Democrats have recently seized on a novel way of reducing health care costs threats.
The Obama Administrations Department of Health and Human Services (HHS) recently announced that any insurance company that wants to increase premiums more than 10% will have to get approval from the government. Congress didnt pass a law mandating this draconian policy HHS Secretary Kathleen Sebelius simply decreed it.
Meanwhile, at the state level, Vermont Gov. Peter Shumlin just signed a bill that will create a public insurance option within his borders. Advocates hope that the end result will be a single-payer system, in which the state pays for the health care of its residents directly.
Both Sebelius and Shumlin declared that they were only trying to rein in health costs and limit wasteful spending on insurance company profits. But cost control by fiat whether through rate regulation or a state-run health care system will fail not only to restrain spending but also to improve Americans health.
The facts suggest that most of the waste and inefficiency in our health care system is in the sectors dominated by government. The federal government loses as much as $60 billion a year in Medicare fraud alone. Thats five times more than the combined profits of the top ten health insurance companies in the Fortune 500.
And the price controls the federal government plans to impose on insurers will simply result in the disappearance of private insurance options. For evidence, take a look at what happened after Massachusetts instituted heavy-handed price controls under its state health reform law considered by the White House to be a model for ObamaCare.
Bay State officials initially denied 235 of 274 rate increases proposed by insurers last year. So insurers temporarily stopped offering new coverage.
The state government and insurers later compromised, but the states attempts to set insurance rates have resulted in a serious shortage of medical care. More than half of the states primary care practices are closed to new patients, and wait times for specialists range from 24 to 48 days, according to a survey by the Massachusetts Medical Society.
In Vermont, things will likely turn out much worse. The Green Mountain States new health care law creates a five-member board appointed by the governor with the power to set prices for all aspects of the states medical system from routine tests to drugs.
The funding mechanism for the whole mess has not yet been set. But the laws framers envisioned a 14% payroll tax paid by almost all workers and employers in the state. Thats on top of the Social Security, Medicare, and other taxes that Vermonts residents and businesses already pay.
Again, we know how this scheme will play out. Vermont is just across the border from Quebec which features a government-funded single-payer system of its own that relies heavily on price controls.
The francophone provinces health care system was implemented in the 1960s at the behest of a commission led by Dr. Claude Castonguay, the so-called father of Quebec Medicare.
Forty years later, in 2008, Castonguay was asked to review Quebecs health care system again. He concluded that Canadian health care was in crisis. We thought we could resolve the systems problems by rationing services or injecting massive amounts of new money into it, he said.
His prescription for Canadian health care? We are proposing to give a greater role to the private sector so that people can exercise freedom of choice.
So just as Canada is running away from single-payer after decades of experience, Vermont is embracing it.
In 2010, residents of Quebec faced a median wait time of 18.8 weeks for surgical and other therapeutic treatments. According to The Fraser Institute, a Canadian think tank, average hospital wait times increased 96% in Canada between 1993 to 2010.
Not the sort of system most Americans would want to emulate.
Here in America, federal and state officials have promised to lower health care costs and right quick. But forcibly regulating prices wont do the trick. Americans and Vermonters in particular should hope that these experiments in health care reform are mercifully short.