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Not enough to bend the 'curve'

Peter Orszag, President Obama’s budget director, took me to the woodshed in a blog post yesterday on the Office of Management and Budget Web site.

My column, also yesterday, argued that the “public option” for health-care reform may allow politicians to pretend they’re doing something to control health-care costs, while not doing the politically difficult things that really could, in Orszag’s phrase, “bend the curve.” The two biggest real things would be for Congress to tax employer-provided health-care benefits and for it to give up its power over the administration of Medicare, allowing decisions on reimbursements and benefits to be made based on what works and what doesn’t work, not on who lobbies harder.

Orszag didn’t dispute my basic point — that is, he didn’t argue for the public option as a cost-control measure. But he did criticize me for not acknowledging that the two big reforms I want are already in the Senate Finance Committee version of health-care reform. But are they?

The tax I proposed — and the one most economists favor — would force employees to treat as income the value of health-care benefits they receive from their employer. The idea is that they would then be more judicious in opting for really expensive plans, preferring to take more income as wages. Costs would be reined in, and the revenue could help subsidize health care for Americans who need the assistance.

The Finance Committee, swerving to avoid the gale of union and other opposition, opted for a weaker variation — an excise tax on insurance companies on the most expensive plans they sell. To get some sense of the difference in magnitude, my tax would raise $250 billion per year, while the Finance Committee tax would raise $201 billion total in years 2013 through 2019.

It’s true, as Orszag argues, that taxing the most expensive plans has a good deterrent effect. Even more important, the Finance Committee tax is designed to sweep in more and more plans in the years after 2019 — that’s why the Joint Committee on Taxation expects receipts from the tax to grow by as much as 15 percent per year in the second decade.

But what does that steep growth in expected revenue indicate? It tells you that Congress has postponed the harder choices — the ones that affect more than a few taxpayers — for another day. Will future Congresses be more eager to raise taxes than this one? Maybe. But let’s be clear — that’s what the design of the tax touted by Orszag asks us to assume.

Similarly, there is in the bill, as Orszag says, a commission intended to constrain Medicare costs in ways that would be difficult for Congress to override. But as the CBO delicately notes, “the proposal would place a number of limitations on the actions available to the commission, including a prohibition against modifying eligibility or benefits ...” As a result, the CBO expects it to produce only $22 billion in savings from 2015 through 2019 — small change for a new $829 billion entitlement.

We need a system that provides health care to all, not just the wealthy and the employed. We also need to pay for it. I agree with Orszag that both of the provisions he cites have promise for meeting the latter goal and should be cheered as opening steps. Neither, though, does enough. So if he wants publicly to criticize “naysayers” like me, fine. I hope he is making the argument privately that both provisions in the Finance Committee bill are good starting points, but should not be the high-water mark of cost control.

By Fred Hiatt  | October 27, 2009; 12:09 PM ET
Categories:  Hiatt  | Tags:  Fred Hiatt  
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The idea is that they would then be more judicious in opting for really expensive plans, preferring to take more income as wages. Costs would be reined in, and the revenue could help subsidize health care for Americans who need the assistance.


Where are you living where workers can individually demand wage increases in lieu of health care cuts? You're looking to absolutely slam the middle class and working poor who have 0 leverage. Companies will just pocket the difference and give their executives raises.

Try again Neocon.

Posted by: theobserver4 | October 27, 2009 2:00 PM | Report abuse

Get this: (from Haitt's own mumblings)

"...the tax I proposed....

"the two big reforms I want...

"...MY tax would raise $250B per year...

EVEN if it's obvious that Haitt didn't write this, (he hasn't such information at hand, nor will anyone think he has sussed out where this or that tax would go...)

it's a little braggadocio for such a twit, isn't it? He thinks suddenly he's
become a big, influential voice? Maybe use the byline ofthe person who gave him
the iffy information...that'd have some
credibility, at least. But by Hiatt?

Posted by: whistling | October 27, 2009 2:11 PM | Report abuse

My isn't Fred busy these days opining on health care. A real expert in the defense and insurance "industries". War and death.

Soon enough he will offer expertise in bankruptcy proceedings.

Posted by: branfo4 | October 27, 2009 2:32 PM | Report abuse

Ha! Ha! Hiatt is having a fit of pique because Orszag, quite wittily I might say, put him back in his place.

Don't make yourself even more ridiculous by persisting in your ignorance and stupidity.

The director of the OMB -- which by the way is non-partisan outfit -- knows a heck of alot more about finance and economics, including the complicated statistical simulations that go into their forecast and cost/benefit analyses -- than you can even dream to achieve.

You are just the typical Neo-con hack, Hiatt, spewing lies and disinformation due to your highly delusional state of mind. By the way, your buddy Kristol today, is just as demented as you.

