KeithHennessey.com

The Administration’s health care reform and fiscal policy strategies are based on flawed premises. When neutral and non-partisan referees like CBO point out these flaws, both strategies collapse. The damage to the President’s health care reform effort is evident. I think the damage to his fiscal policy strategy will soon become apparent as well.

Yesterday President Obama sent an email on health care reform to the White House mailing list. Respectfully, here is my counterpoint.

The President once again correctly identified the core problem, and I compliment him for his emphasis on the need to reduce, or at least slow the growth of, private health insurance premiums. Unfortunately the House and Senate bills move in the opposite direction. They contain insurance mandates that would make private health insurance more expensive for most Americans, and would thus exacerbate the problems described by the President.

I want to propose a four-part test for measuring any particular bill on health care cost control.

short run

long run

Federal deficit

1

2

Government health care spending

X

3

Private health care spending

X

4

In each case, I will define the test so that “yes” is a good outcome:
Test 1:  The bill does not increase the federal deficit in the short run.
Test 2:  The [...]

Imagine that Sony plans to bring to market a new TV that is twice as good as the old $500 TV but costs $200 more to produce.  If instead it is twice as good but costs $2,000 more, they will probably hold off and look for a less expensive way to improve [...]

The President spoke about health care in the cross-hall today, flanked by the heads of several major health lobbying groups (“trade associations,” in Washington vernacular):

hospitals — the American Hospital Association (“AHA”);
doctors — the American Medical Association (“AMA”);
insurance companies — America’s Health Insurance Plans (“A-Hip”);
the drug manufacturers — Pharmaceutical Research and Manufacturers of America (“Pharma”);
the [...]

I had missed this from the President’s remarks to Congress on February 24th:
This budget builds on these reforms.  It includes a historic commitment to comprehensive health care reform – a down-payment on the principle that we must have quality, affordable health care for every American.

Budget Director Peter Orszag repeated the “down payment” language on his [...]

It looks like my post from yesterday agrees with CBO’s December paper.  Maybe I should have read it earlier.
Yesterday I wrote,
Information must be combined with the incentive to purchase high-value medical care – a decision that involves both the medical benefit of the treatment and the financial cost. …
The Administration’s proposals on health information technology, [...]

Last December the Congressional Budget Office published a comprehensive paper that describes how they approach analysis of health insurance reform proposals.  It is a critically important (and somewhat technical) document for anyone who cares about health care legislation in the United States.
CBO is the referee for the budgetary costs of legislation.  They estimate the effects [...]

When I was growing up, I was taught that you change the oil in your car every 3,000 miles.
Suppose I take my three-year old car to Jiffy Lube for an oil change.
Jiffy Lube has all the latest information technology, as well as good data on both manufacturers’ recommendations and best practices.
After entering my license plate [...]