Under Obama Healthcare Scheme, Big Government Rations Care for Sick Patients

U.S. News & World Report (Washington, DC), May 13, 2009

American healthcare may not be perfect. But it’s not on the verge of collapse either—unless President Obama succeeds with his various healthcare reform efforts.

Exhibit A: The $787-billion stimulus bill, which became law on February 19.

The measure builds on the principal flaw in American healthcare—the third-party payer system—government, insurers, or employers. Even more worrisome, the package provides the foundation for government rationing of care.

More than $1 billion of the stimulus is dedicated to government-sponsored research into the “comparative effectiveness” of various medical treatments. In theory, such research could provide doctors with important information. But because the research is government-funded, it will likely be used to justify cuts in government health spending.

That’s what’s done in Britain. The British comparative-effectiveness agency routinely denies cutting-edge medicine because of cost. And the Obama administration has begun creating comparative-effectiveness institutions that parallel those across the Atlantic.

On March 19, the Obama administration announced the establishment of a 15-member “Federal Coordinating Council for Comparative Effectiveness Research” to oversee the research. Terrifyingly, there are no practicing physicians, patient advocates, or nongovernment healthcare economists among the council’s members. Instead, all hail from the Washington, D.C. area—and all are likely to see comparative effectiveness as a way to drive down costs by limiting the availability of drugs and medical treatments and rationing care.

By building on America’s third-party payer system, the stimulus package also guarantees that healthcare will continue to become more expensive without becoming any more secure.

Six in 10 Americans currently secure their insurance through their employers. Employer-based insurance is not portable, so a job loss means a loss of insurance too. A 1985 law called COBRA allows laid-off workers to stay on their old insurance plan for up to 18 months after they leave their jobs. Theoretically, this helps the unemployed maintain coverage. But it’s expensive for both employer and employee. The former employee must pay 102 percent of his plan’s average cost. And the average person who elects COBRA coverage ends up costing his former employer 145 percent of the plan’s cost.

The stimulus bill forces taxpayers to subsidize 65 percent of a newly unemployed person’s COBRA premium while the individual pays 35 percent. That’s significant, but it’s a short-term fix that will do little to help the unemployed find permanent coverage.

Americans face several choices for improving our system. Obama would have us further build on the third-party payer system, to erect yet more government bureaucracy with a public health plan and an insurance exchange, and to expand subsidized coverage. The president would fund such reforms with increased taxes, government debt, mandates on private-sector employers, and reduced spending on Medicare.

Another option is to build on the strengths of America’s health sector and allow individuals, not massive third-parties like the government, to make decisions on how to control funding of care.

Instead of tying health insurance to an employer—present or past—policymakers should move toward a system of private health insurance owned by individuals. Consumers should be able to purchase health insurance with pre-tax dollars, just like those who get insurance through their employers. When combined with a tax-favored health savings account, where patients could save money tax-free for routine medical expenses, these arrangements would provide real health security for Americans.

When times are good, premiums and savings would merely be a monthly expense—just as when an employer pays premiums on an employee’s behalf. But if an employee were to lose his or her job, premiums could be sustained using funds from the tax-favored savings account.

Our employer-based insurance system is weak in times of economic stress. Placing more burdens on employers for former employees will merely kill jobs, both those that exist now and those that would be created in the future. The long-term fix for America’s healthcare system must serve patients, not government.

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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