July 6, 2009

July 6, 2009 | Commentary on Health Care

Government's Comedy of Errors

Does anyone believe the federal government is a model of efficiency?

Oddly enough, superior government efficiency is a core argument offered by President Barack Obama and others pushing creation of a government-run health plan.

Obama claims, "If the private insurance companies have to compete with a public option, it will keep them honest and it will help keep their prices down."

And who would keep government honest? Surely not the designated watchdogs, like the Inspectors-General personally fired by the President for catching a FOO (Friend of Obama) with his hand in the till.

But back to the claim that government could run a health plan cheaper and better than the private sector. The president and his allies need reminders of federal bureaucrats' track record on efficiency. Consider these "success stories":

  • The backlog of Social Security disability claims rose to 750,000 individuals in recent years, with average waits of about a year and a half to get an appeals hearing. Each applicant had to be disabled a full year before they could even apply -- and then wait on the bureaucracy for many months more.
  • Each year, 22-million Americans receive IRS checks of up to $4,700, collectively $44-billion. Almost one-third of the claims are fraudulent, according to the IRS that sends out the checks. This EITC group received additional checks from government "stimulus" plans.
  • Ten thousand or more dead people also received "stimulus" checks from Social Security. Many had been dead for years.
  • The Postal Service, despite its monopoly status, expects to lose $6.5-billion this year. Its idea of economizing? End Saturday deliveries.

Can we expect our federal government, its bureaucrats and its highly-unionized workforce to do any better with health care than it does in these and other instances?

Compare with a handful of private sector examples:

  • Postal problems created the opportunities for FedEx and UPS to set the standard for reliability and efficiency.
  • Unlike government, which has a captive audience, banks and credit card companies must process tens of billions of transactions each and every year and must make their mistakes rare.
  • Computers in England processed 1-million ticket requests and sold out a Spice Girls concert in 38 seconds.

Sometimes government professes that it has achieved similar competence. Medicare claims its administrative costs are less compared to private plans. Don't fall for it. It's a classic apples-to-oranges comparison. Government costs actually are higher, as The Heritage Foundation explains:

In 2005, Medicare's administrative costs were $509 per primary beneficiary, compared to private-sector administrative costs of $453. . . . From 2000 to 2005, Medicare's administrative costs per beneficiary were consistently higher . . . ranging from 5 to 48 percent higher, depending on the year. . . .

This is despite the fact that private-sector "administrative" costs include state health insurance premium taxes of up to 4 percent . . . --an expense from which Medicare is exempt--as well as the cost of non-claim health care expenses, such as disease management and on-call nurse consultation services.

Medicare's overhead costs are consistently understated because the government doesn't count major costs incurred by other federal agencies in support of Medicare. If those are included, the costs virtually double.

Has Uncle Sam earned the right to continue its takeover of health care?

Groups like The Heritage Foundation say it's the people who should have more control over their personal health care and insurance. But Obama and many in Congress push a "public option". That means a new government-run insurance plan that receives taxpayer subsidies to gloss over its inefficiencies. Meantime, government dictates how competing private companies must operate -- to assure that they lose the ability to succeed against the government.

The opposing team and the referee are wearing the same uniform.

No wonder the Lewin Group estimated that 119-million Americans could be pushed out of their private coverage and into the new "public option." No wonder official cost estimates for overall plans are in the $1-trillion to $1.6-trillion range--and only cover a fraction of the now-uninsured. And it could get worse. An in-the-works plan from House Speaker Nancy Pelosi is expected to cost far more than these, possibly $3-trillion or more.

President Obama famously said, "If you like your health plan you can keep it." If only he'd keep his plan... to himself! As Heritage President Ed Feulner writes, "some proposals being made by the White House are advertised on false premises."

Government-run plans don't save money; they add costs. Those who claim otherwise ignore history. Their motto is "I'm from the government and I'm here to help you." Please excuse the rest of us if we laugh.

Ernest Istook is recovering from serving 14 years in Congress and is now a distinguished fellow at The Heritage Foundation.

About the Author

Ernest Istook Distinguished Fellow
Government Studies

Related Issues: Health Care

First appeared in Human Events