Join us for debate at our Facebook Group, Liberty Cafe!

Wednesday, July 22, 2009

Top Five Myths Concerning a Market-Based Approach to Healthcare – “Obamacare” Part II of III

Part one of this column focused on criticisms of the Obama Administration’s Plan. This part will focus on dispelling the myths of a decentralized, free market approach, which should be the solution to providing affordable health care. The last and final part of this column (to be published next week) will elaborate on why a free market solution should be sought.

President Obama will address the nation in another press conference this evening urging the nation to back his health care proposal. It is very likely that he will continue to preach the same old, tired talking points in an effort to win support. The public is beginning to catch on, as support for Obama’s health care plan is steadily declining.

My columns are not meant to predict the future by any means, but it might be safe to say that at least two of these common myths will be discussed by the President this evening.

Myth Number One: Those who oppose Obama’s plan are in denial of the fact that America’s health care system needs reform and accept the status quo.

This statement could not be further from the truth. Politicians (including a growing number in the Democrat Party), columnists and economists who oppose the President’s plan have never said that the health care system is not in need of reform. Instead, they oppose a big-government, centralized solution.

Myth Number Two: More government control in the health care system is needed because insurance companies have “run-away profits” and are gouging the consumer.

Even Fox News’ Bill O’Reilly emphasizes this falsehood on a regular basis in his “talking points memo.” Leftists such as Michael Moore tout France’s system – a country he suggests the United States emulate. Perhaps Mr. Moore is onto something. The eye-opening fact that no one discusses is that France’s private health insurance market is less regulated than the United States. How so? Regulations in America come from both the Federal and State level. Many states in America require community ratings and/or put limits on premiums whereas private insurance in France is mostly experience rated. There are no regulations that specify what benefits must be included in coverage. Regulation from the U.S. Congress and state governments have gone as far as dictating which drugs doctors can prescribe and the dosage of medication that can be given. The health care market is one of the most regulated markets in the nation.

These types of strict mandates are solely responsible for driving up the cost of coverage. According to the Council on Affordable Health Insurance, state government mandates (mandates that prescribe everything from the treatments private insurance must cover or additional services they must add) can increase the cost of health insurance sold in the individual market by 20 to 50 percent, depending on the state and the mandate. In its annual survey, the group counted more than 1,900 benefit mandates in 2008. (1)

Therefore, the pundits have it backwards – more government regulation in the health care market INCREASES costs for consumers.

Myth Number Three: The free market health care system has failed the American people. Anyone who espouses such a system is obviously “in bed” with the insurance companies and not on the side of the hard-working American people who see their health care costs skyrocketing.

This is a very easy liberal talking point to debunk. America’s health care system is NOT free-market based! The dispelling of the penultimate myth is proof. The U.S. system is the furthest thing from a market-based system. Fifty cents out of every dollar paid for health care comes from the GOVERNMENT. (2) Since World War II, the health care market in the U.S. has been a hybrid system that utilizes very few free market principles and massive government intervention in most areas. The outcome has been an inefficient bureaucratic mess.

Centralized health care planners enjoy accusing advocates of a free market approach of being “in bed” with the insurance companies. However, is it the other way around? The answer can be found by tracing the history back to 1939 – the year of the inception of “The Blues” – Blue Cross and Blue Shield. Hospitals created Blue Cross and doctors started Blue Shield shortly thereafter. Under pressure from hospital and physician organizations and with the help of politicians, “The Blues” were able to win competitive advantages from state governments and special discounts from medical providers, which is how they and subsequent major insurance companies gained a MONOPOLISTIC position. Once these giant companies were able to gain most of the market share, the medical community could refuse to deal with other commercial insurers (which would have provided competition to lower prices) unless they adopted the practices followed by “The Blues.” Even the government’s Medicare and Medicaid plans are modeled after “The Blues.”

Those who support a decentralized system wish to end the monopolistic control of large insurance companies and force them to compete, which would play a significant role in lowering costs for the consumer. A decentralized system would also end the practice of state health insurance mandates. The federal government, through the "Health Care Choice Act," would allow health insurance to be sold across state lines. Through existing federal law, states could open their own markets to competition. In New Jersey, with the highest insurance rates in the country, this has just been done. If it were done in Illinois, a family living in Chicago, for example, could save upwards of $3,000 per year if they were able to buy their insurance in Iowa. (3)

In 2008, President Obama opposed the Health Care Choice Act. (4) Why would Obama oppose a measure that forces the insurance companies to compete and provide several low-cost options to the consumer? Insurance companies also oppose this measure. Why would they want to give up their monopoly? This action leaves one to wonder who is “in bed” with the insurance companies and whether this entire debate is not about care of hard-working Americans and more about power and control.

