It’s painful to read Paul Krugman when he writes about health care. Makes you wonder how he ever won the Nobel Prize. Previously, he made the absurd claim that in repealing health reform Mitt Romney would allow “tens of thousands” of people to die. In his latest venture into the field, about which he knows embarrassingly little, he has this to say:
- Mitt Romney, as president, would make “savage cuts” in Medicaid.
- This is unfortunate because “Medicaid has been more successful at controlling costs than any other major part of the nation’s health care system.”
- Medicaid achieves this efficiency (a) “partly by having much lower administrative costs than private insurers” and (b) because “Medicaid is much more effective at bargaining with the medical-industrial complex.”
- Romney wants to slash Medicaid, in part because of Republicans’ “general hostility to anything that helps the 47 percent — those Americans whom they consider moochers who need to be taught self-reliance.” (Some Republicans? No. Apparently, all Republicans!)
I’ll pass on the last claim, except to note that the “Roosevelt coalition” was not a coalition that wanted to help poor people. It was a coalition of self-interested parties (including lots of racists and bigots) who desired to use the coercive power of the state to pursue their own interests, regardless of the impact on others — especially poor people. I will also note that by almost every measure those on the right are less selfish and care more about their fellow man than those on the left, as a general rule.
Tomorrow is Election Day.
What evidence is there that Medicaid outperforms every other part of the health care system in holding down costs? Krugman tells us that:
According to the best available estimates, the average cost of health care for adult Medicaid recipients is about 20 percent less than it would be if they had private insurance. The gap for children is even larger.
But isn’t that because Medicaid pays less than every other payer? Of course. On average, Medicaid pays physicians who treat Medicaid patients only about 59 percent of what a private insurer would pay for the same service. In New York, Medicaid pays even less — about one-third of what private insurers would pay.
Don’t Medicaid enrollees have to wait longer to get care because it pays less? You bet they do. In fact when you add the time price of care to the money price of care, Medicaid may be the most expensive health plan around. Also, health care delayed is often health care denied.
Krugman, however, asserts that Medicaid is more efficient because it has lower administrative costs than private insurance. He appears not to know that two-thirds of Medicaid enrollees [see here, page 13] are in private health insurance plans under contract with state governments!!!
His assertion that Medicaid “bargains” with the provider community is ludicrous. Medicaid doesn’t bargain with anybody. It sets a price and providers take it or leave it. Unfortunately, almost one-third of physicians leave the money on the table and are refusing to take any new Medicaid patients. Moreover, if this were a desirable way to hold down costs, we don’t have to enroll everyone in Medicaid to achieve it. We could just impose price controls on the whole health care system and let everyone pay Medicaid rates.
[Of course, real economists know that the social cost of something is not the price we pay. It is the opportunity cost of the resources needed to produce it. In the case of medical care, as long as we have the same doctors, nurses, hospital personnel, etc. performing the same services, price controls do not lower costs, they shift costs — from patients to providers. In fact price controls actually increase the social cost of care — as the time price of waiting rises to ration a scarce resource.]
What about Romney’s “savage cuts” in Medicaid? For the last 40 years or so health care spending in the United States has been growing at the rate of growth of gross domestic product (GDP) per person plus 2 percentage points. As Chris Jacobs notes, Romney proposes to cut that excess growth in half for Medicaid. In other words, Medicaid would grow at GDP plus 1percent rather the 2 percent. But this is identical to the proposal made by president Obama’s own deficit reduction commission, headed by Alan Simpson and Erskine Bowles. It is also the same growth path proposed by other bipartisan proposals: Ryan/Rivlin, Domenici/Rivlin, and Ryan/Wyden. [See the chart below.]
More importantly, to pay for ObamaCare, the Affordable Care Act [ObamaCare] would slow the rate of growth of Medicare almost to GDP per capita plus 0%!!!! In other words, if Romney’s proposed cuts in Medicaid are “savage,” then Obama’s cuts in Medicare spending are twice as savage!!!
Democrats often point out that the House Republican budget (Paul Ryan’s plan) envisions spending almost exactly the same number of dollars on Medicare that the Obama administration proposes spending. True enough. But the spending cap under ObamaCare is enforced by lowering payments to providers — so much so that one in seven hospitals will leave the Medicare system in the next eight years and seniors will have increasing difficulty finding doctors who will see them, according to the best estimates of the Medicare actuaries. Ryan, on the other hand is free to find better ways of meeting this target, including relying on competition and market incentives. Further, Romney has not endorsed the Ryan budget. In fact, Romney has not endorsed any cap on Medicare spending at all.