During the past few days the legacy media and the Internet have been flooded with news articles, editorials, and blog posts with titles like “Overhead costs exploding under ObamaCare.” This all-too-predictable phenomenon has been breathlessly reported by outlets as different in their ideological perspectives as the Wall Street Journal and the Daily Kos. Sadly, when liberal and conservative publications are equally enthusiastic about breaking a story, it usually means the latter have been duped into promoting progressive propaganda. This case is no exception. The basis for these reports is a “study” produced by a couple of notorious lefty data diddlers.
The con artists in question are Doctors David Himmelstein and Steffie Woolhandler, and their “analysis” can be found at the Health Affairs blog. This pair co-founded Physicians for a National Health Program (PNHP), whose mission is to get the U.S. on a single-payer health care system, and their research is uniformly biased against the free market. The purpose of their Health Affairs post is to pitch a single-payer program based on the Medicare model as a replacement for Obamacare when it finally collapses: The overhead angle is just a Trojan horse used to sneak their statist infomercial into the editorial offices of conservative news outlets.
The subterfuge worked. Investor’s Business Daily, for example, guilelessly repeats their figures in the full knowledge that they are longtime single-payer evangelists: “David Himmelstein and Steffie Woolhandler found ObamaCare increased health care overhead costs by $17 billion last year and will add a total of more than $270 billion by 2020.… Just because these two professors are wrong on their health care prescription doesn’t mean they’re wrong on the diagnosis.” Are the IBD editors kidding? The “diagnosis” arrived at by these two characters identifies the private health insurance industry as the underlying disease causing Obamacare’s excess costs.
As they wrote in Health Affairs, “Most of this soaring private insurance overhead is attributable to… private plans which carry high costs for administration and profits.” But Himmelstein and Woolhandler’s work has more flaws than mere bias against the free market and insurance companies. They have a history of fudging their figures. During the 2009 health reform debate, for example, they produced two hopelessly disingenuous studies—one claiming lack of health insurance killed 45,000 people annually and another alleging the 54 percent of all bankruptcies were caused by medical bills. Both were debunked by honest researchers here and here respectively.
There is no reason to believe that the numbers used by Himmelstein and Woolhandler in their latest analysis are any more trustworthy than those used in their other faux studies. But when they seemed to reflect badly on Obamacare, many conservative outlets jumped on the story and linked to Health Affairs. This provided a lot of undeserved publicity for a piece of agitprop that consists primarily of long discredited claims about private health insurance and the traditional Medicare program which ostensibly demonstrate that “a universal single payer system would pare down both insurers’ and providers’ overhead, yielding huge administrative savings.”
In fact, Himmelstein and Woolhandler exhume some claims that have been buried by the facts so many times that it’s surprising that even they had the audacity to dig them up again. My personal favorite is this preposterous assertion: “Traditional Medicare runs for 2 percent overhead.” This old chestnut also goes back to the 2009 health care reform debate and, as Robert A. Book of the Heritage Foundation showed at the time, “On a per-person basis Medicare’s administrative costs are actually higher than those of private insurance—this despite the fact that private insurance companies do incur several categories of costs that do not apply to Medicare.”
Even if we take the 2 percent overhead figure seriously, the savings can’t possibly offset the huge sums Medicare loses to fraud. As John Graham writes in Forbes, “Last February, the Government Accountability Office issued its annual report on federal programs that it identifies as high risk due to… fraud, waste, abuse, and mismanagement. Medicare is a longstanding member of the list.” Even the New York Times admits that fraud accounts for an “estimated $60 billion of Medicare’s costs every year.” It’s a good bet that, if we adopt a single-payer system based on the Medicare model, it will be equally susceptible to fraud—probably more so.
Thus, their own math suggests that we can save countless billions by doing precisely the opposite of what Himmelstein and Woolhandler advocate. If the high overhead costs they attribute to the combination of private health insurance and Obamacare are broken down by year, the annual cost is about $34 billion, which amounts to a little more than half of the money lost by Medicare to fraud and abuse. That suggests we should move toward rather than away from free market solutions. It would mean more of the free market innovations associated with Medicare Advantage that have actually slowed the overall annual increase in Medicare spending.
But these innovations are anathema to Himmelstein and Woolhandler. Their criticism of Obamacare notwithstanding, they are by no means against government-run health care. Indeed, they are dedicated to eliminating private health insurance. They end their Health Affairs post as follows: “In health care, public insurance gives much more bang for each buck.” The image that sentence evoked can’t be described in this space. Suffice it to say that, unlike The Crying Game, it doesn’t start with kisses. Conservative news outlets should be more careful about how they quote these people. They should beware of single-payer shills bearing statistical gifts.