Real healthcare reform: Get government out

October 27, 2009 in Economy
Tags: constitution, debt, healthcare, obama, pelosi, regulation

The push for healthcare reform has caused a heated political debate this summer. It has become so contentious that people have begun to angrily protest town hall meetings held by congress members. Speaker of the House Nancy Pelosi went as far as to say that the protestors are “un-American.” Since these protests began, a plurality of the American people became opposed to the bill currently in Congress (Rasmussen). Not because of misinformation, but because it is a bad idea.

As the federal government sits on a giant mountain of debt, upwards of $12 trillion, it would be irresponsible for them to take on even more massive programs. President Obama claims the cost of the healthcare bill is around 1 trillion dollars, but actual costs for Medicare were nearly 100 times more than initially predicted. The bill imposes billions in more taxes for the wealthy, which will inhibit job growth. Obama’s advisers did not rule out increasing taxes on the middle class to pay for the reform. Even with the sharp tax increases, the plan will still add $230 billion to the deficit according to the Congressional Budget Office or CBO. A budget deficit of this size is unsustainable and will cause inflation, higher interest rates and 20 percent lower economic output (CBO).

Being proposed is a public option, which would essentially be a government run insurance company. The problem with the idea resembles the problem with Medicare, that without the drive for profit the public option would not be efficient in spending, and it would not need to innovate. The public option would likely have price controls as Medicare does. This means that the government can decide what it will pay for services and drugs. Empirically the price controls on Medicare have driven up the price of the services for private insurance. Ultimately, the public option will lead to a crowd out of private insurance because the government can artificially lower its cost and raise the cost of private insurance. And quality will be suppressed, as it is with Medicare patients who generally have worse outcomes than those who have private insurance. Price controls also lead to denial of service, as about a third of patients on Medicare have a hard time finding treatment.

The healthcare reform bill will mandate employers with payrolls over $250,000 a year to provide health insurance to all of their employees. This will lead to lower wages as employers offset the extra cost and more unemployment particularly for low-skilled workers who will not be hired because of the added burden of providing health insurance. The government will require a minimum amount of insurance be provided, even if it isn’t needed. This will eliminate low-cost insurance and only squander more wealth. In the status quo the government wastes a third of the money put into health care because it doesn’t know how to direct each individual’s money, only that individual does. If this plan passes, the problem of wasted money will be exacerbated because of more centralized control.

Also being debated is an individual mandate, which means that every individual by law must have health insurance. Massachusetts has this mandate in addition to the employer mandate and the cost of health insurance is increasing at twice the national average.  Waiting times have gone up significantly and the amount of doctors willing to provide care has gone down. The insurance subsidies they provide for the middle and lower class have blown out the budget, and legislators are threatening to cut reimbursements to doctors, which will only lead to more denial of service.

This doesn’t even mention the fact that the bill is unconstitutional. It is a clear violation of the Tenth Amendment. There are things that the government can do such as lifting regulation that prevents buying insurance across state lines. This wouldn’t cost any money and could bring down costs enough to allow 17 million people to become insured. The plan in congress will cost trillions of dollars, decrease the quality and supply of services and stifle economic growth.

This bill is not consistent with the idea that Americans are free people. Coercing people to buy health insurance is un-American, not protestors, as Nancy Pelosi would like to think. Excessive government regulation and intervention created the healthcare problem. Instead of the more failed government involvement, we should try real change. Get government out.