That’s about as believable a headline as the one on President Obama’s health reform site.
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The President’s health care reform proposal is introduced by five bullet points, all of which are misleading at best.
The bullet points supposedly show that the proposal “puts American families and small business owners in control of their own health care.”
In reality, the proposal would put the federal government in control of health insurance (which is not at all the same as health care). It would make it a federal crime for people to not buy insurance, or for insurers to offer plans that did not meet expensive federal mandates (such as insuring “children” up to the age of 26). The only families who would remain in control are those exempted from compulsory insurance because they can’t afford it (which was supposedly the reason why people are not insured today). And the only small businesses that would remain in control are those who take care to not hire more than 50 people (one of many unexpected consequences).
Here are the five White House selling points, followed by my doubts:
Not true. It would make insurance more affordable for those who receive subsidies and more expensive for taxpayers who finance those subsidies. It would make insurance more affordable for those who wait until they have preexisting conditions to buy a “Cadillac plan,” and more expensive for those who have been paying for a high-quality plan for years. It would make insurance more affordable for those with adult children living at home, and more expensive for singles and childless couples. If would make insurance more affordable for obese alcoholic smokers and more expensive for people with a healthy diet and exercise. It is all about redistributing health.
The estimate that those lured into subsidized plans and Medicaid would otherwise be uninsured is largely false, as is the related illusion that the number of uninsured would drop by 31 million. Economists know from past expansions of taxpayer-financed benefits that such giveaways mainly substitute for or “crowd out” benefits otherwise purchased by employers or individuals.
Not true. Very few of the insurance companies who choose to participate in the large group plan for federal employees (75% financed by taxpayers) would also offer individual policies for relatively few people on the proposed exchanges. If the federal government made good on the President’s recent threats to slap price controls on premiums, no sensible insurers would participate. If the federal government attempted to impose Medicare-like reimbursement rates on doctors and hospitals, only second-rate doctors and hospitals would accept the insurance. Even the Mayo Clinic in Phoenix recently stopped accepting Medicare because Medicare payments (which “reform” would cut even more) don’t come close to covering expenses.
Not true. The thinly-veiled threat of Nixonian price controls on health insurers would drive capital out of the industry, and likely end in “cost-plus” regulations that are simply encourage higher costs. The next point deals with some of those “commonsense rules.”
Not true. Basing premiums on known health risks is not discrimination but sound actuarial practice. Compelling insurers to charge similar rates to healthy and sick applicants makes no more sense than compelling them to charge the same rates to smokers and non-smokers. Compelling insurers to keep people on the plan even if they lie about their health or lifestyle must result in higher premiums for honest and/or healthy people.
Not true. The costly new subsidies and extra Medicaid spending could reduce future deficits only if taxes were increased even more than spending. By that logic, the President could propose $99 trillion of new spending and $100 trillion of new taxes and claim the result would put the government’s budget (as opposed to taxpayers’ budget) “on a more stable plan.”
Today Politico Arena asks:
Will President Obama’s proposal to block excessive rate increases by insurers help get a health care package through Congress?
My response:
Just where does President Obama think Congress finds the power to authorize the HHS secretary “to review, and to block, premium increases by private insurers, potentially superseding state insurance regulators”? My colleague David Boaz addresses the politics of this unseemly proposal just below. And elsewhere our colleague Michael Cannon offers a devastating economic critique of the proposal, citing White House economic advisor Larry Summers, no less, on the folly of it all. But the constitutional question is what concerns me.
No doubt Obama, a former lecturer in constitutional law, believes that the power of Congress to regulate interstate commerce suffices to allow it to set private heath insurance premiums. After all, once delegated to him, that same power allowed him, he believes, to take over auto companies, to fire corporate executives, to set their salaries, and to do, well, pretty much what he wanted in so many other areas. That’s the modern executive state — the president as CEO of America, Inc. The irony, however, is that the commerce power was given to Congress for precisely the opposite reason — to ensure economic liberty, not to restrict it.
Facing state impediments to free interstate commerce, which had arisen under the Articles of Confederation, the Framers empowered Congress to check such restraints and to do the few other things needed to ensure a free national market. In fact, early in our history a Hamiltonian proposal that Congress undertake a national industrial policy — ObamaCare is a stark example of such a policy — was rejected outright by the Congress as beyond its authority. Obama’s proposal speaks directly to how thoroughly we’ve turned the Constitution on its head. And as recent elections give evidence, the American people are coming increasingly to understand that. This proposal, I predict, will go nowhere.
