Obama on health care

Barack Obama is too smart (I hope) to have an excuse for giving the speech he just gave on health care.

Kevin Drum is (tentatively) disappointed in Barack Obama’s speech on health care: “not very bold,” Kevin says, though he’s willing to “wait for more.”

Certainly Obama’s speech doesn’t stake out a firm position for, e.g., single-payer, or play-or-pay, or any other specific approach to providing universal coverage. But it does come down clearly for universality as a short-term goal, which seems like a fine place to draw the contrast between the two parties.

I think the specifics Kevin finds so unexciting (on-line medical records and claims processes, for example) are designed to serve a specific rhetorical purpose: to answer the “we can’t afford it” objection. That’s an important piece of rhetorical work to do, and can be done without having a fully fleshed-out proposal to put on the table.

My objections to the speech are different than Kevin’s, though not less profound.

First, Obama says:

Another, more controversial area we need to look at is how much of our health care spending is going toward the record-breaking profits earned by the drug and health care industry. It’s perfectly understandable for a corporation to try and make a profit, but when those profits are soaring higher and higher each year while millions lose their coverage and premiums skyrocket, we have a responsibility to ask why.

The profits of health-care companies can’t possibly be reduced by enough to matter substantially. The problem is costs, not profits, though it’s certainly true that the incentive structure facing the for-profit enterprises now encourages them to generate unnecessary cost. But substantial health-care-finance reform has to hit the incomes of some of the people who now work in the health-care industry. A frank account of the matter ought to acknowledge that.

On the other hand, while promises to cut public budgets by getting rid of “fraud, waste, and abuse” are almost always themselves fraudulent, sheer fraud in health care seems to be big enough (10%, according to Malcolm Sparrow) so that reducing it could make a substantial contribution: I’d like to hear a politician mention that.

Second, Obama says that putting the health-care system on line would save “over $600 million a year on health care costs.”

Now $600 million in what Obama says is a $2.2 trillion total health-care expenditure (Query: is that really the current number? sounds high to me, but I could be out of date) is way below the rounding error, and would simply not be worth talking about in a policy speech (though well worth saving at an operating level). My first reaction was to think that someone had just mistyped “million” for “billion,” which is easy to do.

But then the problem is the opposite: it seems grossly improbable that better use of information technology could save nearly 30% of the total cost of health care. Elsewhere in the speech, Obama says that paper-pushing costs about a quarter of the total budget, which seems about right. If $2.2 trillion is the right total number, then a quarter of that is $550 billion. Even if an on-line system brought the paper-pushing cost to zero, which of course it couldn’t, you can’t save $600 billion out of a $550 billion item. Perhaps whatever estimate Obama is quoting includes something for reduced operational costs from on-line medical records and improvements in IT within health-care facilities, but even then $600 billion in savings sounds pretty damned optimistic.

A lawyer friend of mine once remarked on her own tendency to “use numbers as adjectives.” That’s a big problem, even for very smart lawyers like Obama, and the speech makes me worry about whether he shares it. Almost all voters are innumerate, so this sort of mistake, and the attitude behind it, probably won’t hurt him in his quest for the White House. But it bothers me when I think of his likely performance as President.

Finally, and in some ways most seriously, Obama in his speech says something that simply isn’t true:

46 million Americans have no health care at all

No, no, no, no, NO!! That’s just wrong. No one has “no health care at all.” What those 46 million people lack is health insurance. As Obama himself says, one of the big problems with the current system is that the medical costs of the uninsured who can’t pay for their own care land on the insured (and those who pay out-of-pocket). The uninsured get worse (and sometimes more expensive) care than they would if they were insured, but everyone has access to some sort of care, if only through the ER.

The political debate over health care consistently conflates three ideas: health care finance, health care, and health. We’d like to be healthier, to get better health care, and to pay for it in a way that’s less burdensome, imposes fewer catastrophic risks, distorts the labor market less, and interferes less with health care itself. But those three objectives aren’t identical. Health care isn’t the only, or even the most important, contributor to health, and health-care finance is a problem independent of its health-care impacts. A real leader needs to be able to grasp those facts and communicate them to the people.

If I seem to be picking on Obama for making a no-worse-than-usual politician’s speech about health care finance policy, it’s because I hold him to a higher-than-average standard. I have the strong impression that Obama is an intellectual superstar among politicians, someone with sheer brainpower, creativity, and willingness to work hard to get things right equal to the best public-policy academics. That would rank him alongside LBJ and Bill Clinton &#8212 and no one else &#8212 among Presidents and Presidential nominees in my lifetime. This was not the health-care speech I would have expected from someone at that level; I hope it was just an off-day.

Update Ezra Klein has a somewhat different objection: that by offering only uncontroversial specifics, Obama is signaling a lack of seriousness about actually getting the job done (and goring the requisite oxen) if he gets elected. It seems to me that if Obama campaigns on “universal coverage now” against an opponent who opposes it, he has a winning political hand, and that a President elected on that platform has a good chance of forcing something through the Congress, pretty much independent of whether he’s committed to a specific plan in advance. Indeed, vagueness at this stage may be an advantage, in that it offers bargaining room for later.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com