The Obama-Kennedy Health Care "Reform" 
By John McClaughry

Health care "reform" is at the head of the national agenda right now. President Obama and his Democratic allies make this case for "change:

"Americans are spending far too much for health care. That is because of waste and inefficiency among our health care providers. At the same time there are 45 million Americans without health insurance. Your government needs to wring the waste and inefficiency out of the system, curb unnecessary procedures and expenditures, promote behavioral changes to prevent illness, and use the savings to insure and where necessary subsidize the presently uninsured to. achieve universal coverage."

The straightforward way to achieve this lofty goal is to install, as Great Britain and Canada have, a single payer system. Obama says this is what he would do if starting from scratch.

"Single payer" means that all payments to medical providers for covered health care services are made by one single payer: the government, or one or more administrators contracted by the government. Everyone is included in the system. The funds required by that entity to make payments for services come from taxes.

The government determines which medical services will be covered for which patients, how intensively they will be provided, and how much the providers will be reimbursed for providing those services. The government prohibits any private health insurance coverage for medical conditions covered by the single payer plan.

Single payer systems rely upon the government's global budget to "control costs". The global budget attempts to match expenditures and revenues by directing providers to ration health care through postponement and denial of services, and by reducing government reimbursement to the "private" providers.

Since 1965 the U.S. has had a mandatory single payer system for hospitalization and physician's services for over-65 seniors. It's called Medicare, and it's an inspiration for Obama and his allies. Participation is mandatory, because if you don't agree to accept Medicare, you can't collect your social security retirement checks.

Medicare is now insolvent. Its hospitalization insurance fund will not be able to pay for services after 2017 unless new financing is found. Its projected unfunded liabilities (payments above revenues) between now and 2082 total $36 trillion.

Medicare underpays physicians and hospitals. (So do Vermont's Catamount Health, which pays at Medicare rates, and Medicaid, which pays even less.) Obama and his allies are planning to finance much of their "reform" by further cutting payments to providers.

But when Medicare payments are cut, providers contrive to do more billable services to keep up their revenue. So as underpayments increase, the government will have to force providers to ration care to hold down total payments, and penalize providers who earn too much.

Underpayments by government health care programs are essentially a hidden tax on health care covered by private insurance. Because government underpays, providers overcharge private insurers to close the shortfall. This cost shift results in ever-higher insurance premiums, and struggling employers start thinking about simply dropping their employee coverage. This is not a workable model.

The Obama-Kennedy plan is not single payer, because it allows private insurance to continue (under federal regulation). But it contains a "public option" program designed like Medicare. This is supposed to provide competition with private insurers.

Since the ultimate goal of Obama, Kennedy and their allies is single payer, it is perfectly clear that government benefits and favoritism enjoyed by the government-sponsored "public option" plan will allow that plan to underprice its private competitors. Eventually employers will have no choice but to dump their employees into the government plan - even if they are charged a penalty for doing so. This is single payer on the installment plan.

Obama recently remarked that "no one will take away" your current health plan, "no matter what". But a week later he amended that to say that the government won't take away your current plan - but you might lose your current plan because your employer, who owns your plan, might be forced to choose the cheaper "public option" plan.

Obama and his allies also aim to solve the uninsured problem by mandating that every American enroll in a "qualified" insurance plan. Under the Obama-Kennedy bill, if you don't submit proof of enrollment, you'll be tracked down and fined until you do.

The Obama-Kennedy plan would if enacted prove to have some annoying inconveniences, like rationing, waiting lines, maddening bureaucracies, penalties for non-enrollment, demoralized doctors and nurses, shabby facilities, obsolete technology, declining quality of care, and of course much higher taxation.

But don't worry. President Obama and Sen. Kennedy can surely work those things out.

John McClaughry is President of the Ethan Allen Institute.