You Neo-Cons are laughable. And people do laugh at you.

Posted by: Gatsby10 | October 27, 2009 2:41 PM | Report abuse

It's interesting that now that the public option (which, by the way, a MAJORITY of Americans support) is getting more attention, you're suddenly posting more editorials. It's difficult to take you seriously when you choose to ignore evidence of the public option as a cost control device (Maybe Peter Orszag assumed that you read the news, which published the CBO report showing that the public option WOULD reduce the deficit). For your reading pleasure:

Posted by: CTgirl3 | October 27, 2009 2:44 PM | Report abuse

Having helped make an utter disaster of our foreign policy for eight years, Professor Hiatt now turns his talents to health care.

No thanks Mr. Hiatt. Your version of the tax is just a more regressive, wealth-friendly version of Orszag's.

Posted by: B2O2 | October 27, 2009 3:24 PM | Report abuse

How on earth can you call a guy who is proposing raising taxes a neocon? Read the post, Hiatt is just arguing what is obvious to anyone, i.e. that there is alot of smoke and mirrors in these bills that need to be cleaned up.

Take Pelosi claiming that the Public Option will reduce the deficit. What is the caveat, oh yeah that that version of it ties payment to Medicare rates. These rates are way too low, and the cost of medicare is already defrayed by charging other customers with regular health insurance more. Now put more burden on the system by tripling the number of Medicare rated patients doctors and hospitals see, and what do you have:

Lots of bankrupt hospitals and doctors.

Posted by: DCDave11 | October 27, 2009 3:30 PM | Report abuse

You say it, Fred! I'm SO relieved that the media is finally exercising an ounce of skepticism, rather than just kowtowing to Obama as many of your peers (cough, cough, Sulzberger's paper) still are.

There is little reform in the bill (as we can only assume it will look when done) and lots of committing of money toward a system that has failed. Borrowing from China a trillion dollars in money we don't have to prop up a system we can't afford which was formed as a result of a historical quirk arising from worker shortages in WWII ... is a bad idea.

What is needed is consumer-centric reforms that increase HSAs and high-deductible plans, moving from the use of insurance as a credit card toward a use of it for catastrophe (you know, the way insurance is supposed to be...); movement toward a salary reimbursement model for doctors, rather than fee-for-service; abolition of tax discrepancies for employers and individuals buying insurance on their own; mandatory price transparency; the elimination of local insurance monopolies by allowing insurance companies to operate across state lines; and, lastly, tort reform.

THAT would be sustainable, market-driven reform that would improve competition, outcomes, and finances. Instead, we get Pelosi, Obama and Reid's tax-and-spend clunker, an entitlement likely to be as sustainable as Medicare is today, and just as dependent on future Congresses having the cajones today's doesn't to make those cost cuts. Brilliant. There goes our economic growth!

Posted by: itchy1 | October 27, 2009 3:34 PM | Report abuse

What else would we expect from the Washington Times Annex? I wonder when Hiatt will complete the emulation by announcing that he's joined Reverend Moon's Unification Church.

By the way, since he botched the link to Orszag's blog post (purposely? who knows), here is a working one:

Posted by: B2O2 | October 27, 2009 3:37 PM | Report abuse

Fred Hiatt. He runs the worst editorial page on a major US newspaper, an embarassment, let's face the truth, and when he gets noticed by someone in the administration because of the crap he has written he thinks he has hit the big time. Please, please, get rid of this man.

Posted by: gposner | October 27, 2009 3:39 PM | Report abuse

To Gatsby10:

The OMB is quite partisan, as it is a white house appointed position. Perhaps you were confusing it with the CBO, which is non partisan.

Perhaps before espousing liberal rage, you can do some fact checking yourself. But it is likely more fun to run around calling people neocons.

Posted by: TheGJ | October 27, 2009 3:40 PM | Report abuse

LISTEN TO YOUR DOCTOR. 63% of them favor a public option, and an additional 10% favor the US going to a single payer system.

Why do so many idiots out there prefer to listen to Glenn Beck rather than their doctors on medical issues -- or talk radio rather than climate scientists on global warming? Why do they purposely dumb themselves down? Is it a death wish?

Posted by: B2O2 | October 27, 2009 3:42 PM | Report abuse

LISTEN TO YOUR DOCTOR. 63% of them favor a public option, and an additional 10% favor the US going to a single payer system.

Why do so many idiots out there prefer to listen to Glenn Beck rather than their doctors on medical issues -- or talk radio rather than climate scientists on global warming? Why do they purposely dumb themselves down? Is it a death wish?

Posted by: B2O2


I think the short answer is that they are dumb to begin with and watching a fat pasty dude cry on national TV is all it takes to convince them that everything else around them is a lie; even though the dude who can't stop crying couldn't even finish school.

