President fudges facts on health care proposal

San Diego Union-Tribune, October 4, 2009
Real Clear Politics, October 4, 2009

President Barack Obama’s much-anticipated speech to Congress was intended to alleviate growing public concerns about his plan to overhaul American health care. Instead, the president sidestepped legitimate questions about his reform effort and offered up a litany of dubious “facts” to support his proposals.

First off, the president failed to adequately defend his promise that “nothing in [his] plan will require you or your employer to change the coverage or the doctor you have.” Many Americans are skeptical of this claim — and with good reason.

The House reform proposal, for instance, would require many insurers to alter the plans they sell dramatically in order to meet government-defined standards of “acceptable health coverage.” Americans who refused to move over to a plan deemed “acceptable” by the feds would lose their insurance policies and have to pay a hefty fine.

Plus, if congressional Democrats follow through on the president’s desire to create a new government-run insurance plan, millions of Americans could be jettisoned from their private coverage and onto this “public option.”

How? If a public option ends up costing less than private plans — as it inevitably would — plenty of employers would rather pay a fine or an 8 percent payroll tax and discontinue offering coverage. It would be cheaper for them to rely on the government to insure their employees.

The Lewin Group, a respected health care consulting firm, estimates that 119 million Americans would lose their employer-based coverage if Congress created such a federal alternative to private insurance.

Indeed, many Americans have expressed alarm that a public option marks the first step on the road to fully government-run health care such as is in place in Canada. If the public plan were able to tap the federal treasury and thus offer its policies at artificially low prices, then it would easily drive private insurers out of the market. Before long, the public option would be the only option.

The president tried to quell these fears by promising that the public option would be “self-sufficient and rely on the premiums it collects.”

But this seductive promise is hardly believable. As our government’s existing public options, Medicare and Medicaid, have shown, the costs of government health care programs tend to grow out of control quickly.

Medicare’s creators, for instance, promised in 1965 that the program would cost $12 billion by 1990. The actual cost in 1990 — $110 billion, nearly 10 times the original estimate.

By 2008, Medicare and Medicaid constituted nearly one quarter of total federal spending. The president in his recent address to Congress said that his health care reform plan — projected to cost $900 billion — would be deficit neutral. It would be funded mainly by eliminating fraud and abuse in Medicare and Medicaid, both programs of the government.

Faced with exploding costs, a public option that came into existence as a self-sustaining program would likely have to accept federal subsidies simply to stay afloat.

Even if the public option isn’t directly subsidized, the president and Congress could still provide it a leg up against private insurers by exempting it from taxes or regulations governing its competitors.

Such advantages would make it difficult for private firms to compete. Eventually Americans would be left with just one choice: a government-operated health care plan in the mold of Medicare-for-All.

As the president continues to campaign for his reform package in the coming weeks, he’ll have to do more to address these lingering — and legitimate — concerns.

Sally C. Pipes is president and CEO of the Pacific Research Institute. Her latest book is “The Top Ten 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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