The Magazine

A Year of Magical Thinking

The Democrats' health care dream is everyone else's nightmare.

Dec 7, 2009, Vol. 15, No. 12 • By MATTHEW CONTINETTI
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Next time you run into a group of Democrats, offer to splash water on their faces. They've spent 2009 in a dream state, and it's time they wake up. They're convinced that they can subsidize health insurance for millions of people while also "bending the cost curve" of health care spending. They want to sign us up for the political equivalent of one of those three-step "eat more to lose weight" diets. Step one: Pile on the expenditures, regulations, taxes, and fees. Step two: Close your eyes. Step three: Pray it all works out in the end.

Sorry, it won't. Entitlements cost money, and they almost invariably cost more than the government's initial predictions. When you increase demand for a product and the supply remains fixed, the price rises. Thanks to the individual mandate, the Democratic health care bills lasso Americans into a heavily regulated health insurance oligopoly. All these new consumers will wander through the government-run "exchanges," buying the plans they can afford with taxpayer subsidies. As demand for health care increases, so will the cost.

The idea that expanding coverage will save the country money has always been a fantasy. True, the Congressional Budget Office found that, under certain assumptions that the authors of the legislation in effect required the CBO to make, the House and Senate health bills might not blow up the deficit over the next decade. But that won't happen in the real world. For one thing, doctors' reimbursements just aren't going to be cut 20 percent.

The situation with respect to the long-term deficit is even worse. The Lewin Group, the Peter G. Peterson Foundation, and the government's own Centers for Medicare and Medicaid Services have all said that Obamacare won't control costs in the long term. When the experts at Peterson and Lewin looked at the template for legislation now under debate in the Senate, they found that it "does not bend the total health care cost curve downward as a percentage of the economy."

Consider what's happened in Massachusetts since its 2006 health care reform went into effect. More people in the Bay State have health insurance--and costs keep on rising. RAND recently found that health care spending is growing 8 percent faster in Massachusetts than the state's GDP. To deal with this situation, the state government has had to trim coverage and raise taxes. Even the New York Times editorial board has admitted that Massachusetts hasn't figured out "how to slow the relentless rise in medical costs and private insurance premiums."

The administration claims that Harry Reid's Senate bill contains cost-cutting measures. The problem is that these initiatives are unproven, trifling, or plain antidemocratic. For instance, the bill emphasizes preventive care. Living healthier lives is a good thing, but it doesn't lead to lower medical costs. "[F]or most preventive services, expanded utilization leads to higher, not lower, medical spending overall," congressional budget chief Douglas Elmendorf wrote in an August CBO study. Pilot programs to encourage cooperation among doctors and to jiggle around the way Medicare reimburses hospitals could save some cash on the margin. But not much.

As for comparative effectiveness research, the reaction earlier this month to new guidelines for breast and cervical cancer screenings shows that Americans don't like it when government panels interfere with individual health care decisionmaking. And congressional Democrats want to go further. The bill's main claim to control costs is the Independent Medicare Advisory Board (IMAB), an unelected body recommending cuts to Medicare. The Centers for Medicare and Medicaid Services found that the cuts included in the pending legislation would limit seniors' access to quality care. If you think there's a disconnect between the people and their government now, just wait until the IMAB starts saying it won't pay for Nana's surgery.

The White House is trying to persuade skeptical moderate Democrats that the Pelosi-Reid bills--though unpopular with the public and intellectually incoherent--are the only game in town. They're not. It's up to Republicans to make clear that they are willing to work with moderate Democrats in 2010 on incremental, practical, non-magical reforms. If Pelosi-Reid is defeated now, sensible health care reform is both possible and indeed likely next year.

So, here's the first item on our holiday wish list for Congress: Ditch the current bills. Start thinking about bipartisan approaches to health care policy. And awaken Democrats from their dream--before it turns into a nightmare for the country.

--Matthew Continetti