The House of Representatives has already approved, and the Senate is pontificating on -- er "taking up," -- the first major legislative package of the Obama administration. When considering the $900 billion monster, leave aside for the moment the two obvious questions of whether we can afford this bill and whether it can stimulate economic growth. There is, in fact, another salient line of questions going unpondered -- the question of what policies the package promotes, and what their long-term impact will be.
The package has already been exposed as a Trojan Horse, so to speak, for the Democrats' birth control policies, with its $200 million for contraceptives, which has since suffered legislative interruptus. But on the health front, there are other, less public, acts of indecency underway. According to former HHS Secretary Mike Leavitt, this package, properly understood, is really the Democrats' opening salvo on health-care reform. If Republicans surrender this opportunity to defeat this package, or at the very least articulate an opposing viewpoint, they will be handing the Democrats a major victory in their efforts to re-make America's health care system and drive it down the path of increased government intervention.
The consequences of the bill's health provisions will be two-fold: First, it will increase subsidies for health coverage, and, second, it will give government more control over the use of a variety of technologies used by health care professionals.
The subsidies, while problematic in some cases, are at least up front and obvious. The Federal Medicaid Assistance Percentage (FMAP) increase, billed as "State Fiscal Relief," increases the amount the federal government pays to states for Medicaid. This is in effect a transfer payment reducing state deficits while increasing the federal one. The new Medicaid Coverage for the Unemployed program is supposedly a temporary program to cover laid-off individuals via Medicaid. And the $30 billion COBRA coverage provision, provides assistance in paying for COBRA for individuals making up to $1 million a year (yes, that reads one meelyon dollars). All of these short-term benefits, once granted, will be hard for any Congress, of any party, up to and likely including an Objectivist-controlled body, to take away.
But the worst long-term damage could be in the bill's attempt to assert control over the adoption and use of innovative health technologies. A real stimulus bill would encourage America to produce more of the cutting-edge technological goods where we hold a comparative advantage over other nations. For instance, America is the world leader both in the software required for health-information technology, as well as the innovations behind new pharmaceuticals, biomedical products, and medical devices. Yet, some of the policies proposed in the stimulus would make it retard, not encourage U.S. leadership in these critical areas.
In the years ahead, as the burdens on our health care system increase, we will need to expand our use of Health IT. Use of these electronic records can increase efficiency, reduce medical records, and save lives. Yet the fact that these records are a good thing does not necessarily mean that the government needs to spend $20 billion dollars to pay doctors and hospitals to adopt them. There are many good things in this world, including single-malt whisky, flat screen TVs, and wall-mounted singing bass, but that does not mean it is a good idea for the government to pay for them. Electronic records will improve operational efficiency for doctors and hospitals -- therefore, doctors and hospitals should be the ones to pay for them. In addition, paying for HIT adoption in one fell swoop could actually harm the development of the best technologies. It could force practitioners to choose between VHS and betamax, at a time when we see blu-ray on the horizon.
The Democrats' other under-the-radar expansion of government power is in something called "Comparative Effectiveness." In the most basic sense, comparative effectiveness looks at the effect of different options on treating particular medical conditions. This sounds harmless enough, as practitioners should be aware of how effective different treatments are, but it could also be used as a cost-cutting and therefore treatment limiting approach, similar to the approach many European countries use. Comparative effectiveness is still in its infancy, and many questions remain regarding its use, but the stimulus package reveals a heavy reliance on comparative effectiveness that is troubling, to say the least. The Agency for Healthcare (yes, it is one word, per act of Congress) Research and Quality is getting $300 million to pursue comparative effectiveness, a 10-fold increase. And that's not all. The Office of the Secretary at HHS is getting $400 million for this, and NIH is getting another $400 million as well. Giving the money to the Office of the Secretary, which was not the Pelosi-Reid Congress' habit during the previous administration, is an indication that this type of research is likely to be extremely important to the health reform czar's cost control efforts.
The problem with this approach, besides the obvious expense and uncertainty, is the dangers it could pose to the incentives to innovate. Biotech investors are already nervous about the FDA's lengthy and costly approval process, as well as the Center for Medicare and Medicaid Service's coverage decisions, which determine whether or not new products will be paid for at all and how much. The stimulus package's heavy bet on an unproven form of post-market evaluation, which could potentially take away coverage previously granted to products, will make skittish venture capitalists and biotech investors even more gun-shy.
So there you have it. More subsidies for coverage, and expanded government control over medical innovations. These moves come before the new secretary of HHS has even been confirmed. Defenders of the private health care system had best get their game on. The first quarter is almost over.
Tevi Troy is the former deputy secretary of the Department of Health and Human Services.