Barack Obama has a plan for fixing the American health care system. Posted on his website, he has laid his plan out for everyone to review. Only, he has left out a few details.
Obama starts by naming three distinct issues with American health care. First, there are a lot of people who are without insurance. According to Obama’s website, there are “47 million Americans” without insurance, including about 9 million children.
But there are a few details he forgot to mention. Out of that 47 million people, about 10 million of them are not Americans. According to page 29 of the Census Bureau report “Income, Poverty, and Health Insurance Coverage in the United States: 2005 (pdf),” 9.487 million people in America without insurance are “not a citizen.”
Out of the 37 million Americans without insurance, the same page of the report shows 8.3 million who are uninsured make between $50,000 – $74,999. Another 8.74 million make over $75,000 or more. Is it fair to say that these folks should be able to afford health insurance? Understand there are different costs of living across the country, but if you make $50,000 in Newark, New Jersey, that’s like making $35,000 in Des Moines, Iowa. There are people in Des Moines making less than that with health insurance.
I know. I was one of them.
After dropping those 17 million people, we are left with 20 million people without health insurance, or 6.66%. That is no small number, but it is a detail that needed to be pointed out. Also worth pointing out is that means 93.34% of Americans are insured in some manner.
Obama’s second issue is “Health insurance premiums have risen 4 times faster than wages over the past 6 years.” An article from Reuter’s supports that claim. How will Obama’s plan address this problem? He will simply create “a new national health plan” with “affordable health coverage” and “affordable premiums, co-pays and deductibles.”
The question is how?
According to The Cato Institute, Obama’s plan is similar to the law Mitt Romney signed in Massachusetts, which called for “increased regulation, a government-designed standard benefits package, and a new pooling mechanism.” Obama calls his the “National Health Insurance Exchange.” Romney’s was called The Connector:
The Connector is not actually an insurer. Rather, it is designed to allow individuals and workers in small companies to take advantage of the economies of scale, both in terms of administration and risk pooling, which are currently enjoyed by large employers. Multiple employers are able to pay into the Connector on behalf of a single employee. And, most importantly, the Connector would allow workers to use pretax dollars to purchase individual insurance. That would make insurance personal and portable, rather than tied to an employer-all very desirable things.
These are things mentioned in Obama’s plan. According to his website, the “National Health Insurance Exchange” will:
- act as a watchdog group and help reform the private insurance market by creating rules and standards for participating insurance plans to ensure fairness and to make individual coverage more affordable and accessible.
- require that all the plans offered are at least as generous as the new public plan and have the same standards for quality and efficiency.
- evaluate plans and make the differences among the plans, including cost of services, public.
When you see the similarities between the two plans, it is distressing when you see what has happened with The Connector:
the Connector’s board has seen itself as a combination of the state legislature and the insurance commissioner, adding a host of new regulations and mandates.
For example, the Connector’s governing board has decreed that by January 2009, no one in the state will be allowed to have insurance with more than a $2,000 deductible or total out-of-pocket costs of more than $5,000. In addition, every policy in the state will be required to phase in coverage of prescription drugs, a move that could add 5–15 percent to the cost of insurance plans. A move to require dental coverage barely failed to pass the board, and the dentists-along with several other provider groups-have not given up the effort to force their inclusion. This comes on top of the 40 mandated benefits that the state had previously required, ranging from in vitro fertilization to chiropractic services.
Thus, it appears that the Connector offers quite a bit of pain for relatively little gain. Although the ability to use pretax dollars to purchase personal and portable insurance should be appealing in theory, only about 7,500 nonsubsidized workers have purchased insurance through the Connector so far. On the other hand, rather than insurance that “fits their needs,” Massachusetts residents find themselves forced to buy expensive “Cadillac” policies that offer many benefits that they may not want. (Emphasis mine.)
This is just the opposite of what is needed to solve the problem with high insurance premiums. The Wall Street Journal shows how different states have created insurance mandates and how those mandates affect the cost of coverage:
New York requires every insurance policy sold there to cover podiatry. Acupuncture coverage is mandated in 11 states, massage therapy in four, osteopathy in 24, and chiropractors in 47. There are an estimated 1,800 or so such insurance “mandates” across the country, and the costs add up. “It is always the providers asking for the mandate; it is never the consumer,” says health policy guru John Goodman, who has testified before legislatures considering such rules.
What’s more, states like New Jersey and New York add two more ultra-expensive requirements: “Guaranteed issue” allows people to wait till they are sick and then buy insurance; “community rating” prevents insurers from charging different prices to people of different ages and health status.
It’s important to note that Obama’s plan features “guaranteed eligibility. No American will be turned away from any insurance plan because of illness or pre-existing conditions.” It is features like this that make “insurance so expensive that millions of people are exposed to financial ruin because they aren’t allowed to buy basic policies focused on catastrophic costs.”
How expensive? A 2004 study by eHealthInsurance.com found that a typical insurance policy ($2,000 deductible, 20% co-insurance) for a family of four could be had for as little in as $172 per month in a reasonably regulated locality like Kansas City, Missouri. But in New York that family’s only option–managed care–would run $840 per month, and in New Jersey family policies run a whopping $1,200-plus.
Rather than break down the barriers between the states and foster competition between the companies, Obama’s plan threatens to abolish the barriers and create a universal mandate, which would not lower premiums, but raise the cost to the taxpayer, as seen in Massachusetts.
According to MedicalNewsToday, the cost of the plan rose from an expected $472 million in the first year to $625 million. This was because of “higher than expected enrollment in government-sponsored programs.” Governor Deval Patrick has asked for “$869 million for the program for fiscal year 2009, compared with previous estimates of $725 million.”
How does this affect the Massachusetts taxpayer?
Costs also have increased for residents. Monthly premiums for partially subsidized coverage increased by an average of 9.4% going into the second year of the program, according to state figures. Premiums for people purchasing private coverage without a subsidy increased by an average of 5.1%.
And they don’t even have everyone covered yet. Obama’s plan is estimated to cost “$50 billion to $65 billion a year, when fully phased in.” His campaign said “the revenues from rolling back the tax cuts were enough to cover it.” He is going to raise taxes to fund it. He has also added that savings from implementing the plan will help fund it. It is impossible to predict how much they have underestimated the cost, but the government rarely comes in under budget, especially with new programs. This one will be no different.
Obama’s third issue tackled in this plan is the lack of emphasis “on prevention and public health.” Ironically, there is very little in his plan concerning this problem. Aside from initially mentioning that “less than 4 cents of every health care dollar is spent on prevention and public health,” the plan doesn’t really address this issue in detail.
When initially reviewed, the Obama plan seems well thought out, but when closely examined, it doesn’t get into the details on how the plan will be implemented. There are words such as “require” and “force,” which should cause even liberals to stop and consider the power of such terms when wielded by the federal government.
But what it boils down to is huge federal bureaucracies attempting to control the price of health care. And as I have written before, when you have price controls, you will have shortages, followed by rationing.
We already have health care rationing in America, though it is currently limited to one state. With Obama’s plan, it could easily spread across America like a virus.
