Action Is Needed On Health Reform, But Not The Kind Obama Envisions

President Barack Obama’s Capitol Hill colleagues are urging him to act swiftly on health care reform.

Echoing a number of prominent legislators, senior congressmen Jim Cooper, D-Tenn., and Michael Castle, R-Del., recently wrote that the president must quickly enact the health care measures he’d promised on the campaign trail, noting that “every day we wait we lose another opportunity.”

There should be a sense of urgency surrounding health care reform. But hustling through bad policies is worse than doing nothing — and the Obama health care platform is chock-full of bad policies.

Take the president’s plan to legally require that children have health insurance. Of course, it’s an outrage that millions of American kids don’t have coverage. But trying to cover the uninsured through legal fiat has already proven futile.

Just look at Massachusetts. In April 2006, Bay State legislators implemented an insurance requirement for all adult citizens. Today, the program has signed up 442,000 more people for health insurance, but the reality is that 80,000 were put on Medicaid and 176,000 more were put on the taxpayer-subsidized plans.

Costs are out of control, taxes had to be increased and the whole program is only possible because of large transfers from the federal government. In 2007, the plans were so unaffordable that 62,000 Bay Staters were exempted from the individual mandate.

The Massachusetts experience indicates that many low-income parents, if faced with the option of either buying their child an expensive insurance policy or taking the risk of government regulators catching them and facing fines for being uninsured, will likely choose the latter.

Obama also plans to implement federal “guaranteed issue” and “community rating” ordinances. The first forces health insurers to accept all applicants, regardless of health status. The second restricts insurers’ ability to adjust premiums based on an applicant’s expected costs.

Many states already have one of these requirements. Some have both. On average, a state-level community rating law increases insurance premiums by 10.2%, and a guaranteed issue law by 227%.

By making private insurance increasingly unaffordable, these ordinances push patients onto government health insurance. This will surely be amplified by Obama’s plan to expand eligibility for public programs like Medicaid and SCHIP.

Obama also wants a National Health Insurance Exchange where individuals and small businesses could purchase health insurance from government-approved private providers or from the government itself. But because the government can tap into the public purse — and therefore keep prices artificially low — it will always have a leg up on private insurance providers.

Consequently, Obama’s plan will crowd out private plans and the government will gradually develop a monopoly on the insurance market. In other words, the plan discreetly achieves what left-leaning lawmakers have wanted for decades:

“Medicare for All” — a single-payer, government-run health care system.

But across the world — and here in the states — government-run insurance programs have proven inept at getting patients the care they need.

The insurance program administered by the Department of Veterans Affairs, for instance, is notoriously mismanaged. An insurance claim with the VA takes between 127 and 177 days to process — much higher than the private insurer average of 89.5 days. The average appeal takes an incredible 657 days.

Public insurance programs also routinely underpay for medical services. Caregivers have responded by simply refusing to care for publicly insured patients. A 2003 study from the Medicare Payment Advisory Commission found less than 70% of primary-care physicians and specialists are accepting new Medicaid patients, or five times higher than for privately insured patients.

Hospital administrators have responded to underpayment by raising prices on privately insured patients — this is the “hidden tax” that politicians talk about. In Washington state alone, the cost-shifting to private payers to make up for underpayments from Medicare and Medicaid totaled $738 million in 2004.

That same year in California, private payers paid $45 billion to compensate for Medicare underpayments.

The government-run health care systems abroad are also fraught with problems. In Canada, 800,000 of the country’s roughly 33 million citizens are on waiting lists for medical treatments. And the average wait between seeing a primary-care doctor and treatment by a specialist is over 18 weeks. In Britain, more than a million people are waiting to be admitted into a hospital.

Obama’s colleagues are right to demand that health care reform be a top priority. But the big-government health care measures the president and Tom Daschle, the former nominee for Secretary of HHS, have touted thus far are likely to prove costly and ineffective in reaching universal coverage.

Instead of pushing for more government control over the health care sector, Obama should champion market-based reforms that will work.

Pipes is president and CEO of the Pacific Research Institute.

Pipes discusses her new book, “The Top Ten Myths of American Health Care — A Citizens Guide,” and what she would do if President Obama — improbably — asked her to be his health care czar in a podcast interview. Click to start audio clip.

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.

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