The Way Health Care Reform Is Taking Shape

Over the last couple of weeks, we have been given an indication of the shape that health care reform might be taking as it works its way through the legislative process.  For those of us concerned about socializing our medical care to a much greater extent, it is a sobering exercise to review what is being advocated.

I will discuss these components individually.  And I will also discuss how they compare with Obama's campaign statements. 

There are a couple of source documents to which I would like to refer that document where health care reform seems to be leading.  First, there is a letter from Obama himself.  Second, a policy analysis published by Tanner reveals the likely details, and their impacts.  We will discuss them individually:

1. An employer mandate-- During the campaign, my recollection is that Obama did not initially advocate this measure, but one day in the middle of the campaign it popped up on his website.  Tanner points out that this is a "disguised tax on employment".  It will result in higher prices, lower wages, or decreased levels of employment.  An employer mandate also locks us into the existing employer-sponsored system of insurance, which has contributed so severely to health care inflation and higher insurance costs.  Any mandate must carry a penalty for noncompliance.  How severe should that be-- to the point of driving an employer out of business?

2. An individual mandate-- Obama opposed requiring individuals to buy insurance during the campaign, but he is now open to it; and congressional Democrats are proposing it.  Of course, this is a hefty tax on individuals.  The question is, of course, how it would be enforced, and what the penalties would be.  Ultimately, an individual mandate almost forces subsidies for a public insurance option for those who cannot afford the premiums.  Mandates also will compel the federal government to define a minimum benefit package.  When this is politicized, it will raise costs for everyone; and force more people toward the public insurance plan.  Finally, there will be many people who evade the requirement.

3. The public insurance plan--  Obama has always wanted this.  This plan would inevitably be subsidized by the taxpayers or propped up by the treasury; and would also have preferred rates from providers.  It therefore likely would enjoy a competitive price advantage over other types of insurance.  Individuals and even employers would then be tempted to forsake private insurance in favor of the public plan.

4. Comparative effectiveness research and cost-effectiveness research-- These ultimately lead to governmental rationing of health care. 

5. Elimination of the pre-existing conditions problem--  There is a desire to make it mandatory for insurers to grant everyone insurance, and to employ "community rating" so that people are not penalized for pre-existing conditions.  This would make insurance less affordable, and cause more people (and more employers) to check out of the system.  It would raise insurance costs for those who are more healthy.  It could also lead insurers to favor the healthy over those with chronic disease from the standpoint of benefits.

6. Subsidies for the Middle Class-- Inexpensive, subsidized public options would provide the middle class with insurance.  This would have various nefarious effects on the habits of people; but also would tend to crowd out private insurance.  It would be yet more income redistribution.

7. Greater use of technology--This will not remotely deliver all that has been promised recently.  And the government's involvement warrants grave concern.

Obama demagogued John McCain during one of the presidential debates, and misrepresented the McCain proposal to tax employer-sponsored health insurance benefits (in conjunction with a tax credit).  Now, the Democrats are looking at this type of approach; but it is questionable as to whether it will be included in any final plan because Democrats to some extent have a vested interest in employer-sponsored insurance.

There are also questions about how this all will be paid for.  It will be very expensive unless rationing and diminished access to care hold down costs tremendously.

Obama wants to limit tax deductions for those with higher incomes-- which would represent yet another tax increase on that group-- but Capitol Hill is not readily buying into that option.  Governmentally-imposed rationing and diminished access to care might control systemic costs in the long run.  But Obama and the Democrats ultimately are also looking to tax increases to pay the bills.

This is an exceedingly difficult topic.  Every seemingly well-intended idea offered by the Democrats will trigger certain complications and unintended consequences.  I do not know whether Obama will slam this through the Congress with his supermajority; or if objections to the fine print will cause mutiny among his own ranks.

But it  would be far better to restore a competitive, free market based on individual choice by dealing directly with the primary causes of health cost inflation-- third party coverage, first dollar coverage, and the phenomenon of structuring insurance to insulate individuals and families from the cost of their care.

Comments

[Stormy]

As regards the employer mandate with a penalty for non-compliance, John McCain several times in the debates tried to get Obama to tell how much the penalty would be, but Obama just smiled. You can bet that the penalty will be severe, it is a non-negotiable for Obama.

[Joe Guarino]

Stormy, a very severe penalty would be the only way to assure employers would not dump employees on the public plan; or on the open market with higher insurance rates due to the other provisions being considered.

[cm]

i'm not going to pretend to know more about this than you do or to have some great solution to the health care crisis. but i think i've mentioned to you before that i was about evenly split between obama and mccain on the issues, and health care was one of the deciding factors for me in this election.

the free market might work well enough for the healthy. but there are plenty of people with serious health issues who fall between the cracks. not poor enough for government-funded health care. not affluent enough to pay for their own health care. not eligible for private insurance (at any cost) because of pre-existing conditions. i know too many people in that situation.

there is no perfect answer to the health care crisis. i'm praying for the "least bad" answer. a solution that would help the most people while hurting the least. i'm trying to remain hopeful.

[Joe Guarino]

Michele, I know we disagree on this topic, and in some respects the 2008 election is "water under the bridge".

But I think we should all be concerned that Obama did such a "nice" job of selling his plan last year, seducing people with all the putative benefits while failing to acknowledge in a prominent way all the drawbacks. He conveniently neglected to emphasize the downsides-- the mandates, the magnitude of the tax increases or debt that will be required, the effects on employment, the costs to individuals to employers, the rationing and limitations in access to care. He just forgot to emphasize all these points.

[Stormy]

For starters, the immediate losers in Obama's health care program will be: 1) people with serious health problems, 2) the aged, and 3) the young with health defects. If you fall into one of these categories, you life expectancy will be seriously shortened due to rationed health care. Rationing of health care is the only way that can make it happen.

In essence, the people who this program will work well for is the same people that Michelle states benefit from the free market system...the healthy. But, the difference is that they will pay more under Obama's plan than in the current free market system.

We should remember in America today, we have a shortage of health insurance, not health care. Under Obama's plan, we will have no shortage of health insurance, just a shortage of health care.

[Stormy]

Here is our future under Obamacare. Just hope that we stay healthy and don't go the way of Randy Stroup.

http://www.foxnews.com/story/0,2933,392962,00.html?sPage=fnc/us/americasfuture

[Joe Guarino]

Stormy, that is very well phrased. Ordinarily, this would be a very difficult type of legislation to pass because of all the politically touchy, complex, problematic issues. But this year, with the Democrat supermajority in the Senate, and Obama's political support gradually eroding, it is difficult to know what will happen.

[Fred Gregory]

Game, set, match if he gets his public lnsurance plan !

[Bubba]

"Game, set, match if he gets his public insurance plan !"

As someone who has a professional interest in this, the anecdotal feedback I've gotten from insurance producers so far is that it's time to get out of the individual health care business. The insurance companies themselves are laying low for the time being.

It's the same consensus that formed last year over the butchering of Medicare Advantage by CMS. The full effects of that particular disaster have yet to be felt by our Senior population.

Obamacare will have a similar effect on the rest of the population.

[Joe Guarino]

Fred, I agree the whole private system nearly implodes if the public insurance plan passes. The only way to prevent that from happening is to have both employer and individual mandates that are so draconian and severe that none would dare foregoing private insurance.

Bubba, that is interesting information about the way the industry is responding. It would be tragic if the availability of private health insurance to individuals were to become jeopardized.