Is Health Care Reform Possible?

This week, one of the 7 possible congressional health care reform bills currently being configured was scored by the non-partisan Congressional Budget Office (CBO). The legislation, proposed Senate Finance Committee chairman Max Baucus (D-MO), would cost an estimated $843B over 10 years and reduce the federal deficit by $81B over the next decade. While the initial estimates on debt reduction are promising, three obstacles remain. One, the other bills currently in the House and Senate committee’s range anywhere from the Baucus Bill estimates to $1.5T. A final bill would have to be agreed on in conference between both houses of congress. Secondly, the apparatus being constructed to takeover and manage 1/16 of our national economy is staggering (see imbedded chart). And finally, skepticism remains as to whether government can ever meet the cost targets they claim. And there is reason to support this skepticism.

A story broke last week regarding Medicare and accusations that the federal program  ”knowingly” overpays for almost everything it buys. An internal audit found the following examples:

1. $7,215 to rent an oxygen concentrator, when the purchase price is $600

2. $4,018 for a standard wheelchair, while the private sector pays $1,048

3. $1,825 for a hospital bed, compared to an Internet price of $1,071

4. $3,335 for a respiratory pump, versus an advertised price of $1,987

5. $82 for a diabetic supply kit, instead of a $47 price on the Web

Simply staggering. An attempt was made within the Bush Administration last year (led by HHS secretary Mike Leavitt) to replace Medicare’s fixed price fee schedule with a competitive bidding program that would have been piloted in 10 major US cities. This change, it was felt, would have resulted in a $125M savings per year, with an astonishing $1B in return should the program go nationwide.

Sadly, the Democratic-controlled congress stepped in and passed legislation that terminated the competitive bidding contracts and returned things to the status quo. Secretary Leavitt noted, “The problem here is one man’s waste is another man’s living, and whenever there is an effort put forward to actually make an efficiency, someone goes on the offensive and hires lobbyists and does what they can to constrain Congress from doing it.” Why would they do this? The Center for Responsive Politics, the health care industry is currently spending $2 million a day lobbying Congress. Perhaps Mr. Leavitt was correct is his accusations.

Simply put, the biggest obstacles to true health care reform can be found within the ranks of those who claim they can produce progress. How can the same people who are running Medicare (poorly) be counted on the deliver us an efficient, well-ran, and cost neutral health care program when they cannot do that with what they have today? It is not logical to believe they can given their record.

Watching the Wind Get Knocked Out of the Windy City

Much was made this week about Chicago being passed up for the 2016 Summer Olympics. In spite of a personal appearance from President Obama and the First Lady, the International Olympic Committee (IOC) voted to have Rio de Janeiro, Brazil play host instead. Even more embarrassing, Chicago did not even get out of the first round of voting, receiving a meager 16 votes.

President Obama received a lot of criticism for his $1.2M taxpayer-funded sales job in Denmark, and it came from both sides of the aisle. Those on the right were elated at such a failure, while those on the left cringed in the face of another political setback. And after a miserable August and September, Democrats desperately needed a victory, even if it would have been largely symbolic. It was a huge gamble that backfired in a major way. Not helping matters was a video that surfaced early last week showing a 16-year-old honor student being beat to death in a rival Chicago gang fight. 

What got lost in all the pomp and circumstance were two very interesting stories. For starters, it seemed like Chicagoans had some reservations about how the games would be funded. While a recent Chicago Tribune poll showed widespread support for playing host to the 2016 games (64% in favor, 28% opposed), more than 75% of those surveyed say they were against the use of tax money to cover any financial shortfalls. While Mayor Richard Daley insisted taxpayers would not be on the hook for any debt, the city had already pledged $500M to cover any operating shortfalls as part of their bid.

News also leaked regarding the upcoming 2010 Winter Games in Vancouver. A June 15th, 2009 article from the CTV Olympics website noted that “Olympic-related construction bills continue to soar over budget for beleaguered Vancouver taxpayers, with some estimates putting the total added costs at close to $45-million. That’s apart from the troubled Millennium Project to house Olympic athletes, which is over its original budget by more than $100-million and has had to have its financing taken over by the city.” It is a stunning failure of budget management but our Canadian friends to the north were no exception …

The spectacular 2008 Summer Olympics in Beijing were originally estimates carrying an expense of $1.6B while the actual costs came in around $40B. The 2004 Summer Olympics in Athens had a budgeted price tag of $1.6B as well. Final bills? Try $16B. Perhaps the British would learn something from history as they prepare for the 2012 Summer Olympics in London? Sadly that does not seem to be the case. With a seemingly more realistic budget of  $8B, close to $19B has been spent already … as of June 2008!

To put these cost overruns in perspective, Canada taxpayers are just now paying the final $1.5B worth of debt on the 1976  Montreal Winter games … 30 years later. Amazing. Whats more, GDP growth for most of the host countries seem to surge in the year before and during the games of the Olympiad but drop sharply in the years that follow … once the invoices start coming in, of course.

With the United States already hemorrhaging debt at record levels and our government completely comfortable spending money they do not have now or will have within the next 30 years or so, perhaps getting passed up for the 2016 games was more a blessing than it was a defeat.