Rahm Emanuel is making practically every staffer in the White House read Ronald Brownstein’s completely uninformed article about the great “free market economagic” cost saving solutions in the Senate bill. This explains a lot about why the current health care reform proposals are so bad. This is probably the single worst piece of news I have heard during the entire health care debate. If someone as powerful as Rahm thinks there is any value in Brownstein’s writing, reform is in very bad shape.

The problem is Brownstein just doesn’t understand health care systems. Take for example this jewel:

And, with only a few exceptions, that’s just about all the systemic reforms analysts from the center to the left have identified as the most promising strategies for changing the economic incentives in the medical system. (The public competitor to private insurance companies championed by the Left would affect who writes the checks in the medical system, but not what the checks are written to pay for.) Most of the other big ideas for controlling costs (such as medical malpractice reform) tend to draw support primarily among Republicans.

This one paragraph should show you how completely Brownstein lacks even the most basic knowledge about health care reform. The CBO concluded the Republicans’ “big idea” for controlling cost, extreme medical malpractice reform, would save/generate $54 billion for the Federal government. (I would challenge Brownstein to name another single Republican idea that would actually reduce cost, because they did not include any in their alternative bill two weeks ago, and I have heard of no others from them.) Let’s compare this to the public option.

According to the CMS, the strong public option (which paid Medicare rates plus 5%) promoted by House progressives would have costs 18% below that of private health insurance companies. The CBO concluded it would have saved $110 billion. This public option design was still considered weak by reform activists. Mandating that Medicare providers take part in the public option would have saved another $91 billion. If the public option could pay Medicare rates instead of Medicare rates plus 5%, that would have saved roughly another $50 billion. These savings are with the public option only being available to the small number of people on the new exchange.

Allowing every company to buy into this super-robust public option would give them a choice that would be roughly 20% cheaper than their current insurance plan. If even some of those savings were passed on to employees in the form of higher salaries, that would translate into hundreds of billions in increased tax revenue. This one progressive idea, which could save about $250-800 billion, is bad mouthed by Brownstein, yet he claims the Republicans continuous screaming about tort reform, which would save only $54 billion, is one of the “big ideas” for controlling costs.

The Senate bill would make some cost saving baby steps away from fee-for-service medicine, but this is not the real way to get serious about cost control. This is just “reform” to make believers in “free market economagic” happy. If Brownstein really wants to know why the rest of the industrialized world spends about half of what we do on health care (on a per capita basis), I have a nine step solution:

Step 1: Call the German Ministry of Health.
Step 2: Ask why they spend so much less on health care.
Step 3: Call the French Ministry of Health.
Step 4: Ask why they spend so much less on health care.
Step 5: Call the Japanese Ministry of Health.
Step 6: Ask why they spend so much less on health care.
Step 7: Call the Belgian Ministry of Health.
Step 8: Ask why they spend so much less on health care.
Step 9: Repeat Steps 1 thru 8 with as many countries as needed.

What these countries all have in common is a single reimbursement rate negotiator. It is either a government agency or regulated cabal of all insurance providers that set most reimbursement rates. That is why they pay so much less for everything. They pay 30%-500% less for doctor visits, hospital stays, drugs, lab tests, procedures, etc. Our insane system of hundreds of insurers secretly negotiating reimbursement rates individually with thousands of providers and manufactures is a recipe for administrative waste, inefficiency, higher prices, and more expensive care.

The number one reason we pay so much more for health care has nothing to do with overusing care because of a fee-for-service system. It is just that the “fee” we pay for those services is so dramatically higher than any other nation’s.

It is not just what the public option’s “checks are written to pay for.” The hope was the public option could negotiate better rates, and therefore write smaller checks. It could create system-wide change if other insurers  followed suit.

This line from Brownstein is just comically wrong:

And, with only a few exceptions, that’s just about all the systemic reforms analysts from the center to the left have identified as the most promising strategies for changing the economic incentives in the medical system.

Take, for example, the sweetheart PhRMA deal preventing almost any savings from the drug industry. We spend about $200 billion a year on  prescription drugs in this country. We spend roughly 20% more per capita on drugs than the second highest country, France, and roughly twice as much as most european countries. If we implemented progressive solutions like drug reimportation and allowing Medicare to directly negotiate for drug prices, that would save at least a hundred billion bucks. If we allowed the government to negotiate drug prices for everyone in the country, like most countries do, we should at least be able to get our per capita spending on drugs to a level similar to Canada. That would be roughly half a trillion dollars in savings on drugs over only the next 10 years.

There is a wealth of progressive cost control solutions that were not even considered in Congress. All told, they would have saved our country trillions over the next decade. On the other hand the Senate bill makes only tiny steps to slightly reduce over-utilization. Brownstein does the nation a disservice by publishing this article while completely ignoring the real cost issue. Rahm Emanuel commits a near-criminal act by making people at the highest levels of our government read this article as if it had any value. No wonder the health care reform plans have been so bad so far. With the reform effort led by fools who don’t even understand the nature of the problem, it is no wonder existing proposals contain almost no real solutions.