Or they pop on the AM radio and listen to another fat pasty dude who doesn't cry, but snarls instead. Same garbage though....

Insert P.T.Barnum joke here......

Posted by: theobserver4 | October 27, 2009 4:14 PM | Report abuse

I keep hearing tax the plans, tax the plans. If I understand what you are saying, is that somehow, my good insurance, for which I pay quite a bit, will be taxed as income. That will somehow reduce my desire for such a good health plan, and reduce medical costs. How is that, exactly?
I pay for a good health plan b/c it takes care of my health needs. If I have less insurance, I pay more out of pocket. Where have I saved money if I have a reduced insurance plan? How does that reduce health care costs.
And really, the fact this tax is favored by economists means little to me -- their pseudo-science has done little to really avoid recessions, bubbles, reduce medical costs and the like. At best, they propose theories that can never be proven. At worst, they promote opinions and assert they are fact.
Taxing my health insurance will simply cost me more over time -- it will not reduce my medical expenses or need for treatment. My dad was a country doctor. He contained costs by treating medical problems as they arose, urging preventative care, avoiding unnecessary tests, and not charging and arm and leg for treatment. Maybe we should start with the idea that medical professional don't necessarily need to make 3-5 mil a year.
How about simply containing costs by forcing providers to charge less. Its what Medicare/Medicaid and insurance companies do now. How about simply determining a fair prices for medical care, and limiting the cost to that amount. Yeah, maybe we simply stop the spiraling medical costs by capping fees. Yeah, thats the ticket.

Posted by: gprudich | October 27, 2009 4:27 PM | Report abuse

The easy fix is Medicare-for-All.

This maneuver would increase the overall federal share of tax-payer supported medical expenses; however, it should slow and perhaps even reduce overall spending on health care across the economy. The increased efficiency in the broader economy would produce more taxable revenue, which should in turn off-set the costs of the program. Odds are it would be a net gain for the economy as a whole; and most taxpayers and consumers.

Posted by: JPRS | October 27, 2009 5:29 PM | Report abuse

Mr Hiatt said re taxing employees for employer provided health insurance and "turning over the administration of Medicare"" "The idea is that they would then be more judicious in opting for really expensive plans, preferring to take more income as wages. Costs would be reined in, and the revenue could help subsidize health care for Americans who need the assistance."

What la la lan do you live in? Neither step will make a difference. People will not be more judicious in utilizing health care if they cannot get pricing information. The prices "negotiated" by insurers with providers is a secret. Just try the next time your doctor wants a battery of blood tests to get data before the tests are run. The idea that people would price shop if they could may be possible if the US adopts a step taken in Singapore. All medical costs by each provider are published.

A second step is to legislate away the right of insurers to negotiate prices. Or, require providers to provide to the uninsured the same pricing they provide to the provider with whom the lowest price has been negotiated.

The pricing mechanism at work in health care is not the result of choices made by individual consumers of health care. The pricing is the result of insurance negotiations. Individuals buy insurance based on premium, co-pay, coinsurance, and out-of-pocket costs. That is what you have to change if you want consumers to affect health care costs.

Posted by: amelia45 | October 27, 2009 6:18 PM | Report abuse

The whole idea is stupid. If you are rational, here's what you do:

1) Don't pay for the insurance, accept the fine. It's cheaper than health care insurance.

2)The difference between the public option and the fine effectively becomes your "nest egg" to pay cash for your doctor visits

3) If you get seriously ill, you then buy insurance.

Our government is run by ideologues and idiots. There clearly is no adult supervision.

Posted by: Ombudsman1 | October 27, 2009 6:24 PM | Report abuse

So, just to make things perfectly clear: Was Mr. Orszag correct when he said that you claimed that things were missing that were actually included in the Senate Finance Committee bill?

Seems to me that is sort of a central issue here.

Posted by: sembtex | October 27, 2009 6:28 PM | Report abuse

Most Conservatives seem more concerned about reducing health care costs than providing reasonably high quality health care. They want to tax ordinary people's health care benefits, while opposing raising taxes on regular income of the wealthy. Most people have difficulty as is getting by or saving much. Raising taxes on middle and lower class persons will make either that much harder.

Conservatives were not happy with the creation of Medicare in the first place. They seem eager to reduce Medicare benefits in any guise possible. Rather than offer generous health care benefits to senior citizens, most of whom have less than $20,000 in annual income, they appear to prefer seeing most seniors in poverty or working into their seventies.

Posted by: Aprogressiveindependent | October 27, 2009 7:22 PM | Report abuse


Orzag and MESSIAH wouldn't know "competition" if it were wrapped in a dead fish from Rahm's office and slapped across their faces. They're govt. TOADIES.

