Smith Faculty Opinion Article

By Dr. Peter Morici, Professor of International Business E-MAIL WEB SITE

July 20, 2009

Health Care and President Obama’s Sinking Approval Ratings

President Obama’s approval ratings are falling, and on critical issues like health care, those are falling below 50 percent. Simply, the president has not been honest with Americans and is getting caught at it by the Congressional Budget Office.

President Obama flatly asserts that health care reform is deficit neutral. The new taxes on the wealthy and an 8 percent payroll levy on all but the smallest businesses that do not provide health coverage, he says, will pay the freight.

According to the CBO Director Doug Elmendorf, House Bill 3200, which is the primary vehicle for President Obama’s reforms, will increase the federal deficit a lot.

At the core of efforts to reform health are some hard facts. The price of health care services is at least 50 percent higher in the United States than in Canada and Western Europe where nearly everyone has insurance, and by many measures, those systems deliver healthier populations. Those achieve this magic by paying doctors, drug companies, and health insurance executives much less than do Americans.

President Obama is not in a position to make a lot of headway on doctor’s fees, drug costs and health insurance company overheard. He simply does not have the political capital to oppose powerful vested interests, because he is trying to accomplish too much simultaneously. In addition to health care, the president is trying to ram through a cap and trade law that will tax energy use and cut CO2 emissions in the United States by shifting factories to China, where similar taxes and restrictions will not apply; reform Wall Street, where key congressional Democrats harvest their largest campaign contributions; and soak the rich with such higher taxes that they become viewed as a discriminated minority, even by some liberal Democrats in Congress.

The bargaining over payments to doctors in HR 3200 provides the clearest example. It would change the way doctors are paid in Medicare, Medicaid and similar programs by shifting doctors, for example, from pay-for-services to annual per capita payments for patients under their care, and discourage doctors that too often prescribe unnecessary and costly tests and treatments.

The broader idea is that these reforms encourage reform in the private insurance industry.

To get the American Medical Association on his side, though, President Obama has agreed to repeal a 21 percent reduction in the general scale of doctor payments starting in 2010. That swamps the savings the President is promising.

As OMB calculates, with those concessions HR3200 would increase the deficit by $239 billion. And this does not factor in the downside risks that the above cited reforms don’t deliver as promised or the additional administrative costs the executive branch of government will bear.

Moreover, if the reforms in reimbursements fail to deliver the Medicare and Medicaid savings, financing legislation working through the house would automatically raise taxes on families with incomes between $350,000 and $500,000.

Who do you expect Nancy Pelosi and Barak Obama will choose to screw down—the AMA or those folks who earn more than them?

You don’t need a PhD in economics or ten years of lobbying experience to know many of the savings from change in reimbursement systems will never materialize.

Most voters are not sympathetic to the wealthy but they smell snake oil brewing, and quite simply, have a stronger fidelity to the truth and fairness than Nancy Pelosi and Barack Obama. 

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.