President Obama promised that his government health care bill would control health care costs. This claim bolstered Mr. Obama's continued attack on the greedy insurance companies on Monday in Pennsylvania. But even the administration's supporters have a hard time buying into the fiction. "Unfortunately, we came up with a bill that really doesn't attack the cost situation that much," said Warren Buffett, renowned investor and Obama confidant, to CNBC last week.
In June, Mr. Obama claimed, "What I've said is, our top priority has to be to control costs. ... And I've said very clearly, if any bill arrives from Congress that is not controlling costs, that's not a bill I can support. It's going to have to control costs." Administration officials brazenly claim that they have accomplished this goal. On "Meet the Press" on Sunday, Health and Human Services Secretary Kathleen Sebelius actually professed, "Every cost-cutting idea that every health economist has brought to the table is in this bill."
One original cost-control measure was to impose a tax on high-quality insurance, dubbed Cadillac plans. With the cost raised, fewer people would want such extensive medical coverage, and thus people would not seek medical care as often. The idea was that this would free up resources and possibly even force medical providers to cut prices to attract more customers. But after striking a deal with unions, Mr. Obama decided to delay the tax for eight years - until he's out of office.
In contradiction to his alleged desire to cut costs, Mr. Obama proposes to mandate all sorts of additional benefits, such as tests and procedures and unlimited health care that insurance companies must cover. Forcing insurance companies to pick up the tab will increase demand for services immediately, not eight years from now, when insurance is taxed.
Mrs. Sebelius says the administration's proposal will control costs by ensuring "less spending in the Medicare system for things that we know don't add to people's health outcomes but were oversubsidizing insurance companies." Translated into plain English, the HHS secretary is talking about gutting the Medicare Advantage program, which allows beneficiaries an option to receive care through private health insurance plans. Seniors have voted with their feet in droves because they're convinced they get better coverage outside of the regular Medicare program.
The Obama administration doesn't seem to understand the difference between the government's costs and the costs for the system as a whole. Medicare and Medicaid reimburse hospitals and doctors at rates that don't cover their costs. Even lower reimbursement rates will mean private insurers will have to offset those losses, or hospitals and doctors will start losing money, and many will go out of business.
Cuts in Medicare pass the buck to private insurance companies, which pass the costs to private customers who pay higher premiums to cover the Medicare shortfall. As costs rise, more people will opt out of buying insurance. This dynamic does not help lower costs and undermines the ostensible goal of getting more people covered by health insurance.
The notion that the federal bureaucracy can run health care more efficiently than private providers is not credible. Is there a single sector where government provides better service at a lower cost than if it were done privately? Mail? Education? Hardly. The government takeover of health care will be no different.