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Monday, December 14, 2009

Peter Orszag's fairy tales on health care savings

John Fund traces how OMB director Peter Orszag convinced the Obama administration that it was possible to reap so many savings from cutting waste and fraud that they could fund expanding federal health care. It was never real - just his own fantasy.
ObamaCare's core promise—better quality care for everyone at lower costs—is being exposed as an illusion as it degenerates into the raw exercise of political power. Naturally, the White House and its media booster club are working furiously to prop up this fiasco, especially on cost control.

As Obama budget director Peter Orszag put it at a revealing media breakfast earlier this month, the Senate bill does everything the experts recommend to "get at the underlying drivers of health-care costs." While he admitted that "we don't know enough" to produce results right away, the key is to encourage "continuous improvement" through pilot programs and demonstration projects. Cost containment will actually take "years to decades," Mr. Orszag conceded.

The torch was then passed to Ron Brownstein of the Atlantic Monthly, David Leonhardt of the New York Times and editorial writers for the New England Journal of Medicine, among others. Last week the New Yorker ran a 5,000-word apologia from Atul Gawande, who likewise owned up to the fact that there is "no master plan for dealing with the problem of soaring medical costs," only "a battery of small scale experiments." Keep in mind, this is an argument in favor of ObamaCare.

They might have piped up earlier: What they're finally admitting is that all the grandiose talk about "bending the curve" used for months to sell ObamaCare really comes down to their hope that bureaucratic improvisation will make a difference over the long term. Yet the liabilities of the greatest social spending program in American history will be added to the budget almost immediately, and what happens if Mr. Orszag's technocratic revolution doesn't work as promised? Or rather, when it doesn't?

Forgotten in ObamaCare's march-to-the-sea campaign is that during the transition and early on, the White House was divided on whether to pursue health reform at all. Opponents included Larry Summers, worried about the economy and deficits, and David Axelrod, worried about the politics. Another faction led by Tom Daschle preached from the conventional social-equity church of liberalism.

Mr. Orszag proposed another option, citing academic research observing that as much as 30% of health spending is "waste" that doesn't affect outcomes. He argued the country could save $700 billion a year without harming quality—more than enough to pay for universal coverage.

Thus cost control migrated from Orszag theory to free political lunch. Mr. Gawande wrote an influential New Yorker essay on the topic in June, and the theme shaped both the case for a new entitlement and especially the appeal to potential opponents in business.
Unfortunately, few analysts believe his math.
But then Congressional Budget Office director Douglas Elmendorf testified in July that "the curve is being raised," given that ObamaCare lacks "the sort of fundamental changes" necessary to tamp down costs. Meanwhile, it became clear that Mr. Orszag's favored research was always more nuanced and qualified than his pose of papal infallibility. One of his main gurus, Jonathan Skinner, mused recently that "the key lesson" from a new study challenging some of his findings "is how little we know about the science of health-care delivery."

Well, sure. A field as dynamic and innovative as U.S. medicine, in which costs are largely driven by new technologies and better ways of caring for patients, is rife with complexities and uncertainties. But no one bothered to strike that note of caution when Washington was hopped up on a cost-control gambit that was too painless to be true.

The new cost-control apologists concede that there isn't any actual plan for controlling costs: Throw enough speculative policies against the wall, they say, and some breakthrough will stick. Yet Mr. Orszag's no-less-confident predecessors spent decades trying to pull down Medicare spending with little to no success. Technocracy rarely if ever works as intended. Mr. Gawande points to the case study of U.S. farm policy, and if politically sacrosanct agriculture subsidies and rural price-supports are the best to hope for, then what's the worst?
Oh, that's encouraging - that health care will be conducted like federal agricultural subsidies that are created and never die.

Ironically, Orszag used to be the head of the CBO before Obama tapped him to run OMB. I wonder if he'd be presenting honest evaluations of all these Democratic plans if he were still in charge of the CBO. Or is it the move to the Executive Branch that led him to believe in such fairy tales?

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