Earth to CBO, Senate Finance and WaPo: “It’s the Economy, Stupid”

We can now expect another round of misleading and phony arguments on health care costs, this time reacting to the Congressional testimony of Doug Elmendorf, head of the Congressional Budget Office, whose budget-centric explanation of the economics of health care continues to be used as an excuse for bad policy decisions.

From Dean Baker’s favorite source of economic misinformation analysis:

Instead of saving the federal government from fiscal catastrophe, the health reform measures being drafted by congressional Democrats would increase rather than reduce public spending on health care, potentially worsening an already bleak budget outlook, the director of the nonpartisan Congressional Budget Office said this morning.

Under questioning by members of the Senate Budget Committee, CBO director Douglas Elmendorf said bills crafted by House leaders and the Senate health committee do not propose "the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount."

"On the contrary," Elmendorf said, "the legislation significantly expands the federal responsibility for health-care costs."

Well, no kidding. If you only look at the expansion of eligibility for Medicaid and federal subsidies to get millions of currently uninsured/underinsured fully insured, a third grader can figure out that federal expenditures for health care will go up. But that’s not the relevant issue.

What we need to worry about is whether the economy-wide costs, under the insurance payment structure for health care to providers, goes up or down, given all the features in the Senate and House reform bills. It’s the economy, not the budget alone, that matters, as long as the budget impacts are paid for, as they would be under the House bill.

There’s nothing in WaPo’s report of Elmendorf’s testimony that says the reforms in those other elements won’t "bend the cost curve" and lower national expenditures (per person) for health care. In fact, the WaPo story cites Elmendorf as endorsing cost-reducing measures that are either in the current bill or under consideration.

Yet there isn’t a single reference in the WaPo article, or the misdirected quotes from Senators, that explains the point that the relevant question is the impact on the national economy.

If the country completely dismantled the employer-based, private insurance system and replaced it with a single-payer, government-sponsored system like any of those used in over 20 countries world wide, we could cover everyone and do so at 1/2 to 1/3 lower costs per capita than we pay today.

Of course, the federal budget portion of this would go way up. But who cares? Our nation’s health care costs would go down.

We should not stop with a narrow focus on the budget. The finance "experts" in the Senate and the Washington Post editors should know that, but you’ll have to do the math yourself. Ask your kids.

Uh, guys, it’s the economy.
Ezra Klein, but I like your list.
Matthew Yglesias, Max Baucus’ revenge (but only if you allow it)

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