If the American people want government to have a larger and stronger role in health
care, so be it. I've long thought it was probably inevitable.
But the leap shouldn't be made based upon the reassurances President Barack Obama
sought to convey in his speech to Congress. There's substantial reason to doubt each
and every one of them.
Let's begin with the most important reassurance: If you like the health insurance
you have, you'll be able to keep it.
In the bills congressional Democrats have produced to date, this reassurance comes
with a condition and an expiration date. Existing plans are grandfathered in, but no
new enrollees are permitted. And after five years, all plans have to conform to new
federal requirements yet to be determined.
Employers are not going to maintain plans for long that new employees cannot
participate in.
More fundamentally, Obama's other proposals completely scramble the health care
market. The federal government will determine policies and benefits packages that
can be offered. Medical underwriting will be prohibited and pricing differentials
for other factors sharply limited. New taxes will be imposed on insurers and
employers.
At the end of the process, no one can say what insurance products will be available
at what cost. Or what health insurance, if any, employers will offer.
And then there's the public option. Obama says it will compete on a level playing
field, but this is impossible to believe. The federal government isn't going to
sponsor a health insurance program and then be indifferent to its success.
The government-sponsored health insurance plan will crowd out private insurers.
We've seen this play before. Government-sponsored Fannie Mae and Freddie Mac
dominated the secondary mortgage market. When they got in trouble, the federal
government bailed them out — as investors assumed would happen all along, despite
claims to the contrary by federal officials.
If there's a public option, chances are, over time, private insurance will be
relegated to a supplementary role, such as it currently has with Medicare.
The second reassurance in which the American people should place no faith is the
assertion that health care reform as Obama has proposed will not add to the deficit.
So far, congressional Democrats have yet to field a health care reform that doesn't
add to the deficit. And that's after giving credit to phony savings from provider
cuts that Obama says will pay for most of the plan.
This is a game Congress has played many times. When it needs to show some paper
savings, it passes cuts to health care providers, particularly in Medicare. Then
doctors quit taking Medicare patients and hospitals start to squawk. And the cuts
are restored.
Health care isn't going to be expanded without it costing more, particularly if
nothing is done to change the perverse economic incentives inherent in a third-party
payer system.
Relatedly, the promise to seniors that Medicare services will not be cut also should
not be credited. Even without health care reform, current Medicare financing is
unsustainable. The hospitalization trust fund is already running a deficit.
More directly, Obama cannot fund health care expansion elsewhere through Medicare
spending reductions without cutting Medicare services or changing its basic
fee-for-service approach. In short, Obama's pledge to seniors not to cut services is
incompatible with his pledge to the American people not to increase the deficit.
Now, I happen to favor fundamental health care reform. I'm among those Obama
described as wanting to end employer-provided health care and make it an
individually purchased product, the same as all other personal insurance.
However, the gaps in the existing system that most concern Americans are easily and
relatively inexpensively filled: simply allow people who have expended a certain
percentage of their income on health care to buy into the Medicaid program. No one
goes without coverage because of pre-existing conditions; no one goes bankrupt
because of sickness.
Despite his protests, however, Obama isn't really building on the existing system.
Intentionally or not, he's proposing to blow it up. What arises in its aftermath is
pure conjecture.
