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 Obamas proposed health care overhaul. He described the presidents 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 bills 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 wouldnt 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 wouldnt 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 Obamas 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 kids tonsils out.
Contrary to the presidents 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 whats most striking about Mr. Orszags four pillars is how little they describe the health care overhaul thats 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 ObamaCares four pillars as follows: increasing taxes, cutting Medicare, increasing government control and politicizing medicine.
According to CBO projections, in ObamaCares 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 enrollees 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 Nelsons dubious kickback is well known in Nebraska. The Gator Aid deal would exempt South Floridians from Medicare Advantage cuts. Union members wouldnt 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. Orszags, best describe ObamaCare, either set would provide a shaky foundation for lowering costs or improving quality. Not surprisingly, Medicares 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 cant be done by increasing Medicaid spending dramatically, taking money out of Medicare and spending it elsewhere, and raising health costs.
By Mr. Orszags own diagnosis, ObamaCare could hardly provide a more poisonous prescription. And just changing the dosage, as some Democrats are proposing, isnt going to help.