Hacker: Mandate Not Mandatory for Health Care Reform

One of the pleasures of traveling on the West Coast is that you get to read the Los Angeles Times in its natural setting. Like all papers, it is reeling from staff cutbacks, but it remains one of the nation's best. This morning, it ran an op-ed by Yale University political economist Jacob Hacker, who worked with the Economic Policy Institute to issue their own health care reform proposal. He has also advised both leading Democratic Party candidates.

In the op-ed, Hacker admonishes Senators Hillary Clinton and Barack Obama to avoid getting bogged down over the mandate issue, which is easily attacked and helped sink the California reform plan. Even though the economist in him is attracted to the idea and he included it in the EPI-Hacker plan, he rightfully describes mandates as non-essential to achieving far-reaching health care reform.

I'm going to be returning to the economics of health care in a few days after I've had a chance to digest a commissioned analysis of the economics of the EPI-Hacker plan by the Lewin Group. I have some real questions. For starters, they claim they can achieve universal coverage at a cost of about $50 billion. But that estimate relies on about an equal level of cutbacks in physician and hospital reimbursements. While realistic in the abstract, is it realistic politically when Congress routinely avoids cutting back physician payments that have already been mandated in law?

There was also a new report out yesterday from the Center for Medicare and Medicaid Services that I need to look over. This morning's press accounts focused on how Medicare and Medicaid may bankrupt the economy by driving health care costs to 20 percent of GDP by 2017. And the Health Affairs blog fed the anti-government program spin with posts from Sen. Jim Cooper (D-TN) and Sen. Paul Ryan (R-WI) fretting about how it will bankrupt the government in the former case and how government spending distorts the marketplace in the latter.

This focus on government spending ignores one crucial fact that blows both blame-game arguments away: Private health care costs (insurance premiums plus individual co-pays and deductibles) are growing just as fast if not faster than government-provided health care. And while this latest projection from CMS sees private sector health care spending growing at a slower rate than government spending at the end of the ten-year period, there's nothing in the numbers yet. Clearly, people who get their health care via employer-provided insurance (and not Medicare, Medicaid or other government programs) are experiencing rapid health cost inflation, too. Why didn't the press accounts and the Health Affairs blogger-Senators point out that private sector spending on health is bankrupting the rest of the economy? Why the double standard?

These one-sided views of possibly one-sided (again, I haven't read it yet) reports obscure the hydra-headed nature of the health care cost inflation problem. And it facilitates the false claim by people who have other agendas that government "control" of health care is somehow the problem.