Myth Number Four: America is in a “health care crisis.” Immediate action is needed.

Rahm Emanuel says “you never want a serious crisis to go to waste.” Translation: when the government wishes to fundamentally restructure a major sector of the economy in which it stands to gain great power, it is best to sell it under the guise of protection when the public is too panic stricken to object. Power-hungry authoritarians have always sold their ideas at times when the public can be misled into thinking that personal choice and deregulation cause chaos in the market and that centralized planning best manages systemic risk which maintains economic stability. However, government power grabs quickly lose public support once the public realizes what these measures entail.

President Obama campaigned on transparency. In the first seven months of his presidency, transparency has meant ramming legislation through Congress without representatives reading the bill! A perfect example was the stimulus package that was passed earlier this year. The situation was too dire for Washington to play the usual political games. Immediate action was needed. This is the type of “change” in which America could be confident – the public’s elected officials passing legislation without reading it first.

The President has just recently admitted that he does not know all of the measures that are contained in the current health care bill. During a conference call with leftist bloggers, a blogger from Maine claimed Section 102 of the House health legislation would outlaw private insurance. He asked: “Is this true? Will people be able to keep their insurance and will insurers be able to write new policies even though H.R. 3200 is passed?” President Obama replied: “You know I have to say that I am not familiar with the provision you are talking about.” (5)

Myth Number Five: A government option provides more competition as it serves as a competitor to the private industry. Anyone who says this plan is a “back-door” government takeover of health care is simply not telling the truth.

Perhaps the President was confused by the question the blogger from Maine asked because he seems to be confused over the fact that the government can provide additional competition in the health care market.

In order to effectively break this point down, the following question must be asked: Can a private company with limited capital compete with a government plan that has access to a blank checkbook? Furthermore, if the government has the power to mandate and regulate a private company with limited capital, how can it compete? The answer is NO. A similar comparison would be a “mom and pop” shop competing with the likes of Wal-Mart. Just like the many well-intended government incentives of the past, the outcome is very different than the initial intention.

Since the U.S. Treasury gives Congress an unlimited supply of blank checks, the government can offer a lower price for its health care plan in the beginning in order to attract people towards the plan. After all, what is another trillion dollars added to the deficit at this point? Private insurance companies do not have access to such capital. In addition, if Obama’s plan is passed, the government will have even stricter control over what is to be included in the coverage. The end result will be many people dropping their private plan in favor of the government’s plan.

Moreover, the blogger in Maine had a very valid concern. There is a provision in the bill that restricts people from choosing a private plan should they lose their job. Page 16 of the now 1,018-page bill states the following: “Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day" of the year the legislation becomes law.” (6)

Obama’s insistence that Americans will be able to keep the coverage they have if they are satisfied is a half-truth because there are exceptions. Page 16 of this bill states that those who currently have private individual coverage won't be able to change it, and neither will those who are laid off or leave a company to work for themselves be free to buy individual plans from private carriers.

In summary, there is one question I would like to ask of everyone: who is better equipped to make decisions regarding your well being and the well being of your family – you or government bureaucrats? Do not be fooled by the notion that everyone will receive quality care simply because they required to purchase insurance. Countries that have national health care systems have very serious problems that include rising costs, rationing of care and lack of access to modern medical technology. Profits and market-based mechanisms, (words despised by authoritative leftists) are the key reasons why America has been the leader in innovative technology and quality care and NOT the reasons why people cannot afford care, as blame there is attributed to government intrusion.

(1) JP Wieske & Victoria Craig Bunce. "Health Insurance Mandates in the States 2008." Council on Affordable Health Insurance, 2008, p3.

(2) Regina Herzlinger. Who Killed Health Care? America's $2 trillion Medical Problem – And the Consumer-Driven Cure. McGraw-Hill: 2007

(3) Greg Blankenship. "Should Affordable Health Care Stop at the State Border?" Illinois Policy Institute. February, 2008.




No comments: