‘Reform’ still stinks
By SALLY PIPES
December 16, 2009
Yesterday, the Senate’s Democratic leadership blinked first in its showdown with Sen. Joseph Lieberman (I-Conn.). Desperate for the crucial 60th vote needed to pass their health-reform package, Senate leaders capitulated to Lieberman’s demands that the bill drop both the public option and a provision to let those aged 55 to 64 buy into Medicare.
But even without these two controversial proposals, Sen. Harry Reid’s reform package represents an unprecedented—and expensive—intrusion by the federal government into the health-care marketplace.
Take the “individual mandate,” which would legally require everyone to buy insurance starting in 2013 or face a fine. Proponents claim that such a mandate is necessary to draw young, healthy people into the insurance pool, and so help bring down premiums for the old and sick, many of whom may not be able to find affordable coverage—or so the argument goes.
If Congress is going to force everyone to get insurance, it should also do its best to make sure that policies are affordable. Naturally, the Senate package does the opposite. The Congressional Budget Office estimates that individual insurance premiums would be 10 to 13 percent higher under the Senate bill than in the absence of reform.
In New York, the situation would be even worse. One study (conducted using actuarial data from WellPoint, a large insurer) found that the average New York City family with two children would see its premiums jump 82 percent under the Democratic plan.
To address the public’s affordability concerns, the Senate would lavish billions in subsidies on people with incomes up to four times the poverty level, or $88,000 for a family of four. Senate leaders hope these subsidies will keep people from noticing that the reform package has increased the cost of their insurance.
Only in Washington could a measure that raises the price of insurance, requires everyone to buy it and then papers over the whole mess by throwing more public money into the system be considered “reform.”
Congress is also set to shovel more taxpayer dollars into Medicaid. Families as well as single, childless adults with incomes up to 133 percent of the poverty line (or $29,327) would become eligible for the government health-insurance program for the poor.
But Medicaid’s expenses are already spiraling out of control. In 2007, the program cost $338 billion. Within a decade, that number is projected to balloon to $717 billion.
Expanding Medicaid would also push up private insurance costs.
Medicaid typically pays physicians and hospitals less than it costs them to administer treatment. They compensate by charging privately insured patients more. In fact, low reimbursement rates from Medicaid and Medicare already increase private premiums by 15 percent. Those premiums will surely rise even more if Medicaid’s expanded.
The Senate is also intent on making drugs, medical devices and the like more expensive. The bill’s new “fees” are to force medical-device makers to cough up $4 billion, pharmaceutical companies $2.3 billion and clinical laboratories $750 million. These new costs will inevitably be passed along to consumers in the form of higher prices.
And the 40 percent tax on insurance companies offering “Cadillac” plans of $8,500 for individuals and $23,000 for families will be passed on to workers.
Public option or no, the Democrats’ plan is bad for patients and will still lead us down the path to a “Medicare for All” health-care system where government is the sole provider of our care.
Sally Pipes is president and CEO of the Pacific Research Institute. email@example.com