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Peter Orszag Responds to His Critics

Thumbnail image for Orszag.jpgIn his New Yorker profile of Peter Orszag, Ryan Lizza argued that Orszag was the Obama administration official who best represented -- and even guarded -- "Obamaism." I think you see a bit of that today over at Orszag's blog. This is his first post, to my knowledge, linking to other bloggers. And he kicks it off by linking, and respectfully responding, to criticisms made by three conservatives who he "reads regularly": Virginia Postrel, Mickey Kaus, and Richard Posner. He starts it, in other words, by reaching out to critics and trying to convince them that he understands their concerns. Call it the David Brooks strategy.

To draw out one point implicit in Orszag's response, you need to separate health care reform into two pieces. Coverage and cost. The reforms meant to expand coverage are big, expensive, coercive, and largely occur in the private market. They're things like government subsidies to purchase health insurance, individual mandates to make sure people buy health insurance, and market reforms to end the days of cherrypicking and underwriting.

The cost reforms, by contrast, are being done cautiously, cooperatively, and with a focus on Medicare. They're things like the idea to make it easier for MedPAC to reform Medicare, which Orszag talks about in his post. They're things like "comparative effectiveness review," which simply creates data on which treatments are most effective. There is no coercion attached to that data. No statute that forces your doctor to read the findings. But it's a pretty safe guess that its recommendations will be embraced first by government health programs like Medicare.

Which is why it's a bit bizarre to read Postrel writing that "if more-efficient government management can slash health-care costs by addressing all these problems, why not start with Medicare?" When it comes to cost, they actually are starting with Medicare. They hope that the efficiencies work and are voluntarily adopted by private insurance. But there's no actual mechanism to make that happen.

Most people, however, don't notice the Medicare focus, because it's the coverage issues -- insurance market reforms and subsidy costs and employer taxes and individual mandates -- that get all the attention. But another way to think of health reform is that the administration is proposing policies to reform coverage in the health care system and to control costs in the government insurance system.

By Ezra Klein  |  June 8, 2009; 5:18 PM ET
Categories:  Health Reform  
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If there's no mechanism to ensure that the private sector adopts these measures, I sure hope that Medicare takes up the majority of the health insurance market for the sake of Obama's cost cutting targets. Seriously, voluntary adoption?

Posted by: MrGoodKnight | June 8, 2009 7:02 PM | Report abuse

Fair enough that coverage and cost controls are two separate things and Fed will adopt cost control mechanisms to Medicare first as those become available. But the real bet people refuse to bite is how giving coverage to additional 46 million people at the cost of more than 1 Trillion dollars over the decade will reduce the overall cost. That threading of the needle has not happened and hence the general perplexities about health care reforms.

Obama can very well say it is moral to provide health care to all these 46 million folks without insurances. No morally upright society should let it happen, that is true as well. Coverage should increase because Obama promised so on the campaign trail, that is true too. Meanwhile, those who have the coverage can also remember that it can be lost suddenly by way of job losses. So all in all increase in coverage can be argued somehow, though it is unclear if folks will be ready of more Trillion Dollar price tag for that over a decade.

But what about the costs? Has Obama or anybody come forward and have credibly said (public meeting after public meeting) that these are top 3 reasons why our costs are high and we are attacking those in such and such manners with predicted savings? Nope, there is no such honesty from our ruling class. Doing all policy acrobats to link costs and coverage is lot less convincing and misleading people. People know that ‘cost control’ in government program only without full-proof transmission mechanisms to pass on to private insurances will still keep them exposed to higher costs and consequent overall societal losses.

Posted by: umesh409 | June 8, 2009 11:47 PM | Report abuse

I think we'd like a little more assurance that Medicare will actually cut costs than "it's a pretty safe guess."

Posted by: Hansonresponse | June 9, 2009 8:43 AM | Report abuse

There's actually one more leg of the stool... improve the quality of care... which will affect the cost of care directly.

Nearly half of all the medical bills in this country are paid by Medicare, so controlling Medicare costs is critically important. And private insurers generally peg their reimbursement rates and practices to what Medicare does.

The one thing unsaid is that private insuers with their big biz customers have already undertaken some of the proposed reforms. The Administration is being careful to not screw up what already works.

Posted by: Chucksideas | June 9, 2009 10:28 AM | Report abuse

Postel asks, "if more-efficient government management can slash health-care costs by addressing all these problems, why not start with Medicare?"

The reason is that the waste we can most easily get at is in private insurance (high overheads and demands on physicians) and drug companies. There is about $500 Billion a year we could pick up by adopting Medicare for All.

Posted by: lensch | June 9, 2009 12:17 PM | Report abuse

A smart guy like Orszag should read better blogs than that.

Posted by: chrismealy | June 9, 2009 12:59 PM | Report abuse

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