Reviewing the Health Overhaul Bidding | HughHewitt.com | 11.09.09

Let’s review the bidding now that Obama/Pelosicare has passed the House.

As reported here two weeks ago, according to one of the nation’s leading experts on the federal budget, former OBM deputy director and Hoover Institution economist John Cogan, by mid century without the president’s agenda, the federal spending including Medicare and Medicaid are on track to consume 34 percent of national income.

With the president’s program, that number will jump to 60 percent.  Cogan noted that the peak year for U.S. government spending as a percent of GDP was in World War II, when it hit 40 percent for one year.  We are, as he said, entering uncharted economic and fiscal territory.

It doesn’t have to be this way.  There are inexpensive, more effective health reform alternatives on the table.

The president points (correctly) to the need for greater competition among health insurance providers?  But lack of competition is a result not of market failures but state government mandates.  The answer isn’t a fabulously expensive public option.  It is to legislate that an insurance plan that is approved in one state will be salable in all. Instantly you would solve the one-state-few-competitors issue.  And you would introduce competition between the states.  National competition would force states to determine which of their mandates is truly necessary and which is a payoff to special interests. Do the people of Massachusetts really need every health policy to include in vitro fertilization? No wonder they have among the nation’s highest insurance prices.

The president points (again correctly) to the pace of health care inflation generally.  But as economist from Milton Friedman on have noted, health care inflation in the U.S. is a result of breaking the link between the payer of services and the receiver of services—and this, too, is a result of government policies, in this case tax policies.  U.S. tax law heavily discriminates against those who buy health insurance or health care services on their own.  The tax breaks for buying through your employer make other options prohibitively expensive.  So level the playing field.  Give individuals the same breaks that their places of work receive.  The result would be instant pressure on all providers to increase productivity – and stagnating productivity is the central problem in our health system.

But the House has passed a bill that does nothing to reduce mandates (just the opposite, they’ll add a federal layer), nothing to create a national market for health insurance, and nothing to give individuals control over their own health plans.  It does however mandate personal spending that can rise as high as 20 percent of income (see here: http://tinyurl.com/yggstf ).

Here is where it comes down.  The House bill is built on the same social democratic model as Medicare.  When that program was passed in 1966, the House Ways and Means Committee estimated that by 1990 it would cost $12 billion.  The actual number was $107 billion (see here: http://tinyurl.com/yac7tg9 ).  Before the current administration took office, among Washington’s great worries was that the program’s unfunded liability (now running over $74 trillion, multiple times larger than our deficit) would bankrupt the nation.  So in what the president’s budget back in February termed “A New Era of Responsibility,” the House of Representatives proposes to layer on top of that program a new and vastly more expensive program.

We all have our favorite explanation for what has made the Democrats in Washington go mad.  Power crazed ideology?  As the president says, a chance like this comes along only once in a generation.  Good thing, too. Otherwise we’d already be asking other countries for foreign aide.  Or is it putting special interests before public interest?  The public employee unions wouldn’t accept anything that would reduce the need for their members staffing state regulatory authorities.  Pick your poison.

Whatever the reason, the consequences are serious.

Consider this: George Washington and Alexander Hamilton created in the United States government the world’s most credit worthy entity. With that legacy, we bought Louisiana, built the national roads and harbors that allowed the opening of the Midwest, won the Civil War, provided more national roads and waterways to support industrialization, and in the past century won World War I, World War II, and the Cold War, saving civilization not once but twice.  And because we saved civilization, freedom has reached more of the world than ever before in history, and, according to the World Bank, the number of people living in extreme poverty around the globe is on track to fall to fifty percent of its 1990 level by 2015 (see: http://www.worldwatch.org/node/6269 ).

It is not too much to say that Congress’ coming health care votes will be not just about whether we reform America’s health care and health insurance markets foolishly or intelligently.  They will also be about whether we preserve George Washington’s legacy for the generations to come.