Saturday, June 13, 2009

Health Care Reform Chicanery

Even if Peter Orszag worked earlier with CBO, it is hard to believe his numbers in this whole debate. The problem with all these projection numbers (deficit or medical expenses or purported savings) is those all are based on assumptions which invariable go wrong and by then American public is already paying the price in terms of taxes or higher debt. The numbers thrown by White House are essentially unbelievable, unworkable in the end.

It is true that if someone wants to criticize White House for future deficit based on their projected budget figures, one will also have to accept their figures about proposed savings. We cannot be selective in treating their numbers conveniently. Better is to ignore all these numbers – deficit or debt or proposed savings - considering extremely low credibility of all this exercise.

There are number of problems with Health Care Reform when it comes to financing these reforms. First of all, how should Americans believe the cost figure of $1.2 Trillion over the next decade whereas by some other estimate it can be up to $1.8 Trillion in the same period? Which estimate is correct? Which has more credibility? What happens when these estimates go wrong? Is the only result increase in national debt when these estimates go wrong?

There are 3 ways one can pay for these reforms:

a) Propose and execute dedicated tax stream upfront. As tax collections are impacted by acceleration and deceleration in Economy, the real spending in that case should be dictated by available pool of the money under this tax stream.

b) The other way is get into the ‘crystal ball’ business where White House engages itself in creative pursuit of digging out ever esoteric new numbers of ‘purported savings’. Of course, White House is not responsible when these numbers do not materialize in future. By then Obama Administration has gone into the History books with all accolades for accomplishing Health Care Reform. Remember, tax cut debates in Bush’s time? All supporters argued confidently that these tax cuts would pay for themselves in future? Are those paying? Of course not, but American Public is forced to hold the bag. It will be really helpful if these politicians leave Americans alone and not drag them in their pursuits of ‘glory’.

c) Another way could be let American Congress and Administration ‘realize first’ whatever purported savings and additional tax collections every year upfront and put that money into a kind of escrow account of Health Care Reform. Then use that money as these politicians think correct. Americans can live with Politicians using these ‘spoils of savings’ as they think appropriate because at least by then ‘pursuits of glory’ will not leave them with burdens of debts.

President Obama is touting that we need ‘common sense’ approach to Heath Care Reform. Then why is it not adopted in financing part (say the third way mentioned above)? Why is our President engaged in unbelievable, hard to accept number crunching? It is fairly dislocating for a mature democracy that come Saturday and we have our President coming up with yet another ‘hard to believe’ future savings to finance his pet project. It paints a picture of a young man in hurry who is desperate to find money for his long shot business and hence engaged in all sorts of creative, hypothetical articulations with little resemblance to reality.

Can we have more mature discourse here which does not land Americans holding bags in future? Granted, it is all about making Americans healthier. But we do not want that by bankrupting ourselves too. It is also true that if we do not alter the current unsustainable path, we will be bankrupt anyways too. But we cannot forget the role of Politicians in setting us on this unsustainable path. They sold us this ‘snake oil’ in the first place that State or someone else can continue to foot the bill even when unrestrained medical spending is racked up. Solution is not to engage in the same game again – to sell the ‘snake oil’ of some future hypothetical savings for the sake of writing commitments of Trillions dollars today. Really, we need much more mature and credible approach from White House, not the case like trusting ‘fox’ (pharma industry and AMA and their fictional savings) in guarding the hen house. Further, in a normal course what will be a solution to get away from the ‘unsustainable’ spending? Stop that spending or reduce it. But what is it President Obama proposing – signing another commitment of more than trillion dollars in the name of getting off from this ‘unsustainable path’. As a result President Obama has to engage in explaining this contradiction: how increasing coverage to all, which costs trillions of dollars, is in then end about controlling long term costs and White House turning every nook and corner to find future promises of ‘savings’. Why does President Obama think that Americans will believe politicians for this yet another promissory note?

We are proud of life history of our President and the way he attempts to correlate that to soothe world wide audience in saying that ‘he gets it’. By the same token, his life history lacks experience in ‘dealing with money’ and ‘managing financing’. Is that showing it here? Because the first rule of financing is ‘cash in hand is million worth’ than all the hypothetical gains in future. Everyday American household is forced to live with this rule. Why not this Congress and Obama White House?

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