Magical Thinking in Washington

By Paul Greenberg (Archive) · Wednesday, August 11, 2010

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."

-- Friedrich von Hayek, "The Fatal Conceit"

Remember all those jobs "created and saved" the administration was touting? Those numbers have proven about as solid as its claims that the president's stimulus package would keep the country's unemployment rate under 8 percent. Last time we checked, it was in the seedy neighborhood of 9.5 percent.

Does the name Christina Romer strike a discordant bell? She's the chairwoman of the White House Council of Economic Advisers who predicted that the president's economic stimulus bill wouldn't cause unemployment to top 8 percent. It was all spelled out in a thick report ("The Job Impact of the American Recovery and Reinvestment Plan") whose numbers proved, shall we say, highly creative. Now she's soon out of a job, too, having resigned effective early September.

But the administration has just come out with another shining model of creative accounting. The good news, it says, is that its health-care reform, aka Obamacare, is going to keep Medicare in the black for 12 years longer than had been projected earlier. These glad tidings were announced with appropriate fanfare by Medicare's trustees, who include such notables as Kathleen Sibelius, the secretary of Health and Human Services, and the secretary of the Treasury, the all too familiar Timothy Geithner. Hooray, hell's bells, and Happy Days are Here Again!

The bad news is that, once again, the good news depends on bad numbers. With these people, any resemblance between partisan projections and future reality may prove only coincidental. Medicare's own chief actuary, Richard Foster, warns that these newest projections "do not represent a reasonable expectation." He called its math "implausible" and warned that they "do not represent the 'best estimate' of actual future Medicare expenditures." Why are we not surprised?

For example, the report assumes that the nation's physicians will absorb a 30 percent cut in their Medicare payments over the next three years. Do you believe that? Many doctors are saying they can't afford to treat Medicare patients even now.

Not even Secretary Sibelius expects these cuts in doctors' fees will ever go into effect. That 30 percent drop in doctors' fees is about as realistic as similar cuts projected in payments to hospitals, nursing homes, and other such providers of health care.

Who's supposed to deliver all these cuts -- the tooth fairy? What we have here is more Fun With Numbers, the same old shell game, and magical thinking in general, because it's hard to see how anyone could believe these projections will jibe with reality in the coming years.

But the secretary of the Treasury remains as optimistic, or at least as glib, as ever. He hailed the "very positive developments" in this latest report. And the Democratic chairman of the House Ways and Means Committee, Sander Levin (D-Malarkey), assured all: "These reports show the tangible, positive results of the improvements made to Medicare by health reform."

Uh huh. To repeat the words of Medicare's top actuary, which accompanied this report from its trustees the same way a bottle of medicine might carry a warning label in small print, "the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range ... or the long range."

Or do you believe Congress is really going to just sit there while doctors, nurses, hospitals and much of the rest of the medical system are short-changed. You can just hear the howls from Medicare patients now. And those old folks don't just howl, they vote. You can bet members of Congress will listen to them -- if they want to remain members of Congress.

Welcome to Washington, D.C., our own Fantasy Island.

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