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Yes, It Does Matter

March 9, 2010

Speaking of Ezra Klein, one of his posts today had an interesting title that caught my eye.  Apparently, Krauthammer doesn’t think tort reform is important to the Administration because it encompasses only “one-half of one-hundredth of 1 percent of the cost of [the President’s] health-care bill”.  Klein calls him out:

But whatever tort reform you attempt, it’s not going to be expensive. Tort reform is a series of regulations that change the way lawsuits are handled. Saying that the experiments come to only “one-half of one-hundredth of 1 percent of the cost of his health-care bill” is saying exactly nothing about them. If they made all malpractice lawsuits illegal, they’d actually have a negative cost to the federal government, but by Krauthammer’s logic, they’d be a total slap in the face to reform advocates.

He’s right.  Tort reform, which I believe is vital to any health-care reform worth discussing, won’t physically cost anything other than the paper it’s printed on.  Keep in mind, however, that the title of this post is “Can’t judge a policy by its price tag”.  Is that right, Rambo?  Douthat disagrees (in a great post):

This is one of reasons why I’ve been harping about the virtues of a smaller bill, whether it’s drawn up along liberal or conservative lines. Deficit-neutrality is a very good thing, but it isn’t the only factor to consider when faced with a massive piece of legislation. For one thing, as Ryan suggests, there’s the drag on economic growth from the tax increases required to keep a $2.3 trillion bill safely in the black. But even if that possibility doesn’t worry you, there are also opportunity costs to consider, which go up and up the more expensive the bill gets. I’m in favor of cutting Medicare, for instance, but every cut to Medicare you make now, to pay for health care reform, is a cut that can’t be implemented in the future to keep the entitlement system sustainable. Similarly, I recognize that taxes will probably go up over the next 30 years. But every tax you hike now, to pay for health-care subsidies, is a tax increase that can’t be used to balance our books further down the road. Health care reform could end up being technically deficit neutral, in other words, and still help drive the country ever deeper into the red, by limiting our options for deficit reduction in the future.

What’s more, the new taxes and spending cuts are just the direct costs of the health care legislation. As the Cato Institute’s Michael Cannon keeps emphasizing, the House and Senate bills score so well in part because they offload billions in spending to the private sector — through the individual mandate, new regulations on insurers, etc. And again, there are opportunity costs here: Every private-sector dollar that’s required to circulate through the health care system is a dollar that won’t be used to buy a house, or start a business, or take advantage of Toyota’s zero percent financing. These mandates for private spending won’t bankrupt the U.S. Treasury, or even show up on the government’s balance sheet. But they will shape our economy, and perhaps warp it, as profoundly as the taxes that Washington levies and the funds that it expends.

I still think this reform will result in both a budgetary nightmare and a failure to combat cost inflation, which is the primary problem with our health-care system, but even if those two things were addressed in whatever bill comes out of Congress, I’d still have an issue with it.  The price tag of the bill is important.  Even if a bill reduces the deficit, it still has to come up with the funds to make sure it says in the black, and that involves more than just spending cuts, especially when the total is around $1 trillion.  I’ll reiterate my support for something smaller—something has to be done, sooner rather than later, about Medicare’s insolvency and the growth of health-care costs.  But let’s figure out a way to do it that doesn’t involve siphoning $2.3 trillion from what would otherwise be the private sector, eh?

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