When he stands before Congress tonight, the president will almost certainly replace his demand for an immediate “public option” (government-provided insurance plan) with endorsement of a so-called “trigger.” Under his new plan, failure of health insurers to reduce their rates in some period – probably five years – will “trigger” a public option. His implication will be that insurers control health costs and that their greed and ineptness are the primary sources of health cost inflation. In this, the president is wrong.
A numerous economists have pointed out, government policies and programs have created inflationary pressures in health care marketplaces ranging from pharmaceuticals to physician services to insurance itself. But most have special interest groups backing them, and some of those groups are major supporters of the president and his party. To know if Mr. Obama understands the essential economics of controlling health cost inflation and is prepared to act, listen for the following as he speaks:
- Competition: The president has repeatedly said that he wants competition in the market for health insurance. This is why, he has said, he embraced the public option. So does the president endorse allowing any policy that is approved in one state to be sold in all states? Such a move would instantly create a vibrant, national health insurance market with a thousand or more players, a much more potent inducer of competition than any public option ever could be. As of now, our national health insurance market is stuck in the days of the Articles of the Confederation, that is, we have no national market. A policy sold in one state may not be sold in the next without the second state’s approval – which has produced in the health insurance market the same kind of crisis that all of commerce experienced in the days of the Articles. Ending intra-national commercial isolationism was the purpose of the Constitution in the first place. But the Constitution’s writ has not extended to the health insurance marketplace. States have written extensive and expensive regulations governing coverage. In some states these mandates include hair transplants and sex change operations. The result has been vast state-by-state differences in insurance prices. But every one of those thousands of state-level regulations favors one special interest or another. Does the president have the courage to take all those special interests on?
- Choice: The president says he wants us to be free to choose what is best for us. Tonight, does he embrace opening the door for us to own our own insurance? This would mean giving individuals the same tax breaks when buying health coverage and services that employers receive, so that taxes don’t make buying policies ourselves prohibitively expensive. Many unions oppose this move. Among their reasons: group health insurance is something they have traditional negotiated for their members. If the members begin choosing coverage for themselves, they will need their union all that much less. Will the president say no to this core Democratic Party constituency?
- May we decide value for ourselves: Because of tax policies that virtually mandate buying health coverage through employers, health coverage today is not purely insurance coverage. Policies also include an expensive element of prepayment for normal services, for example doctor visits and routinely prescribed medicines. The result is that most of us never get to see the prices of the services we receive, denying us a clear way to gauge value. Market economists agree that the lack of consumer power to demand value has kept our health care markets from producing the same increases in productivity that the rest of the economy has experience. Will the president embrace expanded health savings accounts, which would fix this problem? HSAs have proven popular, but again, for the same reason as before, the unions don’t like them. Again, will the president take this special interest group on?
- May we decide if we are in or out: The president wants to see all Americans receive a health insurance policy. Never mind that after taking out those who Medicaid already covers but who haven’t applied, and those with incomes $60,000/year and up, and those who will be without coverage for only a few months, and those who are young and healthy and don’t want coverage, and those who are in the country illegally, and those who simply misreported their lack of coverage to Census Bureau questioners… in other words those who are without coverage for only a short time, can get and pay for it but don’t want it, or whom we wouldn’t cover even with a public plan, we are approaching universal coverage today. But if the government mandates buying something, it must define what must be bought – and that would be an open door to Congress to do exactly what the state legislatures have done… pile requirement on top of requirement, driving up the cost of health care and health care coverage. Will the president drop the call for employer and individual mandates?
- May we stop paying lawyers when we pay our doctor: Everyone knows by now that medical liability reform is would bring down health costs. No one believes that trial lawyers should have a piece of each payment to our doctor, though through liability premiums effectively they do now. But trial lawyers are historical supporters of the president’s party. They oppose reform. Will the president tell them they are wrong?
Despite the rhetoric, America does not have a “health care system” as such. It has numerous health care markets. Antiquated or misguided government policies have driven prices up and quality down in many of those markets. Tonight, will Mr. Obama signal whether he is brave enough to trigger an end to those policies, even though when he starts to pull that trigger, powerful special interests are sure to shoot back?