Obama makes the case for Obamacare

Today, President Obama gave a speech to the American Medical Association (video here; transcript here). I was very impressed with it, and want to highlight a few key points:

If we fail to act, one out of every five dollars we earn will be spent on health care within a decade. And in 30 years, it will be about one out of every three -- a trend that will mean lost jobs, lower take-home pay, shuttered businesses, and a lower standard of living for all Americans.

And if we fail to act, federal spending on Medicaid and Medicare will grow over the coming decades by an amount almost equal to the amount our government currently spends on our nation's defense. It will, in fact, eventually grow larger than what our government spends on anything else today. It's a scenario that will swamp our federal and state budgets, and impose a vicious choice of either unprecedented tax hikes, or overwhelming deficits, or drastic cuts in our federal and state budgets.

I hadn't heard some of these stats before, and I think they make the case for action better than almost anything else. As expensive as some form of universal health care will be, we can't afford not to do it.

[Electronic medical records] will reduce medical errors, it's estimated, that lead to 100,000 lives lost unnecessarily in our hospitals every year.

I really have a hard time believing this statistic. I've heard some variant of it before - and this CBS piece presents a compelling scenario in which electronic records would literally be life-saving - but Obama's overselling a bit here. Electronic records not only won't stop every simple accident from occurring, but it's not hard to imagine mixups occurring specifically due to electronic records: what happens if a system is down, or there's a typo somewhere, for example? Still, I think the basic point is valid, even if 100,000 is a bit inflated.

Despite what some have suggested, the reason we have these spiraling costs is not simply because we've got an aging population; demographics do account for part of rising costs because older, sicker societies pay more on health care than younger, healthier ones, and there's nothing intrinsically wrong in us taking better care of ourselves. But what accounts for the bulk of our costs is the nature of our health care delivery system itself -- a system where we spend vast amounts of money on things that aren't necessarily making our people any healthier; a system that automatically equates more expensive care with better care.

Now, a recent article in the New Yorker, for example, showed how McAllen, Texas, is spending twice as much as El Paso County -- twice as much -- not because people in McAllen, Texas, are sicker than they are in El Paso; not because they're getting better care or getting better outcomes. It's simply because they're using more treatments -- treatments that, in some cases, they don't really need; treatments that, in some cases, can actually do people harm by raising the risk of infection or medical error.

And the problem is this pattern is repeating itself across America. One Dartmouth study shows that you're less likely -- you're no less likely to die from a heart attack and other ailments in a higher-spending area than in a lower-spending one.

Right on, Barack! He's referring to this article that I posted about recently, and I only heard about it because Obama had been passing it around the West Wing, so it's no surprise to see it in this speech. But still, I was skeptical that the specific issues raised in the article would get as much attention as they did in this speech, and that's great to see.

Now, if you don't like your health care coverage or you don't have any insurance at all, you'll have a chance, under what we've proposed, to take part in what we're calling a Health Insurance Exchange. This exchange will allow you to one-stop shop for a health care plan, compare benefits and prices, and choose a plan that's best for you and your family -- the same way, by the way, that federal employees can do, from a postal worker to a member of Congress.

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And I believe one of these options needs to be a public option that will give people a broader range of choices -- (applause) -- and inject competition into the health care market so that force -- so that we can force waste out of the system and keep the insurance companies honest. (Applause.)

I'm really glad to see this in the speech, as well. The AMA isn't a public option-friendly organization, and in order to actually get a public option passed, Obama's going to have to make the case for it, and do so to hostile audiences like this one.

Indeed, it's because I'm confident in our ability to give people the ability to get insurance at an affordable rate that I'm open to a system where every American bears responsibility for owning health insurance -- (applause) -- so long as we provide a hardship waiver for those who still can't afford it as we move towards this system.

This is excellent! His plan during the campaign famously didn't mandate that individuals have health insurance, which I and many others on the left found to be one of its biggest weaknesses. And while I'd prefer that, instead of a "hardship waiver", we just provided care for free to those who couldn't afford it (a la Medicaid), I'm glad to see movement here.

