed to help the economy recover in a period of deepening gloom. The president has made this argument on numerous occasions, such as earlier this week when he announced Kathleen Sebelius as his pick for Secretary of Health and Human Resources. So too has Henry Waxman (D., Calif.), chairman of the House Energy and Commerce Committee. “The costly failure of our health care system affects the financial health of our businesses,” Mr. Waxman said at a conference at Families USA, the national nonprofit dedicated to health care for all Americans. “It affects our competitiveness in the world . . . This isn’t something to put off; this is something to do right now to help fix our economy.”

Health care certainly plays a major role in the U.S. economy, and by almost any objective account a highly positive role. It employs 13 million Americans and accounts for one out of 10 jobs. But the assertion that the costs of providing health insurance cripples American corporations in the global economy is simply wrong.

CBO director Douglas W. Elmendorf explained this last week to the Senate Committee on Finance, which is chaired by Max Baucus, a leading proponent of government health care. The point is that for employers, health care is merely a part of total compensation: It reduces cash compensation for employees but it does not increase costs of employment. To argue otherwise is to argue for lower total U.S. compensation — that is, lower wages for U.S. workers. Said Mr. Elmendorf, “the costs of providing health insurance to their workers are not a competitive disadvantage to U.S.-based firms.”

Another common argument for more government insurance is that the uninsured shift costs to private payers when they avail themselves of the health-care safety net — thus jacking up health-care premiums in the private sector. Many reform advocates make this claim, including Sen. Edward M. Kennedy (D., Mass.) and Sen. Baucus in an op-ed in this newspaper.

This is not the case. In the first place, a recent CBO report (“Key Issues in Analyzing Major Health Insurance Proposals, ” December 2008) is clear on one issue: Working to achieve universal coverage through expanding government’s role in health care will increase total costs and therefore either increase premiums or taxes, not reduce them. As for the argument that the uninsured shift costs, Mr. Elmendorf was quite direct dispelling this myth in his testimony before Mr. Baucus’s committee. “Overall,” he said, “the effect of uncompensated care on private-sector payment rates appears to be limited.”

In fact, insofar as there is a cost shift, it derives from the government programs Medicare and Medicaid, which reimburse providers at rates roughly 20% to 40% lower than the private providers. This has been detailed by the widely used and quoted health consultant firm, the Lewin Group. But this is conveniently ignored by those who want to expand government health care.

Preventative care, disease management and electronic medical records are also constantly cited as big cost-savers. The idea here is that if our health-care system was set up to prevent disease rather than just treat it, and could do so without duplicative paper records, it could save money. It’s a great hypothesis, but research does not indicate it amounts to much. “In many cases,” as Mr. Elmendorf testified regarding such initiatives, “those studies do not support claims of reductions in health spending or budgetary reductions.”

Americans like their current health care, its plethora of choice and its intensive, high tech approach to fixing our ailments. A Gallup survey in December reported that “on balance, Americans still favor maintaining the current system, 49% to 41%.” But the CBO is very clear that saving money on health care involves doing less of the very things Americans like the most.

“Studies attribute the bulk of the cost of growth to the development of new treatments and other medical technologies,” the CBO notes in a report issued last December, later adding, “Given the central role of medical technology in cost growth, reducing or slowing spending over the long term would probably require decreasing the pace of adopting new treatments and procedures or limiting the breadth of their application.”

In other words, reducing costs means rationing the care of those who currently have private insurance and Medicare.

Ms. Pipes is president and CEO of the Pacific Research Institute and author of “The Top Ten Myths of American Health Care” (Pacific Research Institute, 2008).

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