Health reform is back from the dead. Many Democrats have realized that their electoral prospects will be better if they can point to a real accomplishment. Polling on reform – which was never as negative as portrayed – shows signs of improving. And I’ve been really impressed by the passion and energy of this guy Barack Obama. Where was he last year?
But reform still has to run a gantlet of misinformation and outright lies. So let me address three big myths about the proposed reform – myths that are believed by many people who consider themselves well-informed, but who actually have fallen for deceptive spin.
The first of these myths, which has been all over the airwaves lately, is the claim that President Barack Obama is proposing a government takeover of one-sixth of the economy, the share of GDP currently spent on health.
Well, if having the government regulate and subsidize health insurance is a “takeover,” that takeover happened long ago. Medicare, Medicaid and other government programs already pay for almost half of American health care, while private insurance pays for barely more than a third (the rest is mostly out-of-pocket expenses). And the great bulk of that private insurance is provided via employee plans, which are both subsidized with tax exemptions and tightly regulated.
The only part of health care in which there isn’t already a lot of federal intervention is the market in which individuals who can’t get employment-based coverage buy their own insurance. And that market, in case you hadn’t noticed, is a disaster – no coverage for people with pre-existing medical conditions, coverage dropped when you get sick, and huge premium increases in the middle of an economic crisis. It’s this sector, plus the plight of Americans with no insurance at all, that reform aims to fix. What’s wrong with that?
The second myth is that the proposed reform does nothing to control costs. To support this claim, critics point to reports by the Medicare actuary, who predicts that total national health spending would be slightly higher in 2019 with reform than without it.
Even if this prediction were correct, it points to a pretty good bargain. The actuary’s assessment of the Senate bill, for example, finds that it would raise total health care spending by less than 1 percent, while extending coverage to 34 million Americans who otherwise would be uninsured. That’s a large expansion in coverage at an essentially trivial cost.
And it gets better as we go further into the future: The Congressional Budget Office has just concluded, in a new report, that the arithmetic of reform will look better in its second decade than it did in its first.
Furthermore, there’s good reason to believe that all such estimates are too pessimistic. There are many cost-saving efforts in the proposed reform, but nobody knows how well any one of these efforts will work. And as a result, official estimates don’t give the plan much credit for any of them. What the actuary and the budget office do is a bit like looking at an oil company’s prospecting efforts, concluding that any individual test hole it drills probably will come up dry, and predicting as a consequence that the company won’t find any oil at all – when the odds are, in fact, that some of the test holes will pan out, and produce big payoffs. Realistically, health reform is likely to do much better at controlling costs than any of the official projections suggest.
Which brings me to the third myth: that health reform is fiscally irresponsible. How can people say this given Congressional Budget Office predictions – which, as I’ve already argued, are probably too pessimistic – that reform would actually reduce the deficit? Critics argue that we should ignore what’s actually in the legislation; when cost control actually starts to bite on Medicare, they insist, Congress will back down.
But this isn’t an argument against Obamacare, it’s a declaration that we can’t control Medicare costs no matter what. And it also flies in the face of history: Contrary to legend, past efforts to limit Medicare spending have in fact “stuck,” rather than being withdrawn in the face of political pressure.
So what’s the reality of the proposed reform? Compared with the Platonic ideal of reform, Obamacare comes up short. If the votes were there, I would much prefer to see Medicare for all.
For a real piece of passable legislation, however, it looks very good. It wouldn’t transform our health care system; in fact, Americans whose jobs come with health coverage would see little effect. But it would make a huge difference to the less fortunate among us, even as it would do more to control costs than anything we’ve done before.
This is a reasonable, responsible plan. Don’t let anyone tell you otherwise.
Mr. Krugman won the 2008 Nobel Prize in Economics.
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