Thursday, November 4, 2010

If Elephants Had Wings

The NY Times has a piece today by one of the former White House Economics brains and it states:

Sure, the health care law is not perfect, but it would cut the nation’s long-term fiscal imbalance by a quarter and reduce the projected deficit within Medicare by three-quarters. That may seem fanciful, given how distorted the public discussion has become. But that’s what the projections show, as long as Congress sticks to its guns and the Obama administration does a good job carrying out the provisions of the law.

Not perfect indeed, it creates a massive new Government infrastructure and command and control system and destroys what was left of the system which may have worked. The chance that the current administration does a good job is zero.

He continues:

Why do so many people assume that the act does almost nothing to save money? One explanation is that people’s first impressions of health care reform were formed during the summer of 2009, when the debate was dominated by the House bill. In health care reform, there’s always an underlying tension between those who are more concerned about expanding coverage and those who are more concerned about containing costs and improving quality. The House bill tilted toward coverage; the Senate bill, toward cost-effectiveness and quality.

The House bill was legitimately criticized for not doing enough to reduce costs. And that became the prism through which the legislation was and is viewed, even after improvements were later made in the Senate version and in the final law.

The reason is the Bill does nothing to reduce costs as we spent all of last year stating. Costs are reduced by demand reduction not supply control. Demand reduction means getting number one the fattys to stop eating, plain and simple, stop smoking, drop STDs and the list goes on. That is a 20-25% drop! That id demand management and not supply management. We wrote a book on that and we prepared a plan along those lines. Overall it costs less doing demand management. But alas this was not in the cards for these folks. They do not think that way, the deny the market and its forces.

So here is what the wunderkind suggests:

There are four ways to contain health care costs: by reducing payments to providers and suppliers; by rationing services; by having consumers pay a greater share; and by giving providers incentives to be more efficient.

Any comment on demand reduction? No, he clearly seems in my opinion to me to be clueless on such factors. This is particularly disturbing since I believe that this young man was in the same nursery school class as my children when his father was at MIT with me. Perhaps it will still take a bit longer .... get out the Tonka trucks again ... more Legos ... how about some cookies and milk ... nap time kids!

There is a note which also must be made. As regards the Health Care Bill, I would guess that there are more citizens outside of Washington who read the bills than there were members of Congress who even tried, by a factor well exceeding a thousand. I remember last year reading draft after draft and page after page and shaking my head as I wrote up the findings. This was I believe a first in citizen participation. As the left wing advocates of deliberative democracy often say that the people should have less to say about such complex issues because they just do not understand, well in this case it was those very "ignorant" simple people who read the garbage which was produced in Congress, and even PBS seems to have gotten most of the tale correct. This last election was democracy, representative democracy, in action. My compliments to the citizens who read and understood ... and to the young man from Washington, remember there is a demand curve as well...