Controlling costs

CONTROLLING COSTS…. A couple of weeks ago, Ezra Klein raised a good point that’s worth keeping in mind as the debate over health care reform unfolds: “In most cases, individuals arguing that health reform is too expensive are dead-set against policies that would make it cheaper. It’s a neat trick: Their opposition to real cost controls makes health-care reform pricey, and then they attack it on grounds of cost.”

It’s an observation with broad applicability. For example, Tyler Cowen argued yesterday that the Obama administration’s approach relies on saving money in the long run (by lowering health care costs) by spending more upfront now (by extending coverage to the uninsured). Cowen thinks the president is playing a dangerous game, because the “most likely possibility is that the government will spend more on health care today, promise to realize savings tomorrow and never succeed in lowering costs.” He describes the larger policy as possibly becoming “the new voodoo economics.”

Matt Yglesias recognizes the risk, but thinks Cowen is overlooking the point of the White House’s policy.

[I]t seems strange to characterize this as a problem with Obama‘s plan. What we have here is a Democratic president advocating for some tough reforms that will reduce public expenditures over the long run. Those reforms will be hard to implement. And one reason they’ll be hard to implement is that, as Ezra Klein notes, conservative politicians who ought to be the core constituency for endeavors to slow the growth of Medicare costs seem more interested in drawing blood from Obama than in slowing the growth of government. It seems to me that the most useful intervention from a right-of-center economist might be to try to build support in Congress for these politically difficult measures, not to attack the administration for putting unrealistic proposals on the table.

Ezra fleshed this out in more detail this morning:

[I]t is baffling to watch [Cowen] blame this on the Obama administration. As he himself says, the White House is firmly behind the most promising proposals on cost: The efforts to tie Medicare’s reimbursement rates to the cost-effectiveness of different treatments and initiatives to give MedPAC the power to aggressively reform Medicare. But those policies are not certain to exist in the final bill.

What stands in the White House’s way is Congress. And, more often than not, it’s the Republicans in Congress. Liberals, after all, will sacrifice almost anything to radically expand coverage. This leaves cost-conscious conservative facing a bit of a dilemma. They can attack the most vulnerable parts of the policy — the cost controls — in the hopes of bringing the whole thing down. The downside to that, of course, is that liberals simply jettison cost-controls to protect the coverage expansion. For a fiscal conservative, this should be considered the worst of all worlds.

They are, in other words, still opposed to reform because it costs too much and opposed to the measures that would make reform more affordable. Watch for GOP lawmakers to fall into this, over and over again, throughout the summer.