On Health Care, Obama's Dirty Secret

Originally Posted At The National Review
By Rick Lowry
June 26, 2009

Pres. Barack Obama knows health-care policy. Give him an hour and a half to hold forth, as ABC News obligingly did at a town-hall meeting, and he will invariably impress with his fluidity.

This makes it all the more remarkable that he often appears unable to understand how his health-care program threatens private insurance. At a recent press conference, Obama argued that the very notion of it doesn’t compute: “If private insurers say that the marketplace provides the best-quality health care, if they tell us that they’re offering a good deal, then why is it that the government — which they say can’t run anything — suddenly is going to drive them out of business? That’s not logical.”

This is exceptionally brazen sophistry. Private insurers are at a disadvantage vis-à-vis the federal government because they don’t have the power of the government to dictate prices to doctors and hospitals. That’s what Medicare does, and why it pays less for health services than private insurers.

Surely Obama understands the competitive advantage that this confers on the government. If the public option in ObamaCare underpays providers in a similar fashion, it will charge cheaper premiums than private insurance. Employers will dump their employees into the public plan, and a massive “crowding out” will occur. The respected health-care research firm The Lewin Group estimates as many as 119 million people could migrate from private insurance to the government plan, whether Obama considers it logical or not.

Since Medicare doesn’t pay hospitals enough to cover costs, they have to make up the expense by charging more to private insurers. According to Lewin, as Medicare hospital payments declined from 95 percent of costs in 2003 to 91 percent of costs in 2007, private-payer rates steadily increased. A massive new government plan that doesn’t pay its own way will augment this cost shift, making private insurance more expensive still and sending ever more people into the arms of the government plan.

ObamaCare, then, could unravel the entire private system very quickly. And in Obama’s telling, it all would have been a strange accident of fate. All he wanted to do was reduce health-care costs, and lo and behold, he ended up with the Canada-style system no one thought politically possible. What dumb luck.

Since some 80 percent of Americans are satisfied with their health care, Obama must minimize the risk to them. This is why one of Obama’s signature lines — almost up there with hope and change — is the promise that anyone who wants to keep his health insurance can do so. “If you like your health-care plan, you’ll be able to keep your health-care plan, period,” Obama said in his speech to the American Medical Association. “No one will take it away, no matter what.”

This stark language is becoming less sustainable, though. According to the research group HSI Network, the version of ObamaCare currently before the House Ways and Means Committee would cover most of the country’s 47 million uninsured, but at a cost of $3.5 trillion over ten years and while crowding 64 million people out of private insurance. Obama wants to pretend that getting to universal coverage is an essentially costless, win-win proposition, when it will come at enormous expense and disrupt the insurance of millions of Americans happy with their health care.

Asked at his press conference about his frequent reassurances that people will get to keep their current insurance, Obama reached for wiggle room. He explained that the government won’t “make you change plans.” Well, one is thankful for little things. But Obama implicitly left open the possibility that his reform will tilt the system so that employers, on their own, unload their coverage. Which is exactly the problem, and why Obama’s reform threatens private insurance.

Only if Obama successfully obfuscates this point will he get his public option. Otherwise, the chances of his big-bang change to the American health system radically diminish.

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