Betsy McCaughey’s Voodoo Health Economics

Betsy McCaughey’s new editorial in the Wall Street Journal argues that the President’s recent Council of Economic Advisers report — which found that slowing health care spending by 1.5 percentage points (from 6 percent a year to 4.5 percent) would create “as many as 500,000 jobs a year” and increase “annual income for the average family of four by $2,600” — is simply “untrue”:

On Monday President Barack Obama’s Council of Economic Advisers released a report called “The Economic Case for Health Care Reform.” The report argues that Americans must curb their consumption of medical care in order to avoid soaring federal deficits, unsustainable burdens on family budgets, and damage to the economy. All of these claims are untrue.

McCaughey argues that efforts to lower health care spending would expose “the nation to medical scarcity,” resulting in “a European-like system where medical care is limited.” She deliberately confuses slowing the growth of health care spending with slashing existing spending. As a result, she’s able to claim that “you may be able to keep your health plan — as politicians have promised — but you’ll find a lower standard of care when you need it.”

But this argument isn’t about Americans not receiving care when they need it, it’s about improving our value of care. More services do not necessarily translate into better health care. In fact, they often produce worse outcomes. A recent Business Roundtable study found that compared to France, Germany, Japan, and the United Kingdom, U.S. workers and employers receive 23 percent less value from our health care system than the citizens of these other nations.


We pay for volume and not value; quantity and not quality and McCaughey is trying to conflate the Democrats’ efforts to increase system efficiency with cuts in needed medical services. Simplifying medical forms or doing a better job managing chronic diseases (thus negating the need for more expansive treatments down the road), however, is not the same as denying treatment for a heart attack. In fact, every other major industry has long abandoned the use of paper records or performing numerous unnecessary or duplicated services.

McCaughey buries the distinction and attempts to diminish the severity of the health care crisis. Health care costs are not skyrocketing, families are not burdened by growing premiums, and “cutting annual increases in health-care spending by 1.5% a year” will endanger jobs, she argues. For most families, things are getting better, not worse. “Food and energy together have taken up a declining share of Americans’ spending each year since 1960… [allowing Americans] to spend more on health care.” Never mind the gap between wage and premium growth, the growing number of uninsured, or the increasing number of medically-related bankruptcies.

Since health care costs are increasing at a lower rate in 2007 than in 1980, they are of no concern to the nation’s financial stability. In fact, Medicare’s increasing spending can be fixed by “asking wealthy seniors to pay more or inching the eligibility age upward two months a year until it reaches age 70 in 2043” — a proposal which, in reality, would save little money, since the young elderly are healthier than older and disabled Medicare beneficiaries.