The Cato Institute had already scheduled a policy forum for noon today where the Urban Institute’s Gene Steuerle and I will discuss the implicit tax rates in the House and Senate health care bills.
We’ve already been able to calculate the implicit tax rates that President Obama’s new proposal would impose on low- and middle-income workers. We have also been able to calculate the incentives to drop coverage under the president’s proposal. Upshot:
Zip over to Cato right now to hear me present the results – or watch the forum streaming here.
Or it may even be worse.
This morning, President Obama released his latest health care blueprint, which he hopes will breathe life into his moribund effort to overhaul one-sixth of the U.S. economy. The new blueprint is almost exactly the same as the House and Senate health care bills that the public have opposed since July. It mostly just splits the difference between the two.
One new element, however, is the president’s proposal to impose a new type of government price control on health insurance premiums. I explain here how those price controls are a veiled form of government rationing that helped sink the Clinton health plan.
If anything, those price controls make the president’s new plan even more bureaucratic and government-heavy. The Senate bill would take an ill-advised stab at cost-control by imposing a tax on the highest-cost health plans. That president proposes to pare back that excise tax and instead have a panel of federal bureaucrats cap the growth in health insurance premiums for all health plans. Those new government powers could make it even harder for people to obtain the coverage and care that they need.
Hoping to revive his increasingly unpopular health care overhaul, President Obama has invited Republicans to a bipartisan summit this Thursday and plans to introduce a new reform blueprint in advance of the summit. On Sunday, the White House announced that a key feature of that blueprint will be premium caps, a form of government price control that helped kill the Clinton health plan when even New Democrats rejected it.
The New York Times reports on President Obama’s blueprint:
The president’s bill would grant the federal health and human services secretary new authority to review, and to block, premium increases by private insurers, potentially superseding state insurance regulators.
It bears repeating what Obama’s top economic advisor Larry Summers thinks about price controls:
Price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time.
For example, as I have written elsewhere, artificially limiting premium growth allows the government to curtail spending while leaving the dirty work of withholding medical care to private insurers: “Premium caps, which Massachusetts governor Deval Patrick is currently threatening to impose, force private insurers to manage care more tightly — i.e., to deny coverage for more services.” No doubt the Obama administration would lay the blame for coverage denials on private insurers and claim that such denials demonstrate the need for a so-called “public option.”
As the Progressive Policy Institute’s David Kendall explained in a 1994 paper, the Clinton health plan contained similar price controls. Kendall explains why they would be a disaster:
In spite of the late hour in the health care debate, Congress has not yet decided how to restrain runaway health care costs. The essential choices are a top- down strategy of government limits on health care spending enforced by price controls or a bottom-up strategy of consumer choice and market competition. History clarifies that choice: Previous government efforts to regulate prices in peacetime have invariably failed. Moreover, government attempts to control prices in the health care sector would undermine concurrent efforts to restructure the marketplace…
The idea of controlling costs by government fiat is seductively simple. But it rests on a conceit as persistent as it is damaging: that government bureaucracies can allocate resources more wisely and efficiently than millions of consumers and providers pursuing their interests in the marketplace. The alternative — one rooted in America’s progressive tradition of individual responsibility and free enterprise — is to improve the market’s ground rules in order to decentralize decision-making, spur innovation, reward efficiency, and respect personal choice.
As centrally planned economies crumble around the world, many in the United States seem bent on erecting a command and control economy in health care. This policy briefing examines the reasons why government price regulation would fail to constrain health care costs and create many adverse side effects…
Ultimately, government price regulation will always fail because it does not change the underlying economic forces driving up prices. If we are serious about slowing the growth of health care costs, we have to change the ways we consume and provide medical care. Price controls evade the hard but essential work of structural reform in health care markets: They are a quintessentially political response to an economic problem. The alternative is to allow well-functioning markets to set prices and allocate resources, while ensuring that all Americans have access to affordable health care coverage. The market-oriented approach leaves decisions to cost-conscious consumers and health care providers rather than bureaucrats.
Any of that sound familiar? It’s worth reading the whole thing.
This is not hope. This is not change. (Much less a game-changer.) It is, to pinch a phrase, a return to “the failed theories that helped lead us into this crisis.”