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Obama’s healthcare plan: Not healthy, not wealthy, and certainly not wise. - Pacific Research Institute

Obama’s healthcare plan: Not healthy, not wealthy, and certainly not wise.

The Examiner (Washington, D.C.), March 7, 2009

In his recent speech to Congress, President Barack Obama touted his administration’s “historic commitment” to “the principle that we must have quality, affordable health care for every American.” But the plan he’s poised to enact would provide care that is neither quality nor affordable, and his commitment is historic largely for its folly.

Obama’s first budget calls for a whopping $634 billion to be put into a reserve fund for healthcare reform over the next ten years, but it provides few details on how the money is to be spent. Instead, in hopes of avoiding the political battles over details that bogged down President Clinton’s attempts at healthcare reform in the early 1990s, it offers only a few broad principles intended to guide Congress in designing a reform package.

Despite the lack of details, these principles — when taken with the beliefs held by his healthcare advisers, including new health czar Nancy-Ann DeParle — tell us much about what Obama has in mind. And it doesn’t look good.

Most importantly, Obama’s budget instructs Congress to “aim for universality.” This clear goal, which claims the support of both Ezekiel Emanuel — brother of White House Chief of Staff Rahm Emanuel and author of the initial outline for Obama’s healthcare budget — and Health and Human Services Secretary-designee Kathleen Sebelius, will effectively create a massive new healthcare entitlement.

That entitlement, though, promises an equally massive financial burden. By his own admission, the hundreds of billions that Obama plans to set aside for health reform are only a down payment. Many estimate that his final vision could cost more than $2 trillion over the next ten years. Obama has outlined a few ways to pay for his reforms, but his proposals won’t cover the full balance.

In order to achieve universal coverage, Obama calls for the expansion of existing federal healthcare programs and the creation of a National Health Insurance Exchange. This Exchange would allow individuals and small businesses to purchase private insurance policies with benefits packages that have been approved by the federal government. The feds would also market a government-run plan, or “public option,” equivalent to the plan enjoyed by federal employees.

Sounds like a healthy, competitive market. It’s anything but. Because the government can dip into the federal purse to keep the public option at an artificially low price, private offerings on the Insurance Exchange will slowly be driven out of the market. Before long, the “public” option will be the only option.

In order to gain federal approval, private insurers on the Exchange will have to issue policies to all comers regardless of health history and charge everyone the same or similar rates. In health policy-speak, these two regulations are called “guaranteed issue” and “community rating,” respectively.

Both lead to significant increases in the cost of insurance for everyone. Why? Well, under guaranteed issue, it only makes sense to purchase insurance after you become sick. Why pay premiums if you’re not going to use the healthcare system — and if you can get insurance at any time? Further, if everyone has to pay the same rate, insurers will have to charge rates high enough to cover the sickest individuals.

Some states have already experimented with guaranteed issue and community rating. The results were catastrophic. In New Jersey, for example, the price for a standard insurance plan rose as much as 683 percent.

Meanwhile, Obama healthcare guru Ezekiel Emanuel has argued that the administration’s health reforms also ought to oblige insurers to offer bloated plans that cover a glut of potentially unnecessary procedures. Such benefit mandates are certain to add even more to the cost of a policy.

Now imagine facing those skyrocketing premiums in combination with a mandate to purchase insurance.

Obama has been coy about what mandates, if any, achieving universal coverage would entail. But in practice, universal coverage almost certainly means a federal mandate requiring every individual in the country purchase health insurance. Indeed, a senior staffer on the administration’s healthcare team admitted as much recently, saying that whatever plan results “will cover everybody. And I don’t see how you cover everybody without an individual mandate.”

In other words, everyone will be forced to purchase insurance regardless of whether they can afford it. That’s exactly the criticism that Obama aimed at Hillary Clinton when she proposed a mandate during the Democratic primaries. Now he’s all but proposed a mandate of his own.

Obama recognizes that the cost of health care must come down if his plan is to be affordable. But his plans for reining in costs through increased usage of information technology and research into the relative effectiveness of various medical treatments will have minimal impact.

Few would take issue with the argument that technology will help the health sector improve outcomes, minimize errors, and save money. But some perspective is necessary. Even the rosiest of projections on the savings from health IT amount to about 3 percent of what America spends on health care each year. And that doesn’t take into account the billions in start-up costs that could deliver more value in other applications — like upgrading medical equipment or improving patient care directly.

Obama also supports comparative-effectiveness research (CER) as a means of controlling costs. CER involves pitting different treatment options for the same disease against one another to see which one works best. In theory, a worthwhile pursuit. But with government funding the research, scientists will face significant pressure from penny-pinching government officials to find in favor of the cheapest option available — not necessarily the best one.

That’s exactly what happens in the United Kingdom, which has a comparative-effectiveness research agency of its own. British patients are routinely denied effective medications simply because they cost too much — at least, according to the government. Such denials may save the national treasury money, but they cost lives. Americans should not be anxious to replicate this system.

With the nation’s health at stake, the details of a health reform plan matter. Unfortunately, Obama seems to have chosen to gloss over the minutiae and focus on the far easier task of selling vague “reform.” But a closer look at his budget’s treatment of health reform reveals a plan that will make our nation neither healthy nor wealthy — and that certainly isn’t wise.

Sunday Reflection contributor Sally C. Pipes is president of the Pacific Research Institute. Her latest book is “The Top 10 Myths of American Health Care.”

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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