Bruce Bartlett Should Understand This

Former Reagan official turned sensible human being Bruce Bartlett holds forth on health care reform:

I don’t dismiss health reform. I just thought it was unwise for the Obama administration to take it up while the economy was in the tank.

For both political and substantive reasons, I thought it should have focused like a laser beam on the economy and related issues like reform of the financial sector.

Secondly, I thought its proposals were ill thought-through and that it would have been better to take the time to develop something more coherent, rather than making things up on the fly, which appears to be the case.

I also believe the administration has done a poor job of addressing what I think is the biggest problem with the American health case system: it costs too much for what we get. We spend in total twice as much of our gross domestic product on health as most other major countries without getting much in return for the extra spending.

Finally, I think the goal of universal coverage is a good one, but the Obama proposal is not properly financed. I think a broad-based new government benefit should be financed with a broad-based tax that is to a large extent paid by the beneficiaries, as is the case with Social Security.

There’s really quite a bit to respond to here, but the first weird thing is that in a prior paragraph Bartlett acknowledges that dramatic spending cuts to entitlement programs (i.e., Medicare and Social Security) are simply infeasible from a political perspective. This is quite true, so it’s not really clear why he doesn’t seem to be able understand how politics have shaped health care reform in the same way. For example, even if you accept the premise that an administration can’t work on more than one issue at a time, it should be obvious to anyone that has worked in politics why Congress isn’t going to take up a massive legislative overhaul in an election year. If health care reform drifts into 2010, it’s going to become even more politicized than it already is, and vulnerable legislators up for reelection are going to have even more whacky incentives than they already do.

Similarly, Bartlett wonders why the administration hasn’t done more to address the efficiency of the system. Of course it’s easy to level these sorts of charges from the outside, but just take a look at where we spend the additional money (from McKinsey).

The dark blue areas illustrate excess spending relative to other countries. So obviously you can see we spend way more proportionally on “health admin & insurance” (the benefit of a private insurance system) and we spend way more on drugs, but by far the biggest quantity is spent on “outpatient care,” or as it’s more commonly known, doctors. Therefore, the easiest way to reduce overall spending in a dramatic fashion would be large, across the board cuts to physicians. First, it’s not clear how you could really do that outside of instituting a single-payer system, and second, if you think entitlement cuts are politically unrealistic, try proposing massive overhaul to institute single-payer health care that would literally halve doctor’s incomes.

Finally, you can say what you like about the harebrained approach to some of the proposals, but it’s worth noting this is a product of the legislative process. Well considered ideas about how to reform the health care system have been around for a long time, but legislators have found they’re difficult to implement cleanly without drawing the ire of powerful interest groups. Thus, you get ideas like non-profit co-ops or a tax on millionaires instead of ending the employer benefit tax exemption.

Overhauling a sixth of the economy is a difficult and messy task, but that doesn’t mean the status quo is preferable.


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