A pattern already is emerging in these early days of the Obama administration: The president and his apostles spend weeks building up expectations for a bold initiative to address a problem formerly thought intractable — and then their bombshell innovation turns out to be a dud.
Example: Last week, the administration released its detailed request for the 2010 budget. In the weeks leading up to the release, the president had talked bravely of ordering a line-by-line review of every single agency’s budget to cut out all the waste and unnecessary spending. The result: reductions totaling $11.5 billion — and most of that in defense. That number is not even a rounding error on the banking bailout, and these minuscule cuts come at a time when the federal budget deficit is projected to top $1.8 trillion in 2009, with annual deficits expected to surpass $500 billion all the way to the financial horizon.
This week, the issue is health care. And, here, the expectations could not be higher — that is where the president set them.
Recall that, as a candidate, Obama promised voters he had a plan to cut premiums for family coverage by $2,500 per year for those who already have insurance. The president followed up on that pledge by convening two highly publicized “summits” during his first days in office. At both, the most prominent theme was the administration’s determination to “bend the cost curve.” Entitlement reform, it was proclaimed, starts with a health-care plan that gets at the cost problem.
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Congress is at present racing ahead with a plan to provide a universal entitlement to health insurance — but where is Obama’s celebrated plan to “bend the cost curve” and solve our financial problems? Said plan was nowhere to be seen. And this week we learn: They don’t have a plan and never did. Instead, they have a letter signed by six — really, six — Washington-based organizations representing unions and the health-care industry, expressing agreement that rising costs are a problem and pledging cooperation in reducing them. A letter — nothing more. In various news accounts, the story is embroidered with suppositions about reducing obesity, coordinating care, and eliminating unnecessary paperwork. But there is no plan to do any of that.
The signatories to the letter couldn’t pledge to take specific actions even if they wanted to — they have no such power. Costs are rising rapidly because there are strong financial incentives pushing the system in that direction. And those incentives are rooted in current government policy — Medicare, Medicaid, and the tax preference for employer-paid health-insurance premiums. The only way to fix the problem of expense without arbitrary governmental controls is to reform current policy in such a way as to ensure cost-conscious consumption and the freedom of service suppliers to meet consumers’ needs with innovation and efficiency.
Any reform with real financial teeth — for instance, the imposition of spending limits by the Washington — would be controversial. And that is why the president decided to dump that problem in somebody else’s lap. Whose lap? Possibly Congress’s, probably yours. What is certain is that Obama intends to pretend as though he actually did something about costs because he convened a meeting and extracted six signatures on a vague letter. If in coming years costs continue to rise at the same rate as they have risen in recent history, we may be sure that the president’s defenders will blame “the industry” — not the Obama administration’s recusing itself from the hard work of developing a coherent strategy on the issue.
We wonder: What do the signatories hope to get out of their deal with the president? They must know that the administration will now try to hold them accountable for something over which they have no control. The most likely answer is, simply, time. The industry feels vulnerable to government-imposed cost controls, but it will be difficult for Congress to impose any such limits this year now that there is a seemingly painless way to achieving the same savings. By the time it becomes clear that nothing real was ever done, “the industry” hopes the political dynamics will have changed more to their advantage. One very likely outcome is that the insurance industry will be rewarded for its fealty with a federal mandate that all Americans buy their products under a national-health program whose rules will be written in no small part by insurance-industry lobbyists.
All of this might be dismissed as just typical Washingtonian opera if the subject matter were less important. The unavoidable fact is that health-care costs do threaten the financial stability of the government, given the current structure of our entitlement programs. Spending on Medicare and Medicaid is expected to rise from about 4.3 percent of GDP today to 8 percent in 2030. The Obama administration and Congress are racing to pass a health-care bill with permanent and certain long-term spending commitments, with only the most speculative notions of cost-cutting. Refusal to deal realistically with health-care costs is why we have a long-term fiscal problem in the first place, and it is a roadmap to ruin.
