The High Cost of Health Reform

WASHINGTON-Last night, speaking about the health "reform" bill to ABC's Charles Gibson, President Obama declared, "If we don't pass it, here's the guarantee....your premiums will go up, your employers are going to load up more costs on you. Potentially they're going to drop your coverage, because they just can't afford an increase of 25 percent, 30 percent in terms of the costs of providing health care to employees each and every year. "

But even without a public plan and a lower Medicare age eligibility, the bill would limit Americans' choice of plans, increase the cost of care, and discourage people from signing up for insurance. The Congressional Budget Office estimates premiums would rise by about 50% under health "reform" by 2016.

Granted, the final bill, as of this writing, is not available for analysis. It is being shaped by a small group of senators, out of public view. Despite promises from the Democratic leadership to have the bill online-open to the scrutiny of the voters-for 72 hours before a vote, the Senate could well vote on a bill that few senators and ordinary Americans have had a chance to read.

The main announced provisions of the Senate bill would make the U.S. system of health insurance unsustainable. If enacted, it would likely lead eventually to a single-payer government plan nationwide, with private care only available for a privileged few.

Insurance would have to be "comprehensive." The first major problem with the health "reform" bills is that the insurance that would be offered by employers and through the new federal health exchange would have to be a generous, costly, comprehensive plan-as defined by Congress-covering services that many do not need or want.

Since most people will have tax incentives to purchase health insurance only through the exchanges or through employers, it will be practically impossible for other plans to be offered to the public.

It's one thing to mandate that everyone has basic insurance against major, unexpected, catastrophes. It's quite another to require Americans to have broad insurance covering routine health care that is predictable and can be paid for out of pocket.

The bills require that everyone purchase insurance, with no copayments, for annual checkups and certain other preventive services, coverage for mental health and drug addiction, and dental and vision care for children. Many people, especially young adults, don't need such broad, expensive coverage.

The Congressional Budget Office estimates that the expansion of the benefits package would raise the cost of premiums from an average of $4,824 for singles and $13,375for families to $7,800 for singles and $19,200 for families who get insurance through small businesses in 2016. For singles and families getting insurance through large benefits, premiums would rise to $7,300 and $20,100 respectively.

This increase could be avoided if people were permitted to choose a minimal, instead of a comprehensive plan. Then insurance companies could compete to offer lower-priced plans, possibly in combination with tax-free accounts for routine care, encouraging people to shop around for lower-priced services.

Insurance companies would have to cover anyone. Another factor that would drive up premiums is the requirement that insurance companies cover everyone with a narrow range of premiums, no matter how sick. The result would be to shift premiums from older to younger people.

Not only would people have less incentive to keep themselves healthy, but they would have no reason to sign up for the already-expensive insurance, opting to pay Congress's modest, proposed penalties, and sign up only when sick. So the pool of insured people would be weighted towards the sick.

The Senate penalty, $750, is mild compared to the cost of premiums. In the House bill, the penalty is 2.5% of income, up to the cost of the plan, but this fee is waived for those who cannot afford it. It would be rational for many, and not just low-wage earners, not to sign up until they were sick, further raising the cost of care.

Health reform is costly, and would add to the federal deficit. The White House already predicts that debt as a percent of GDP will reach 76% in 2019, and health reform will make our deficits even larger.

Health "reform" would be funded by some combination of new tax increases, either on expensive health plans or on income, and Medicare spending cuts, totaling $493 billion in the Senate bill and $571 billion in the House bill. These Medicare cuts are never going to take place, and so health reform would be another contribution to the rapidly-growing deficit.

Congress has consistently broken its own laws on cuts for Medicare. Since 2002, Medicare reimbursements to physicians were supposed to be reduced, but each time Congress has passed laws nullifying the cuts because reducing payments is unpopular. Meanwhile, Medicare received $198 billion from general revenues last year, a rising trend. The idea that Congress will cut Medicare reimbursements is implausible.

Comparative effectiveness boards would stifle innovation. Both bills rely on boards of doctors that would recommend drugs and procedures based on cost effectiveness. The way this works in many other countries is that certain drugs are permitted and others are not. This would discourage the development of differentiated drugs that are tailored to small numbers of patients, worsening America's international competitiveness in the fields of medical devices and pharmaceuticals.

Faced with declining approval ratings, Mr. Obama is twisting the facts to scare the Senate into voting for health "reform" and the public into backing it. But the steadily-dwindling support for the proposed bills shows that Americans aren't fooled.