Jewish World Review Sept. 29, 2004 / 14 Tishrei, 5765

Devon Herrick

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Consumer Reports

Kerry health plan barely trims ranks of uninsured | Democratic presidential candidate John Kerry is proposing to transform the U.S. health-care system with a costly plan that will expand government control without appreciably reducing the level of uninsured.

Kerry's goal is to insure about two-thirds of the 45 million people who lack health insurance. By any measure, the effort will be expensive. A recent analysis by the National Center for Policy Analysis estimated the price of these reforms to exceed $1 trillion over 10 years - an amount equal to almost $1,000 per year for every household in America.

More than half of the money in Kerry's plan will be spent expanding Medicaid and the state children's health insurance program (S-CHIP).

Yet past experience shows that for every uninsured individual who enrolls in public programs like Medicaid and S-CHIP, another individual drops private coverage to take advantage of the free public coverage.

Indeed, when the S-CHIP program began in the mid-to-late 1990s, the proportion of children signing up for S-CHIP coverage was exactly offset by a loss of children who previously had private coverage. The overall rate of uninsured children did not fall.

Kerry's health-care agenda does not begin and end with expanding already established government programs. On the stump, Kerry likes to say that everyone should be able to join the same health plan as federal employees. To accomplish this, Kerry would have millions of Americans get their insurance through a complex system of "manage competition" styled after the federal employee health benefits system.

In this, Kerry's proposal is remarkably similar to the idea conceived by Hillary Clinton in the early 1990s, which was overwhelmingly rejected by the public and Congress. Yet if Kerry succeeds where the Clintons failed, most people would be unable to retain the private plans they currently have.

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Unlike the Clinton plan, Kerry would not force employers to provide health insurance coverage for their workers. Instead, he would use tax subsidies as an incentive for companies to voluntarily insure their employees.

Where he does propose subsidizing private insurance, most of the subsidies will go to people who are already insured, and employers will receive subsidies even if they fail to insure a single additional employee.

Bottom line: Incredible as it seems, it is entirely possible that a Kerry administration could spend $1 trillion and achieve no significant reduction in the uninsured.

While Kerry's approach will fail to reduce noticeably the number of uninsured, it will have significant consequences for the quality of care people receive. People who go from employer-sponsored health plans to Medicaid will have a harder time finding doctors resulting in longer waits for care.

Those who are able to buy into the managed competition system also likely will see an erosion of high-quality care. While they would be able to choose among competing health-care plans, the government, not the market, will set the rule by how insurers must "compete."

If experience is any guide, insurers will be required to charge "community-rated premiums," which bear no relation to actual health-care costs. Young, healthy but poorer enrollees would overpay compared to their older, better paid co-workers with higher health costs.

In health insurance terms, this relationship tends to be unstable. The inevitable result is healthy lower-paid workers will drop out of the plan leaving only those less-healthy workers who were getting a bargain.

Since those who are left were paying less than the actual cost of their annual medical bills, premiums must rise. This results in a fresh round of healthy people dropping coverage.

Finally, the Kerry plan will undoubtedly lead to a new round of health-care inflation. Federal spending alone will increase by more than $100 billion a year. Since there will be no commensurate increase in the supply of medical practitioners and hospital providers, the bulk of this new spending will buy higher prices rather than more health care.

On its face, the Kerry health plan has many flaws. It's expensive, and most of the subsidies will go to people who already have health insurance. If enacted, it will radically change our health-care system into one where the government sets rigid rules and physicians and patients have little choice but to kowtow.

Devon Herrick is a senior fellow at the National Center for Policy Analysis. Comment by clicking here.


© 2004, National Center for Policy Analysis Distributed by Knight Ridder/Tribune Information Services