Obama's Health Care Plan

I wrote about three big health care fallacies here.

If I were to summarize the Obama Health Care reform plan, it would be that he wants to create a "public option," or a public insurance plan, that would essentially compete with private plans and put downward pressure on health care costs. The president is correct that competition would put downward pressure on prices. The president is wildly incorrect that his plan would do that.

Ezra Klein, over at the American Prospect, has written some interesting defenses of Obama's "public option" plan here:

Moreover, public insurance is simply more efficient. Medicare holds costs down better than private health insurance. The substantially public systems employed by every other industrialized nation cost less and cover more than the American model. So the question became how to marry the policy need for public insurance with the political need to preserve the status quo.

Arnold Kling, the free-market economist who writes over at the Library of Economics and Liberty, makes the case against the theory behind the public option, but not necessarily the public option itself:

Getting people to reduce their use of medical services is the spinach of health care reform. Expanding insurance coverage is the dessert. The Democrats want to enact dessert now, and worry about spinach later. For the dessert part, they want no Republicans involved. Down the road, when they are ready to tackle the spinach part, they will press for bipartisan cooperation and statesmanship from Republicans.

Readers can troll around the Internet and political journals and find some pretty good stuff out there. For the record, I find the idea that a public option that competes with private plans to keep health care costs down is colossally stupid. Here are some reasons why:

• 1) The American Left's overarching faith that the government can do anything well---besides fight was and build roads--is beyond laughable. Why on earth would anyone want the same people who run the post office to be a major player in the insurance market?
• 2) Expecting the government to provide a service efficiently is equally inane. Democrats have been all over the idea of expanding Medicare, Medicaid, S-CHIP (State Children's Health Insurance Plan), and every other entitlement, for that matter. Leave aside for the moment that we, as taxpayers, can't even afford these programs in their current state. Medicare and Medicaid are sodden with horrendous fraud---an NPR article mentions the per annum Medicare fraud number at around $35 billion. That's JUST Medicare...!!!! In New York State alone, Medicaid fraud was $5 billion (note that Medicaid is a state program that bills the federal government, not technically a federal program) out of its $50 billion dollar budget.
• 3) A public insurance option is going to work like most other government services providers: it uses the coercive power of the state to hold down prices. But, as they say, there is no such thing as a free lunch. Will doctors, hospitals, and other health insurance providers happily accept the lower prices? Will they continue providing the same level of care at a lower price? My guess is no. The government will be forced to ration services---deny services, reduce supply---at all levels, as they do in European countries. Is this what we want?
• 4) What will happen to private plans if they are forced to "compete" with a public option that can hold prices below-market? Will that lead to increased competition or less? Economists have described a phenomenon called "crowding out," whereby a substantial increase in the public sector--taxes, investment, etc.---leads to a gradual phasing out of the private sector. In this scenario, private plans will be forced out of the market because of the decreased profit-potential (the Left sees this as a good thing) and the net effect of this will be more enrollees on the public plan. Competition will decrease: fewer insurers in the market place will mean less downward pressure on health care costs. Americans would leave private insurance coverage in droves and flood the public option. The costs of the public option will skyrocket...and...tah-dah! We'd have another entitlement we can't pay for!

Professor Greg Mankiw comments on the public option here:

If advocates of a public plan want to start a nonprofit company offering health insurance on better terms than existing insurance companies, nothing is stopping them from doing so right now. There is free entry into the market for health insurance. If a public plan without taxpayer support would succeed, so would a nonprofit insurance company. The fundamental viability of the enterprise does not depend on whether the employees are called "nonprofit administrators" or "civil servants."


On Monday, President Obama met with doctors' groups, most notably the American Medical Association, to try and cajole them...or is it coerce them...into supporting his plan. Obviously his is going to need doctors to actually PARTICIPATE in the public option, so that Obama's wet dream of universal health insurance will be achieved. In his usual style of horse-trading, Obama offered this carrot to the doctors:

Obama Open to Reining in Medical Suits

The American Medical Association has long battled Democrats who oppose protecting doctors from malpractice lawsuits. But during a private meeting at the White House last month, association officials said, they found one Democrat willing to entertain the idea: President Obama.

In closed-door talks, Mr. Obama has been making the case that reducing malpractice lawsuits — a goal of many doctors and Republicans — can help drive down health care costs, and should be considered as part of any health care overhaul, according to lawmakers of both parties, as well as A.M.A. officials.

It is a position that could hurt Mr. Obama with the left wing of his party and with trial lawyers who are major donors to Democratic campaigns. But one Democrat close to the president said Mr. Obama, who wants health legislation to have broad support, views addressing medical liability issues as a “credibility builder” — in effect, a bargaining chip that might keep doctors and, more important, Republicans, at the negotiating table.



HAHAHAAHAHAA! Whoo! Sorry about that. To think that liberal Democratic president who is a lawyer by trade and who has accepted beaucoup amounts of campaign cash from Trial Lawyers groups would dare come close to slaying the plaintiffs lawyers' golden goose requires the willful suspension of disbelief.

Nevertheless, Obama has shown a remarkable ability to adjust his positions, e.g. Guatanamo Bay, military tribunals, taxing health benefits, so I kept an open mind with this one.

Full disclosure: my father is a neurosurgeon and has been dogged by bullshit lawsuits for much of the last two decades. I make no secret about my disdain for frivolous lawsuits, especially against doctors.

Well, sure enough....my instincts proved to be correct. Obama was SOUNDLY BOOED at a the meeting. He evidently waged a full-scale retreat on the on issue of reining in lawsuits against doctors:

For all the young president's popularity, the response he got Monday from doctors at an American Medical Association meeting was a sign his road is only going to get rockier as he tries to sell his plan to overhaul the nation's health care system.

The boos erupted when Obama told the doctors in Chicago he wouldn't try to help them win their top legislative priority—limits on jury damages in medical malpractice cases.

But what could they expect? If Obama announced support for malpractice limits, that would set trial lawyers and unions—major supporters of Democratic candidates—on the attack. Not to mention consumer groups.

At some level, one has to give the President some credit. He could have very easily pandered to the A.M.A and told them he would slap limits on non-economic and punitive damage awards, and then done the opposite---you know, like he normally does. But I think we might be seeing the beginning of the end for Obama's health care agenda. Tyler Cowen thinks so too:

Wow, that was quick

Democrats on three House panels continue to meet privately to seek consensus on a single plan. Democrats on the House Ways and Means Committee said they were trying to decide whether to finance coverage of the uninsured with one broad-based tax, like the value-added tax, or a combination of smaller taxes.

The article is here. I wasn't expecting that for years to come. From my distant perch out here in Fairfax (and Arlington), I believe this means health care reform is falling apart. It means the unions won't let them tax health insurance benefits and the C.B.O (Congressional Budget Office) won't let them punt on the issue of finance.

Comments Please!!!!!