Obamacare’s Six Worst Flaws

Published in The Examiner, July 9, 2009

President Barack Obama has warned of “lost jobs, lower take-home pay, shuttered businesses and a lower standard of living for all Americans” if we don’t act immediately to overhaul America’s health sector.

Sounds scary. But even scarier are the proposals that he and other congressional leaders have put forward and what would happen to health care for the American people if they were implemented. Here are the six worst:

1 A mandate that individuals purchase insurance. Many lawmakers have suggested that we can control health spending only if the government requires every American to have insurance. But that means that government will decide what kind of health insurance we must have, how much we must pay, and what fines and penalties we will face if we don’t comply. And there would have to be an endless ocean of taxpayer subsidies to make the insurance “affordable.”

2 A “pay-or-play” mandate for employers. Employers would be forced to either pick up a substantial part of their employees’ insurance premiums or pay a tax. As businesses absorb this blow, jobs will disappear and workers will face lower wages.

3 A uniform, government-defined benefits package. Rather than letting individuals pick plans based on their own needs, the Obama proposal would require insurers to offer a minimum benefits package. Congress will soon see every special interest group — from alcohol-abuse counselors to chiropractors and acupuncturists — lining up on Capitol Hill lobbying to have its service included in the “minimum” package. Such mandated benefits at the state level have pushed up the costs of health insurance for people unable to afford Cadillac plans. Today, nearly 2,000 of these benefit mandates have been enacted in the states, and the Council for Affordable Health Insurance estimates that they drive up the cost of insurance by as much as 50 percent.

4 A national health insurance Exchange. Proponents of this approach say it would “streamline the purchase of health insurance” by giving consumers one place to purchase government-approved insurance policies. In fact, it would be a vehicle for the federal government to get into the business of sweeping regulation of health insurance that inevitably would destroy choice and innovation.

5 Comparative-effectiveness research. Thanks to $1.1 billion in funding in the stimulus package, the federal government is supporting research to assess how different medical treatments stack up against one another. Sounds reasonable enough. But in other countries, such research is used by cost-conscious bureaucrats to restrict treatment options. And that’s exactly what could happen here. As House Appropriations Chairman David Obey, D-Wis., admitted earlier this year, drugs and treatments “that are found to be less effective and, in some cases, more expensive will no longer be prescribed.”

6 A new, government-run health insurance plan. The White House and leading congressional Democrats are determined to create a government-run health insurance plan to compete against private insurers. They claim that this “public option” would play by the same rules as private plans.

Americans shouldn’t buy it. A government option will inevitably become subject to politics and special interests. Lawmakers will be tempted to grant the government plan unfair advantages over its private counterparts, including giving it authority to pay doctors and hospitals less than their costs of providing care — as Medicare and Medicaid do today.

This would push more costs onto private payers. Medicare, for example, underpays health providers by about 20 percent. Medicaid pays them even less, sometimes pennies on the dollar. Doctors and hospitals have to make up that difference somewhere, so they charge higher rates to everyone else. This “cost shifting” inflates insurance premiums by about $1,700 a year for a family.

A public plan would only make this worse. As prices go up, individuals and employers would have little choice but to drop their private policies and enroll in the government plan. According to an estimate from the Lewin Group, as many as 119 million Americans would shift from private insurance to a public option.

So much for Obama’s repeated promises that Americans wouldn’t have to change their plans if they were satisfied.

Grace-Marie Turner is president of the Galen Institute, a nonprofit research organization focusing on patient-centered solutions to health reform. She can be reached at P.O. Box 320010, Alexandria, VA 22320, or at turner@galen.org.

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Published in The Examiner, July 9, 2009

President Barack Obama has warned of “lost jobs, lower take-home pay, shuttered businesses and a lower standard of living for all Americans” if we don’t act immediately to overhaul America’s health sector.

Sounds scary. But even scarier are the proposals that he and other congressional leaders have put forward and what would happen to health care for the American people if they were implemented. Here are the six worst:

1 A mandate that individuals purchase insurance. Many lawmakers have suggested that we can control health spending only if the government requires every American to have insurance. But that means that government will decide what kind of health insurance we must have, how much we must pay, and what fines and penalties we will face if we don’t comply. And there would have to be an endless ocean of taxpayer subsidies to make the insurance “affordable.”

2 A “pay-or-play” mandate for employers. Employers would be forced to either pick up a substantial part of their employees’ insurance premiums or pay a tax. As businesses absorb this blow, jobs will disappear and workers will face lower wages.

3 A uniform, government-defined benefits package. Rather than letting individuals pick plans based on their own needs, the Obama proposal would require insurers to offer a minimum benefits package. Congress will soon see every special interest group — from alcohol-abuse counselors to chiropractors and acupuncturists — lining up on Capitol Hill lobbying to have its service included in the “minimum” package. Such mandated benefits at the state level have pushed up the costs of health insurance for people unable to afford Cadillac plans. Today, nearly 2,000 of these benefit mandates have been enacted in the states, and the Council for Affordable Health Insurance estimates that they drive up the cost of insurance by as much as 50 percent.

4 A national health insurance Exchange. Proponents of this approach say it would “streamline the purchase of health insurance” by giving consumers one place to purchase government-approved insurance policies. In fact, it would be a vehicle for the federal government to get into the business of sweeping regulation of health insurance that inevitably would destroy choice and innovation.

5 Comparative-effectiveness research. Thanks to $1.1 billion in funding in the stimulus package, the federal government is supporting research to assess how different medical treatments stack up against one another. Sounds reasonable enough. But in other countries, such research is used by cost-conscious bureaucrats to restrict treatment options. And that’s exactly what could happen here. As House Appropriations Chairman David Obey, D-Wis., admitted earlier this year, drugs and treatments “that are found to be less effective and, in some cases, more expensive will no longer be prescribed.”

6 A new, government-run health insurance plan. The White House and leading congressional Democrats are determined to create a government-run health insurance plan to compete against private insurers. They claim that this “public option” would play by the same rules as private plans.

Americans shouldn’t buy it. A government option will inevitably become subject to politics and special interests. Lawmakers will be tempted to grant the government plan unfair advantages over its private counterparts, including giving it authority to pay doctors and hospitals less than their costs of providing care — as Medicare and Medicaid do today.

This would push more costs onto private payers. Medicare, for example, underpays health providers by about 20 percent. Medicaid pays them even less, sometimes pennies on the dollar. Doctors and hospitals have to make up that difference somewhere, so they charge higher rates to everyone else. This “cost shifting” inflates insurance premiums by about $1,700 a year for a family.

A public plan would only make this worse. As prices go up, individuals and employers would have little choice but to drop their private policies and enroll in the government plan. According to an estimate from the Lewin Group, as many as 119 million Americans would shift from private insurance to a public option.

So much for Obama’s repeated promises that Americans wouldn’t have to change their plans if they were satisfied.

Grace-Marie Turner is president of the Galen Institute, a nonprofit research organization focusing on patient-centered solutions to health reform. She can be reached at P.O. Box 320010, Alexandria, VA 22320, or at turner@galen.org.

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About the author