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November 16, 2009

Warning sign: Reich says health bills too costly

When a guy like Robert Reich says the health-care legislation lacks adequate cost controls, that's a pretty good sign it lacks adequate cost controls. This isn't Mitch McConnell talking. Reich, labor secretary under Clinton, mainly wants a robust, government-run health insurance option to give private insurers a run for their money. His list of cost-savers:
a public option open to everyone (allow states to opt out of this if they dare), Medicare-negotiated drug benefits, no 12-year monopoly for new drugs, and a major squeeze on Medicare reimbursements for doctors -- and have CBO score the savings. I guarantee you, the number will be large.

A public option available to everyone -- not just people who lack insurance -- really would stop costs from rising so quickly. Letting Medicare negotiate lower drug prices would also save money, but probably not as much as Reich thinks. "A major squeeze on Medicare reimbursements for doctors" could have terrible consequences if the targets were primarily general practitioners, who are already getting hammered. The target needs to be specialists -- surgeons, neurologists etc. -- and not just on their fees per procedure (see below).

Reducing patent protections for new drugs is a terrible, terrible idea. Dollar, for dollar, pharmaceuticals are among the best medical investments going. Telling the biotech companies they'll

get competition from generics the minute their pills hit the market is a perfect way to get them to stop trying -- hurting patients and a key U.S. industry in one stroke.

Reich fails to mention two other cost-control measures missing from the legislation. 1) Malpractice lawsuit reform. This isn't a silver bullet, but it's real money and ought to be thrown in not just as good policy but as a tactical plea for possible Republican support. 2) Much more emphasis on "evidence-based" medicine and reimbursement. The BIG reason for out-of-control medical costs isn't that we're paying surgeons too much. It's that they're doing too many unnecessary surgeries. Have the Congressional Budget Office score those provisions and you'll see even bigger savings.

Posted by Jay Hancock at 6:51 AM | | Comments (4)
Categories: Health Care



A public option is meaningless without a mandate. A mandate simply forces healthy folks to subsidize the health care of those older and less healthy. So if one raises the cost of health care for one population segment and reduces the cost of health care for another population health care how does that make the cost lower?

Oh I get it, the government only counts the cost of what it pays! Well in that case I have another suggestion, get the government out of the health care business and its costs will go a lot lower!

Dan, you're getting real close.

Get the government AND THE HI PROVIDERS out of the EVERYDAY ASPECTS of the health care business and its costs will go a lot lower!

There are still legitimate roles for both the Government and HI providers... just not the roles they either currently have or the one they are scheming (together!) to have in the future.


The advocates who say we should spend less on health care seem to be the same ones who preach we should spend more on education. Why is one form of spending better than another? Oh, I get it, policy wonks like Reich do not mind goring an ox as long as it is not their own.

Reich's arguments make no economic sense. If "public option" magically made costs lower why don't we "public option" every industry? Well, first, we need Dr. Reich to explain exactly what he means by "public option". Along the way perhaps he can also explain the magic that will allow more people to receive medical care at less total cost. And for an extra 25 points I would love to hear him explain this without once using the words mandate, ration or central authority.

I've said before but I agree with MrRational.

The irony of this health care reform discussion is I grew up being told central planning was one of the marks of communist Soviet Union. Central planning did not work for the Soviet Union and it will not work, despite all insistence, for the United States.

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.

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