You Can’t Handle the Savings

First, we were told that President Obama was going to cut the national budget deficit in half in four years (give or take). Then we were told by the CBO that his proposed budget would double the deficit over the next 10 years. Next, we found out that his department heads were ordered to identify $100 million in spending cuts. Just last week, it was announced that the slightly improved budget included some $17 billion in savings.

Today, we were told of a truly healthy dose of savings which may just outdo all the others combined. From our friends in Canada, we have the following:

U.S. health-care stakeholders are pledging to cut spending by $2 trillion over 10 years to curb the “unsustainable course” of spiralling costs, U.S. President Barack Obama said.

“This is an historic day, a watershed event in the long elusive quest for health-care reform,” Obama said on Monday in the White House.

The president met with organizations and associations in the health-care industry, including insurance and pharmaceutical companies, union members, doctors and hospitals.

The president said they have pledged to cut the rate of growth of spending by 1.5 percentage points each year between 2010 and 2019, which would amount to over $2 trillion.

Read all of that article, or this one, or this, or this–they are all missing something very important: data.

Further, this announcement is predicated on something which is not stated clearly, but may be inferred from what is said. This very important inference? That the health care system in the United States will be completely defined and controlled (that is, it will be a closed system). I say “will be” because it is not so today.

The only reason the consumers in a market-driven system are not factored in when determining the price and availability of a product (in this case health-care services) is if the market won’t be driving–as in single-payer government-run health-care.

Further, the math behind the idea that health-care costs would have gone up in 2010 by 13% (or whatever the number might be) but due to these cost-cutting measures, the costs only went up by 11.5% is ludicrous. All I have to do is claim that everything would have been 1.5% higher and I’ve realized my savings–just like that. And who can claim that I didn’t cut possible future costs? We’ve already seen this once with “we are going to save or create X jobs with this stimulus.” For all I know my job has been saved an average of once a month for the last 3 months.

Simply put, for those “organizations and associations in the health-care industry” to claim that they a)know what the actual cost increases will be year over year for the next decade; and b) that they will be able to reduce those costs by $2 trillion by committing to a series of, well, undefined changes and hope for a better future is a monumental deception.


Keith Hennessey has somewhat to say on the matter as well.