Until people take personal RESPONSIBILITY for being FAT SMOKING DOPERS/BOOZERS (40% of medical bills) -- MESSIAH ain't got squat.

Posted by: russpoter | October 27, 2009 7:38 PM | Report abuse

Get stuffed into a position as editor in a national newspaper (for who knows what reasons) and you then get to name-drop all those important figures that take you to task.

Orszag, as duty calls, had to respond to Hiatt's cut-&-paste crap, and he did so quite eloquently.

I am still stunned Hiatt has a job above that of a K-street doorman, but we live in an age where an illiterate, alcoholic buffoon can be appointed president by the Supreme Court, a telegenic airhead with the obstinate, unremitting stupidity of a housefly can be nominated as VP, and a drug addict and convicted felon, hosting a redneck radio show coast-to-coast, is leader pro tem of the GOP.

Seriously -- you can't make this stuff up.


Posted by: Frank57 | October 27, 2009 8:02 PM | Report abuse

When Fred advocated (and still does) elimination of tariffs, does he cry crocodile tears because he is worried about the COST of the elimination of that revenue?

Was Fred worried about cost of the wars of Iraq? Afghanistan? whatever other war he wants us to be bogged down in?

Don't ya get the idea that Fred only worries about the "cost" of programs he hates (esp. programs for the American middle class)? If he likes a program, then do we ever debate the cost?

Posted by: santafe2 | October 27, 2009 8:13 PM | Report abuse

Just shut up.

Posted by: edfunk1 | October 27, 2009 9:34 PM | Report abuse

it's so unnerving that republicand,although a minority,have the biggest mouths and so much control...this is the party of the barabbas complex....get a bunch of thugs with guns ,give them banners and they sound like the majority...i just hope it doesn't work and we put back a bunch of barbarians in both houses again...Obama should go at it alone and use the reconciliation clause to get the Public Option with no opt out and for anyone who wants it....remember...the corporation is a far bigger enemy than government ever could be

Posted by: kiler616 | October 27, 2009 10:23 PM | Report abuse

employees of the Washington Post doubtless consider themselves fortunate to have the caring, impartial advice of fred hiatt as regards crafting their employee benefits; take for example (please!) his 2 generous suggestions regarding health care:

> ".tax I proposed ..would force employees to treat as income the value of health-care benefits they receive from their employer. The idea is that they would then be more judicious in opting for really expensive plans.."

> "..for [the government] to give up its power over the administration of Medicare, allowing decisions on reimbursements and benefits to be made based on what works.." [fred doesn't really specify what he means by 'what works' - we suppose he means that benefits and reimbursements will be 'based on what fred hiatt and management deem to be sufficient and appropriate'; gee, guess that 'works' for lil freddy, eh?]

gee, fred is kind of a double threat isn't he -- when he isn't trying to neo-con the public on foreign policy, he's trying to short sheet them on health care. fred goes that famous 1708 quote one better:

"Millions for defense, but not one cent for tribute (or health care)!"

[aside: thankfully fred hiatt is such an obvious fraud that he is unlikely to trick anyone into listening to him - he is about as subtle as a bad smell in an elevator]

Posted by: ithejury | October 28, 2009 4:17 AM | Report abuse

The whole public option thing is just a public relations dodge by the Congress to avoid taking responsibility for lower benefits at a higher cost. That's what no one wants to say about this. That it might cost more and we might get fewer benefits, in order to pay for those who now lack insurance and can't afford to pay for it on their own. Right now, we pay on a one-time basis when these people get sick. Under health care reform, we'll be paying higher premiums every month, plus the system will cost more overall unless those premiums collect the full cost of their treatments.

One possible solution is to do what the Europeans and Canadians do, and have a two tiered system. Essentially, what you would do would be to expand Medicaid to cover most of those who are now uninsured. You would have to do this by building a lot of public health care clincs and staffing them with costs paid for by the Federal government, because doctors in private practice don't want to accept Medicaid reimbursement rates. To do that, Medicaid would need to be fully costed by the Federal government, or else you would have to force the Southern states with low taxes to raise those taxes in order to cover more people under Medicaid than they do now. That's a big part of the reason why we have the health care crisis now, and why the Southern states with Republican representation want to have an "open states" plan where people can get coverage from a company in any state. Of course they do; that's a great deal for them. People in a low tax state with hardly any regulations, like Alabama, can get a free-ride at the expense of taxpayers in, say, Minnesota or Wisconsin. Just like they do every time there's a hurricane, to pay for cleanup costs. When will the Southern states be forced to stop raping the taxpayers of the Northern states- that's the real issue here.

Posted by: ripvanwinkleincollege | October 28, 2009 4:53 AM | Report abuse

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