Sunday, December 28, 2008


To hear the media tell it, comprehensive health care reform is a done deal. Democrats control both ends of Pennsylvania Avenue. Business, labor and the insurance industry are on board. The lion has lain down with the lamb.

In reality, reform could crater for the same reasons it did in 1994: The leading Democratic plans include radical changes that would tax and disrupt the health care of millions. With a minimum price tag of $120 billion, universal health insurance coverage will require taxing the middle class during a recession, further expanding a $1 trillion deficit, or having the government deny medical care to patients. An estimated 30 million Americans would lose their current coverage under Barack Obama‘s plan. Millions could lose established relationships with their doctors.

Today’s love-fest will quickly descend into a bloodbath once the lions make their intentions clear.

The carnage would mount over time. The leading plans would cost lives by effectively nationalizing health insurance and impeding innovations that make medicine better, cheaper and safer.

Republicans, centrist Democrats, and independents must protect Americans from the worst elements of those proposals. That means drawing three lines in the sand. Any proposal that crosses one of the following lines should be stopped. Not watered down. Not enacted and fixed later. Killed.

(1) No government-run health care for the middle class.

Echoing the Left’s rallying cry of “Medicare for all,” Mr. Obama proposes a Medicare-like option for everyone under age 65. Others endorse variants on that theme.

Medicare is an unwise model for reform. When private health plans and providers try to meet the glaring need for electronic medical records, coordinated care, and medical-error reduction, Medicare’s change-resistant payment system punishes them for doing so. That discourages innovation and costs lives.

The average family of four pays $5,200 in taxes to fund Medicare, only to have Medicare waste one third of it (about $1,700) on services that do nothing to make seniors healthier or happier. That’s a pure income transfer to providers of $150 billion - roughly the entire economic output of South Carolina. Diverting those resources from more productive uses, such as covering the uninsured, costs lives.

The Left’s plans could cost additional lives by letting government bureaucrats decide who gets medical care. Merely providing current-law benefits under Medicare and other programs will require Congress to double income taxes by midcentury. Since Americans are not likely to tolerate rates that high, at some point Congress will be forced to limit Medicare spending.

The Left’s idea of limiting Medicare spending is to have bureaucrats tell Mom she cannot have the cancer treatment she wants. Obama & Co. propose taxpayer-funded research that will help Medicare do just that. Expanding government health programs will hasten the day that government rations medical care to seniors.

Finally, a public plan would pay providers less than private insurance. Patients switching to public coverage may therefore find that their doctor can no longer see them, just as Medicare enrollees are having an increasingly difficult time finding primary care physicians.

(2) No mandates.

You cannot improve a bad product by forcing people to buy it. But you can make it worse. Mandating that people purchase health insurance - on their own or through an employer - will increase its cost and oust millions from their current source of coverage.

Mr. Obama’s employer mandate could force 80 million Americans to switch from their current health plan to a more expensive one, threatening their current source of care. Premiums would climb further as providers and other special interests demand that Congress mandate coverage of their services. As premiums rise, more people will require government subsidies to comply with the mandate.

(3) No price controls.

Price controls have failed in every application throughout history, including health insurance.

Economists find that free markets provide secure health insurance to lots of sick people, and that forcing insurers to charge the same premiums to healthy and sick people offers no improvement. Instead, such premium controls encourage insurers to avoid the sick, and encourage healthy people to avoid insurance altogether.

Premium controls may even cost you your health plan. In the health insurance “exchanges” of the federal government, Harvard University and the University of California, premium controls forced carriers to eliminate comprehensive insurance options.

Taken together, mandates and premium controls would effectively socialize private health insurance. They would eliminate both low-cost and comprehensive insurance options, and slowly march everyone into a narrow range of health plans. If government controls the decision to purchase, what you purchase, and the price, that is government-run health care.

Holding the line against socialized medicine won’t be easy, but it can be done. Blocking new public programs will be easiest thanks to industry opposition. According to one report, “Hospitals and doctors fear another public program would reduce what they are paid, as Medicare and Medicaid have done. Insurers worry they could lose customers to the government.”

Mandates and price controls will be harder to stop, since the industry and certain struggling employers would love to use those measures to hurt their competitors or otherwise pad their bottom lines. The health insurance lobby, for example, is all too happy to force you to buy health insurance.

Fortunately, opponents have many arrows in their quiver. Mandates are anathema to most employers. Working families will resist being ousted from their current health plan and forced into one that’s more expensive or that won’t let them see their family doctor. Mandates would give Congress the power to force Americans to fund contraception and abortion, which will mobilize social conservatives.

The Left has been adding arrows to the quiver, too. Mr. Obama himself attacked Hillary Clinton for wanting to “force uninsured people to buy insurance.” His prospective National Economic Council chairman, Larry Summers, describes employer mandates as “disguised tax and expenditure measures” that increase unemployment, work against the very people they purport to help, and expand the size of government. Obama campaign adviser David Cutler documented the effect of premium controls on coverage choices at Harvard.

The most important arrow in the quiver may be the self-interest of the Republican Party. Bill Clinton demonstrated that the most effective way to block tax cuts is to paint them as an assault on your health care. Twenty-eight percent of Americans already depend on government for health insurance. If that share grows, whether through government programs or subsidies for “private” coverage, we can start writing obituaries for the party of tax cuts.

An intolerable status quo is no excuse for making things worse. The center-right needs to mobilize now to stop left-wing Democrats from taking another large leap toward socialized medicine.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of “Healthy Competition: What’s Holding Back Health Care and How to Free It.”

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