Friday, July 24, 2009

Peter Orszag's political incorrectness

This morning's Wall Street Journal features an article by Laura Meckler entitled "Obama's Health Expert Gets Political". In it Ms. Meckler describes Orszag's foray into the heated Congressional debates about reigning in healthcare costs. Among other measures proposed by Orszag is the expansion of powers of the Medicare Payment Advisory Committee (MedPAC). In its current role MedPAC makes recommendations to the Congress, who can follow or ignore them. One example is the recommended $200 billion in cuts in the last year promptly ignored by our legislators.

Of course Members of Congress as well as such powerful regulators as the Department of Health and Human Services are opposed to the increase in MedPAC's powers. Why? Because for them power is a zero-sum game: MedPAC's increase will result in their decrement. But what does it mean for the consumer? Why should we trust Congress to promote efficiency? In fact I would argue that they see their jobs as maintaining the status quo -- would special interest groups be spending $40 million over 3 months or $1.4 million per day on lobbying efforts if these did not influence the legislators? For Congress, their political interests will always outweigh ours. And what about the DHHS? Well, if you consider that its components are such agencies as the FDA, who gets major funding from the manufacturers to review their products... Well, you get the picture, right? The status quo is working for them.

In comes the idea of a MedPAC with teeth: they make the recommendations and they have the power to carry them out. Of course all the special interests are trembling in their boots! Of course there is a swell of Orwellian rhetoric inciting panic among the uninitiated that the government will kill our grandmothers in the name of money! Come on, this is all disingenuous lies thrown at the public in hopes that we are idiots!

Orszag's stance is not politically popular because there are some hard things that have to happen. We as investors and as consumers will need to tighten our belts to make this reform successful. The irony is that, whether or not the reform passes, the belts are getting tighter. How will we feel if this tightening, instead of providing efficient and accessible care for our fellow citizens, simply continues to subsidize the annual bonus of the $12-million insurance company CEO?

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