Sen. Barack Obama has promised to “turn the page on the failed politics of yesterday’s health care debates.” He’s right to call for a new approach to healthcare reform. What he’s offered thus far, however, is a government-heavy solution that’s all-too-similar to the tired proposals of yesteryear.
The centerpiece of the Obama plan is the creation of a National Health Insurance Exchange. In theory, the exchange would help citizens and businesses buy private health insurance directly from providers.
Insurers would be required to issue every applicant a policy, regardless of pre-existing conditions or other risk factors. They’d also be required to cover a host of non-essential procedures. Regulators would place restrictions on the prices of private plans, and the government would even offer a publicly run plan.
Obama promises that he would provide subsidies to those who can’t afford insurance. The problem, however, is that heavy-handed regulation will inflate insurance prices. Already, mandated benefits increase the cost of a basic health insurance plan by 20 to 50 percent. Prohibiting insurers from setting prices based on how much they expect a particular applicant to cost will lead to higher prices for all.
So the details of Obama’s plan will actually undermine his stated goal of covering everyone. He only talks about mandating insurance for children, which differs from his former rival Hillary Clinton who proposed a mandate for all to be covered.
Over-regulated health insurance will price many out of the market and drive others — particularly the young and healthy — to choose not to purchase insurance.
As the young and healthy opt out of the market, high-risk patients would comprise an increasing portion of the insurance pool — driving costs even higher. Low-risk policyholders generally pay more into the pool than they take out. Without them, insurers would be forced to hike premiums to compensate.
Even with subsidies, insurance would become unaffordable for many people. For those that truly couldn’t afford private insurance, Obama promises an expanded version of Medicare.
The program is certainly popular with seniors. But it’s an administrative nightmare for doctors and hospital administrators, who must grapple with 100,000 pages of regulations.
It’s no wonder then that 30 percent of Medicare enrollees report difficulty finding a doctor who will treat them, according to the Medicare Payments Advisory Commission. Many physicians don’t want to deal with the paperwork or the below-market reimbursement rates.
It’d be even harder to find a doctor if thousands of new, high-risk patients were added to the Medicare pool.
All this government meddling is a recipe for higher costs, reduced consumer choice, and diminished quality of care. Indeed, government-run systems in Canada and Britain are facing these very problems today. The British government is even moving away from its government-run model in favor of greater private-sector involvement. It’s baffling why Obama would have us follow Britain’s example just as it’s abandoning its storied — and failing — healthcare model.
Instead of trying to expand healthcare coverage through government force, Obama should empower Americans to take ownership of their own healthcare policies.
How? The easiest way is to change the tax code.
Right now, employers receive tax breaks for purchasing insurance for their employees, who also do not pay tax on the value of the healthcare benefit. Individuals who purchase insurance on their own don’t get a benefit. Granting both parties the same tax break would inject competition into the healthcare market and allow workers to purchase policies that would be portable from job to job.
Lawmakers should also allow Americans to purchase health insurance across state lines. By preventing consumers from shopping for insurance in lower-cost states, the government restrains competition, keeping prices artificially high and deterring some from buying insurance. There’s no reason that residents of New York, for example, should have to pay higher insurance rates than residents of Idaho, simply because of where they live and which mandates their state government imposes.
Obama styles himself as a post-partisan candidate with commonsense solutions to the country’s biggest problems. There’s no better way to prove that than by junking the failed government-heavy healthcare policies of days gone by in favor of free-market reforms.
Sally C. Pipes is president and CEO of the Pacific Research Institute and author of “Miracle Cure: How to Solve America’s Health-Care Crisis and Why Canada Isn’t the Answer.”
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