Orszag’s ‘pillars’ unsteady as health care foundation

Over the past several months, White House budget director Peter Orszag has emphasized that rising federal health care costs threaten to cripple our nation financially.

In a Wall Street Journal op-ed in May, Mr. Orszag wrote that the effects of “every other fiscal policy variable” on federal deficits would be “swamped” by the effects of Medicare and Medicaid. In this, he is completely right. But his solutions are entirely wrong.

In these pages on Wednesday, Mr. Orszag laid out his defense of President Barack Obama’s proposed health care overhaul. He described the president’s proposal as resting on “four pillars”: ensuring deficit-neutrality, taxing “Cadillac” health plans, creating an Independent Medicare Advisory Board (IMAB) and providing incentives to pursue best practices. Let me briefly address each of these.

First, the proposed legislation is not deficit-neutral. According to the nonpartisan Congressional Budget Office (CBO), unless Congress follows through on the bill’s wildly unrealistic pledge to cut doctors’ payments under Medicare by 21 percent this year and never raise them back up, Obama- Care would increase deficits by more than $200 billion in its real first decade (2014 to 2023).

Second, the 40 percent tax on “Cadillac” plans would indeed, as Mr. Orszag claims, give people an incentive not to buy expensive health care plans. But a tax on real Cadillacs and other luxury cars would encourage people not to buy them, either. Yet it wouldn’t do anything to reduce the costs of other cars.

Third, the IMAB is constitutionally dubious. This unelected board would be empowered to make recommended changes that wouldn’t have to be approved by Congress. Unless Congress proactively overturned these “recommendations,” they would automatically become law. That is not how our Constitution describes the lawmaking process.

Fourth, the notion that the government is the pre-eminent evaluator of best practices recalls President Obama’s statement that if “your child has a bad sore throat . . . the doctor may look at the reimbursement system and say to himself, ‘You know what? I make a lot more money if I take this kid’s tonsils out.’ ”

Contrary to the president’s implication, most Americans trust doctors not to engage in medical malpractice far more than they trust the federal government to tell doctors how to practice.

But what’s most striking about Mr. Orszag’s four pillars is how little they describe the health care overhaul that’s actually on the table.

They give no indication that, in its real first dozen years (2014 to 2025), ObamaCare would increase Medicaid spending by $1.1 trillion; would funnel $1 trillion from taxpayers through the federal government to insurance companies; and would spend an additional $1 trillion elsewhere — all according to CBO projections.

With all due respect to Mr. Orszag, I would describe ObamaCare’s four pillars as follows: increasing taxes, cutting Medicare, increasing government control and politicizing medicine.

According to CBO projections, in ObamaCare’s real first decade, taxes would increase by $1 trillion; $800 billion would be siphoned out of Medicare and spent on ObamaCare; and the average Medicare Advantage enrollee’s benefits would be cut by $21,000. At every turn, the 2,000-page bills would increase government control and politicize health care.

Already, we see the politicizing in action. U.S. Sen. Ben Nelson’s dubious kickback is well known in Nebraska. The “Gator Aid” deal would exempt South Floridians from Medicare Advantage cuts. Union members wouldn’t have to pay the “Cadillac” tax.

And, under language that Sen. Nelson helped negotiate, longstanding protections against using tax dollars to fund abortions would be scrapped. In the words of Sen. Tom Coburn, R-Okla., “Nebraska taxpayers will be paying for abortions in California.”

But whether my four pillars, or Mr. Orszag’s, best describe ObamaCare, either set would provide a shaky foundation for lowering costs or improving quality. Not surprisingly, Medicare’s chief actuary says ObamaCare would bend the health care cost-curve up. And numerous polls show that Americans overwhelmingly think the quality of care would decline.

The long-term financial solvency of our nation does largely depend on checking runaway Medicare and Medicaid spending. But that can’t be done by increasing Medicaid spending dramatically, taking money out of Medicare and spending it elsewhere, and raising health costs.

By Mr. Orszag’s own diagnosis, ObamaCare could hardly provide a more poisonous prescription. And just changing the dosage, as some Democrats are proposing, isn’t going to help.

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