Governor Schwarzenegger: Don’t Build This Wall!

Governor Schwarzenegger: Don’t Build This Wall!

One of President Reagan’s most famous quotes was his appeal to Soviet Communist Party Chairman Gorbachev to “tear down this wall!” Governor Schwarzenegger has a similar opportunity to prevent a wall that limits people’s freedom from being built in the first place.

ObamaCare relies on states to implement most of its rules. ObamaCare will require every American not dependent on government health plans like Medicaid or Medicare, or enjoying employer-based benefits, to purchase health insurance in a state-based “exchange” as of January 2014. Last month the Legislature sent two bills to Governor Schwarzenegger. These bills would create California’s exchange and supporting bureaucracy, which would be led by a board of five political appointees.

The governor’s signature on these bills would harm Californians’ access to health insurance. The best-case scenario for the California exchange is similar to the outcome in Massachusetts, where an April 2006 law created the “Commonwealth Connector,” which also deploys a politically appointed board to limit choice of coverage. Unsurprisingly, limited choice means higher costs.

Economists John Cogan and Daniel Kessler of Stanford University, and R. Glenn Hubbard of Columbia University, found that premiums in Massachusetts increased by 6 percent more than in the rest of the country, and 14 percent more for small businesses, between 2006 and 2008. California’s exchange is likelier to have significantly worse outcomes, because of our Legislature’s commitment to government-monopoly (so-called “single-payer”) health care.

President Obama and Kathleen Sebelius, U.S. Secretary of Health and Human Services, as well as many Congressional Democrats, share our Legislature’s passion for government-monopoly medical care. They view ObamaCare as an important step towards this goal, and have left the door open for states to apply for “waivers” to keep moving towards “single-payer.”

Governor Schwarzenegger should understand that the California exchange would soon embark on this mission. Its most important power would be to “selectively contract” with insurers to offer policies in the exchange. This is fundamentally different from traditional insurance regulation, which concerns solvency, fraud, and good-faith claims-processing by insurers. Instead, bureaucrats would choose the policies available to those Californians forced into the exchange by ObamaCare.

That will be most of us. John Goodman of the National Center for Policy Analysis has concluded that any household earning less than $80,000 annually will lose its employer-based benefits and be driven into an exchange. Californians will be forced to buy health insurance chosen by bureaucrats appointed by politicians dedicated to the eventual elimination of all choice in health insurance.

Nor should Governor Schwarzenegger be fooled by the notion that the federal government will grant California oodles of cash to start and operate the exchange. Secretary Sebelius now has no more than $1 million to grant each state. With polls indicating a Republican majority (committed to repealing ObamaCare) in at least one Congressional chamber after the mid-term elections, California should not expect any further grants.

Polls show that between 50 percent and 60 percent of Americans oppose ObamaCare and most Americans know it will increase costs to governments, employers, and individuals. These higher costs will not lead to better health care or innovation. Instead, new layers of government bureaucracy will second-guess every doctor’s decisions. States are resisting that arrangement.

A federal judge in Florida has agreed to hear a lawsuit by that state’s attorney general, in concert with 19 other states, that ObamaCare is unconstitutional. The attorney general of Virginia has a separate but similar lawsuit. Governor Pawlenty of Minnesota has signed an executive order forbidding his bureaucrats from even applying for federal funds to finance an exchange, and other states are taking similar steps to avoid getting “hooked” on an expensive government program increasingly likely to fail.

The California exchange, unfortunately, would persist even after ObamaCare is repealed, implementing a government takeover the nation will have rejected. Governor Schwarzenegger has twice vetoed a government-monopoly health system, in 2006 and 2008. If he allows the Legislature to slip it past him now, in 2010, that will wall off Californians from their freedom of choice. The governor can bolster his legacy, and improve Californians’ health care prospects, by preventing such a wall from being built in the first place.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.