[TheMercenary]

Another good op ed with some things to think about as Congress rushes through this change.

Obama’s More-for-Less Health Care Doesn’t Add Up: Caroline Baum

Commentary by Caroline Baum

Aug. 3 (Bloomberg) -- President Barack Obama has been exhorting lawmakers to use the August recess to read health- care-reform bills currently before Congress.

In other words, if the president had gotten his way, members would have voted first and read second legislation to revamp one-sixth of the U.S. economy. No wonder public support for both Obama and his health-care plan is eroding, according to recent polls.

Yes, people are resistant to change, as the president noted, especially when it comes to something as important as their doctor. But maybe something else is at play: the growing realization that the numbers don’t add up.

I listened to Obama’s July 29 town hall meeting in Raleigh, North Carolina, hoping to understand how the government plans to deliver more for less, to cover most of the 46 million uninsured Americans while lowering premiums, limiting out-of-pocket expenses and requiring insurance companies to cover preventive care.

I heard Obama say a lot of people will get a lot more without anyone getting less.

I heard him say two-thirds of the cost of covering everyone in America can be paid for “by money that is already in the health-care system.”

I heard him say he favors a public option to increase competition and keep costs down.

I heard him say he “will not sign a health-care bill that is not deficit neutral” and that doesn’t lower health-care inflation over the long term.

Let’s see how some of these claims stack up:

1. Mind Your P’s and Q’s

Obama wants to insure more people and lower the total cost of care. In economic terms, he wants to control price (P) and quantity (Q). What makes Obama think he can repeal the law of supply and demand?

To achieve higher Q and lower P, the supply curve has to shift outward, to the right. How does the government plan to increase the supply of health care? By making it less attractive to young men and women with a passion for medicine and a desire for independence?

Obama says he wants to encourage medical students to become primary-care physicians via financial incentives, reversing the trend toward specialization, which is where the money is.

Easier said than done, says Paul Feldstein, professor of health-care management at the Paul Merage School of Business, University of California, Irvine. “It takes a long time to produce more doctors.”

Once the government starts to dictate budgets and salaries in an effort to control costs, medicine becomes a less attractive profession.

Rationing is inevitable, Feldstein says, and there are only two options: with price and free choice or with regulation. Surely Obama spent enough time at the University of Chicago to understand his P’s and Q’s.

2. Inefficiencies of Scale

Obama says his advisers have identified $500 billion to $600 billion of inefficiencies in the system that would pay for reforms. When was the last time the government wrung inefficiencies out of anything? Medicare is plagued with waste and fraud.

Health-care reform is long overdue. We need a system that offers wider choice, proper incentives (eliminating fee-for- service) and subsidies for those who can’t afford it.

We don’t need something that fails to cut costs and eliminates choice. Plan B anyone?

3. Enhanced Competition

Obama says the government needs to offer a public health- care option to encourage competition. This line of thinking leads “to the uncomfortable conclusion that the government must be a player in every industry,” says Cliff Asness, president of AQR Capital, a hedge fund in Greenwich, Connecticut, who debunks this and other health-care myths in a paper posted on his Web site.

How do other industries manage to be highly competitive without Uncle Sam’s interference?

Unless the public wants health-care outcomes akin to those of the nation’s schools -- another sector offering a “public option,” Asness points out -- Obama needs a better plan and a more convincing argument.

4. Measuring the Right Stuff

Obama has accused opponents of his health-care plan of “scaring everybody” with intimations of rationing. He scared back, telling his Raleigh audience last week that “if we do nothing, I can almost guarantee you your premiums will double.”

The high cost of health care is another myth skewered by Asness, in his paper, and Kenneth Arrow, Nobel Laureate in Economics, in an interview in the Atlantic.

The gist of their arguments: This ain’t your father’s health care. Innovations in diagnostic and surgical procedures cost money but allow for better and less invasive treatment.

What about the accusation that the U.S. spends more money on health care and boasts life-expectancy rates well below those of most developed countries?

A red herring. There’s a big difference between health and health care. If you eat too many Big Macs, smoke and drink, that’s a lifestyle choice.

Once you suffer a heart attack or are diagnosed with cancer, the survival rates in the U.S. -- especially for cancer -- are second to none. For all the hoopla over Canada’s socialized medicine, the cross-border flows aren’t south to north.

“The low longevity ranking of the United States is not likely to be a result of a poorly functioning health-care system,” according to a new study by University of Pennsylvania professors Samuel H. Preston and Jessica Y. Ho.

What’s the prognosis if ObamaCare is enacted?

“People have to get less or pay more,” Feldstein says.

As a group the elderly are the largest consumers of health- care services. If you want to cut costs, you have to go where it’s being spent.

The Eskimos had an efficient way of rationing: in some cases they simply sent the elderly out to sea on an ice floe. It’s not what Gram and Gramps envisioned for their golden years.

http://bloomberg.com/apps/news?pid=2...d=ah.vuAG5B4iU