Let me give you an example of what I'm talking about. We need to end the practice of denying coverage on the basis of preexisting conditions. (Applause.) The days of cherry-picking who to cover and who to deny, those days are over. (Applause.) I know you see it in your practices, and how incredibly painful and frustrating it is -- you want to give somebody care and you find out that the insurance companies are wiggling out of paying.

Awesome. Fuck that pre-existing bullshit. Cover everyone for everything they need.

Now, there are already voices saying the numbers don't add up. They're wrong. Here's why. Making health care affordable for all Americans will cost somewhere on the order of $1 trillion over the next 10 years.

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That said, let me explain how we will cover the price tag. First, as part of the budget that was passed a few months ago, we put aside $635 billion over 10 years in what we're calling a Health Reserve Fund. Over half of that amount -- more than $300 billion -- will come from raising revenue by doing things like modestly limiting the tax deductions the wealthiest Americans can take to the same level that it was at the end of the Reagan years

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But we can't just raise revenues. We're also going to have to make spending cuts, in part by examining inefficiencies in our current Medicare program. There are going to be robust debates about where these cuts should be made, and I welcome that debate. But here's where I think these cuts should be made.

First, we should end overpayments to Medicare Advantage. (Applause.) Today, we're paying Medicare Advantage plans much more than we pay for traditional Medicare services. Now, this is a good deal for insurance companies. It's a subsidy to insurance companies. It's not a good deal for you. It's not a good deal for the American people. And by the way, it doesn't follow free market principles, for those who are always talking about free market principles. That's why we need to introduce competitive bidding into the Medicare Advantage program, a program under which private insurance companies are offering Medicare coverage. That alone will save $177 billion over the next decade, just that one step. (Applause.)

Second, we need to use Medicare reimbursements to reduce preventable hospital readmissions. Right now, almost 20 percent of Medicare patients discharged from hospitals are readmitted within a month, often because they're not getting the comprehensive care that they need. ... That will save us $25 billion over the next decade.

Third, we need to introduce generic biologic drugs into the marketplace. (Applause.) These are drugs used to treat illnesses like anemia. But right now, there is no pathway at the FDA for approving generic versions of these drugs. Creating such a pathway will save us billions of dollars. We can save another roughly $30 billion by getting a better deal for our poorer seniors while asking our well-off seniors to pay a little more for their drugs.

So that's the bulk of what's in the Health Reserve Fund. I've also proposed saving another $313 billion in Medicare and Medicaid spending in several other ways. One way is by adjusting Medicare payments to reflect new advances and productivity gains in our economy. Right now, Medicare payments are rising each year by more than they should. These adjustments will create incentives for providers to deliver care more efficiently, and save us roughly $109 billion in the process.

Another way we can achieve savings is by reducing payments to hospitals for treating uninsured people. ... But if we put in a system where people have coverage and the number of uninsured people goes down with our reforms, the amount we pay hospitals to treat uninsured people should go down, as well. Reducing these payments gradually, as more and more people have coverage, will save us over $106 billion. And we'll make sure the difference goes to the hospitals that need it most.

We can also save about $75 billion through more efficient purchasing of prescription drugs. And we can save about $1 billion more by rooting out waste, abuse, fraud throughout our health care system so that no one is charging more for a service than it's worth or charging a dime for a service that they don't provide.

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Now, for those of you who took out your pencil and paper -- (laughter) -- altogether, these savings mean that we've put about $950 billion on the table -- and that doesn't count some of the long-term savings that we think will come about from reform -- from medical IT, for example, or increased investment in prevention.

Not bad. The big knock on the recent health care proposals is that there wasn't any good way to fund most of it. And while there's a decent amount of hand-waving here, the distance between what we'll be paying, and what we can afford, looks reasonably small (especially considering the long-term benefits).