The Comeback (23 page)

The College noted that this wasn’t the first untrue comment by the president:

The President suggested that a surgeon’s decision to remove a child’s tonsils is based on the desire to make a lot of money. That remark was ill-informed and dangerous, and we were dismayed by this characterization of the work surgeons do. Surgeons make decisions about recommending operations based on what’s right for the patient.

But if the president was overzealous in his efforts to get his signature bill passed, the debate in Congress was worse. Based on an offhand comment by Sarah Palin about “death panels,” the Republicans made that a unifying description of the health-care bill. Yet the only relevant phrase Republicans could point to in the legislation was a provision, originally supported by many key Republicans, that compensated doctors for talking with patients about all their end-of-life options.

Anyone who has dealt with a terminally ill relative or friend and gone through this process understands that it is an excruciating time and that doctors play a vital role in carefully and sensitively describing the options. Nonetheless, this somehow became the provision that Republicans pointed to as allowing “death panels” and became the primary argument for their opposition to the bill.

A much more important, but little noticed and discussed, provision in the bill effectively imposes some type of rationing of Medicare by a panel of unelected Americans. This huge cut in reimbursements to doctors without any specifications, guidance, or criteria gives a few unelected Americans enormous authority to effectively cut $350 billion in funding for various treatments in medicine that they perceive as too costly, unnecessary, or ineffective. This little-discussed provision in the legislation, if not reversed by a later Congress, means that doctors who want to use certain forms of treatment for a specific patient’s needs may be paid little or nothing at all.

The final 2,000-page bill was drafted by a handful of lawmakers behind closed doors and not shared with members of Congress until hours before the House vote. But something was happening across the country. Democratic lawmakers found themselves confronted by angry constituents at town hall meetings, upset at the bill’s soaring cost. The constituent uprising and Tea Party protests were so alarming that many Democratic members said they could not support the bill if it expanded the federal deficit.

Thus for the Democratic House leadership, the March 2010 vote hinged on their ability to claim significant deficit savings. Days before the House vote, the leadership announced that the supposedly “nonpartisan” Congressional Budget Office (CBO) had scored the legislation and had said the bill would result in $100 billion in savings over the next ten years.

But to score the bill, the CBO was given a set of assumptions provided by the Democrats and the Obama Administration. So less than a month after the bill was signed into law, the CBO quietly acknowledged that it had understated by at least $115 billion the cost of the health-care bill. The CBO also explained that its scoring did not include fifty-two items that had no specific funding level but that the law said should be given “such sums as may be necessary.”

Since the initial CBO scoring, I questioned whether the government scorekeepers were candid in saying the health-care bill would reduce the budget deficit. In April 2010, I publically challenged Dr. Peter Orszag, then director of the Office of Management and Budget, on this when he spoke at the Economic Club of Washington.

It turns out that those of us who expressed skepticism on the health-care bill’s deficit-reducing qualities were right. Although
one always appreciates vindication, it doesn’t change the fact that the health-care bill passed based on a huge and fraudulent deception aimed at the American people.

Yet the health-care deficit fraud continued. While running for Congress in the Fall of 2010, Democratic Representative Jim Moran of Virginia produced a glossy brochure that defended his vote on bill as “reducing the federal deficit by more than $100 billion over the next decade.” He cited the House Budget Committee as his source. Apparently, unlike the CBO, the House Budget Committee saw no need to correct its errors.

Despite the CBO correction, as of November 2010, if you went to the White House Web site you would still have seen the fiction that the health-care law would “reduce the deficit by $100 billion over the next ten years.”

In fact, the health-care law will not only explode the federal deficit, it will impose huge new costs on states that must pay for creation of insurance pools and the processing of the estimated 16 million additional Americans to the expanded Medicaid program. Moreover, the law puts an increasing amount of the Medicaid burden on the states. These new costs are a growing concern in state capitols.

Should it matter that the new health-care law may raise our federal and state deficits by at least $2 trillion more than promised? Yes. Five percent annual interest on $2 trillion is $100 billion. That means our kids will have to pony up roughly $100 billion each year just to finance the new costs from this bill. With states already in serious fiscal trouble and some cutting school to fourday weeks, this new burden forces us to confront a rather scary future of inflation, choking taxes, cuts in services, and a declining economy.

If the public had known the true cost of health-care reform before our political leaders sought the rushed and fixed CBO scoring,
then we would have had a different outcome. If political leaders from both sides had tried to define the problem, which was originally about millions of underinsured Americans, had agreed on the facts, and had debated different solutions and their true costs, we would have had a more intelligent discussion and a much better result. Maybe we could have had malpractice litigation reform as part of the law, which would save about $40 billion in spending, according to the CBO.

Some proponents of the bill explain these deliberate deceptions through the old adage “the ends justify the means.” In fact, then–House Speaker Nancy Pelosi, in a rather unguarded moment, said that we would have to pass the bill to find out what’s in it. This Machiavellian logic eliminated any chance for cost-effective improvements in health-care coverage, which a reasoned examination of the facts would have aided.

Sooner or later our nation is going to have to address our serious budget crisis. It will require tough decisions, compromises, and, above all, an adherence to facts. Americans deserve the truth. Sadly, they did not get it in the health-care debate.

The consumer technology industry is defined by rapid innovation and falling prices. Its success has allowed content creators, service providers, Web sites, blogs, and all sorts of new media to flourish. It is intensely competitive and yet loved by consumers. This fast moving, deflationary, job-creating, $160-billion industry has several basic tenets that all participants understand. These principles are relevant to the health-care debate.

1.
Competition produces better products and lower prices. Consumer electronics is an intensively competitive, lowmargin business. Companies succeed by innovation, quality, reputation, and efficiency. With the advent of the Internet, consumers are better informed than ever about the quality of their products.

Lesson for policy makers: Competition requires consumer choice and information. Consumer insurance choice is limited as companies are artificially restricted from competing across state lines. Consumers have little incentive to be smart purchasers when someone else is paying—many doctors see patients flood their offices once their deductibles are met. Consumers should not be ordering from a menu without prices: they should always pay a portion of their health-care costs. As in the rest of the economy, there is no such thing as a free lunch.

2.
Innovation is rewarded. The first to market takes big risks but also sees gains in sales, reputation, and market share. Failure is considered a learning experience.

Lesson for policy makers: The proposals debated ignored the risks and costs imposed on health-care providers (malpractice litigation, for example) without addressing incentives for health-care providers. My wife, a retinal surgeon, has developed a promising treatment that could save tens of thousands of macular degeneration patients a lifetime of uncomfortable and costly injections and save Medicare at least a billion dollars. Yet there is little financial incentive for the medical world to pursue further development of this treatment, and it will certainly be opposed by drug companies.

3.
Government-set standards discourage innovation—the marketplace provides it. For several years, various policy makers have tried to impose design standards on technology— which fortunately our industry has defeated, to the benefit everyone. We beat back efforts to restrict recording capability, to add government-mandated buttons to the remote control, to equalize volume, to make every product include features that few would want but all would pay for, and to create products that reject every type of interference. Instead, the industry let the consumers choose what they wanted, and this has produced a robust competitive market that did not foreclose introduction of products like the iPod, the PVR, and HDTV.

Lesson for policy makers: Forcing doctors to follow specific treatment regimens because they save money may dramatically discourage the type of innovation that has made our nation the health-care destination for the world’s wealthiest people. However, doctors should be discouraged from excessive testing by measuring the use of reimbursable tests on doctor-owned equipment and restricting physician liability for not conducting marginally valuable tests.

4.
Never go large-scale without testing and proving the concept or model first. No company starts without a prototype. The prototype is tested, researched, and given to carefully chosen users for feedback. Nothing is perfect from the start. It takes time and effort. You need to build market demand, raise production, and listen to the feedback.

Lesson for policy makers: Without a national consensus, radically changing by legislative fiat an industry that consumes 17 percent of GDP is a risk that no rational or strategic business would
undertake. Congress should roll back the health-care law and try some pilot projects to evaluate their success.

5.
When things are not going well, define the real problem. Companies with declining sales undertake rigorous analysis on what they are doing wrong. It’s a matter of survival and necessity. When Best Buy was financially challenged over a dozen years ago, it brought in teams that honestly assessed the cause of the problems, and the company changed to correct them and succeed. Companies like Apple, Intel, Motorola, and HP have redefined themselves repeatedly by confronting their problems and acting to shift the direction of the company.

Lesson for Congress: Our nation’s health-care costs and large uninsured population are the problems Congress should define and address. The costs stem from a lack of information and competition, an obese population (which reportedly adds $147 billion annually to health-care costs), unnecessary legal fees to avoid litigation, and end-of-life treatment. Take together, this consumes almost half of all health-care spending. My father-in-law, a cardiologist, performed two invasive cardio procedures recently on two terminal Alzheimer patients who were over ninety years old. The patients lacked living wills, and their family members asked that they be kept alive at any cost. Simply encouraging living wills when getting a drivers license could cut health-care costs.

The health-care debate was important but deceptive and sadly divisive. Like a nation going to war, a consensus was needed, and we never had that consensus. The Obama Administration and the Democrats were never clear on what their core objectives were: was it insuring the uninsured or lowering costs? But rather than attack the problem in a piecemeal way, our government thought it could
function in the role of the free market. We will be living with the consequences for some time to come.

Congress should borrow a prescription from the most innovative industries and follow market-driven principles. It should acknowledge that innovations from folks like Jim Traficant are the real costreducing tools. Perhaps if we put one hundred government-paid scientists in a room they would eventually have landed upon Jim’s idea. But Jim did it without taxpayer dollars.

Above all, government should also remember the physicians’ adage: First, do no harm.

K
ATHY
G
ORNIK AND
her college friend, Jim Thiel, had an idea for a better loudspeaker. In 1976 they cobbled together a prototype, packed four days worth of sandwiches, and drove to Chicago for the International Consumer Electronics Show. They exhibited their prototype in a small hotel room and got enough interested retailers to place orders that they could go to a bank and get financing to start manufacturing. Today, Thiel Audio sells speakers throughout the world, and the Thiel factory in Lexington, Kentucky, employs dozens of Americans, knowing that their innovation, craftsmanship, quality, and love of product are enhancing people’s lives and contributing to a better world. Kathy is passionate about entrepreneurship, innovation, free markets, capitalism, freedom, and the U.S. Constitution—and the better world they create.

Around the same time Kathy and Jim started Thiel Audio, Loyd Ivey had an idea for better stereo sound. Bored with high school, he dropped out at sixteen, took his ideas and passion for music, and started his sojourn toward producing a better product. He also used CES as a platform to build his business, which became Mitek Corporation, a multi-national audio and electronics company. He has thousands of people employed in the United States and abroad, both imports and exports, and is a huge advocate of free and fair global trade agreements. Loyd’s battle cry is “make trade, not war,”
and he believes in the number one rule that you do not shoot your customers.