Samuelson: Despite Rhetoric, Health Care Costs Will Rise

The most misused word in the health-care debate is "reform." Everyone wants reform, but what constitutes reform is another matter. If you listen to President Obama, his reform will satisfy almost everyone. It will insure the uninsured, control runaway health spending, subdue future budget deficits, preserve choice for patients, and improve quality of care. These claims are self-serving exaggerations and political fantasies. They have destroyed what should be a serious national discussion of health care.

The health-care conundrum involves a contradiction that the administration steadfastly obscures: in the short run—meaning four to eight years—government cannot both insure the uninsured and rein in health spending. Here's why. The notion that the uninsured get little or no care is a myth: they now receive about 50 to 70 percent of the health care of the insured. If they become insured, their health spending would rise toward 100 percent; that would increase both government and private health costs, depending on how the insurance is provided.

Until health spending is better controlled, expanding insurance coverage will be expensive. The president talks endlessly about the need to curb spending and eliminate waste. These are worthy goals. But changing the way medical care is delivered and paid for would take years and involve disruptive and unpopular measures. Patient copayments might increase; networks of doctors and hospitals might displace individual practices; the tax exclusion for employer-paid health insurance might be curbed. Obama downplays the obstacles. In practice, any reform isn't likely to compel needed changes, in part because it's not always clear what will work.

Evaluations of congressional proposals reflect this reality. The Congressional Budget Office judges that the legislation in the House would, through expanded Medicaid and subsidies for private insurance, cut the uninsured to 17 million in 2019, from 46 million in 2007. But the cost would be $1 trillion over the decade; of that, $239 billion would add to the budget deficit. Worse, the costs would rise faster than the sources of financing, including a tax on the wealthy. In 2019, the projection's last year, the deficit would be $65 billion. Assuming that deficit rises 4 percent a year, the cumulative shortfall in the second decade would total $800 billion.

But Obama sees all blue sky. "Here's what reform will mean for you," he said at a recent rally. "It will mean lower costs, and more choices and coverage you can count on. Health-insurance reform will save you and your family money," he said. (Note: except for subsidies, it's doubtful families will experience savings any time soon.) And later: "We'll also change incentives so that our doctors and nurses can finally start providing patients with the best care and not just the most expensive care. And if we do that, then reform … will lower deficits in the long run."

Contrast Obama's reassuring rhetoric with this exchange at a congressional hearing between Sen. Kent Conrad, chairman of the Senate Budget Committee, and Douglas Elmendorf, head of the CBO.

Conrad: "From what you have seen from the product of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?"

Elmendorf: "No, Mr. Chairman. In the legislation that has been reported, we do not see the fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health-care costs … The [cost] curve is being raised."

Judged objectively, reform may do exactly the opposite of what Obama says. It would bloat spending, not restrain it. But because the president is so well spoken, he has the ability to make misleading statements sound reasonable or sophisticated. Still, they're misleading.

The administration had to make choices; it could emphasize expanded insurance coverage ("access") or cost control, but not both. It chose coverage, embracing the longstanding liberal grail of "universal" insurance. Millions of Americans would receive more health care, though how much their health would improve is uncertain (the administration can't logically argue that much health care is wasteful and also that the uninsured will automatically benefit from more of it). Many with insurance would gain the peace of mind that they won't lose it.

But what helps many Americans as individuals may hurt society as a whole. That's the paradox. Unchecked health spending is depressing take-home pay, squeezing other government programs—state and local programs as well as federal—and driving up taxes and budget deficits. The president has said all this; he simply isn't doing much about it. He offers the illusion of reform while perpetuating the status quo of four decades: expand benefits, talk about controlling costs. The press should put "reform" in quote marks, because this is one "reform" that might leave the country worse off.