Replacing Obamacare: A Prescription for Real Health Care Reform
Blue Shield Health Conference
El Dorado Hills, California
October 25, 2010
In a moment of breathtaking condescension during the debate over Obamacare, Nancy Pelosi said, “We have to pass the bill so you can find out what is in it…”
Well, they passed it. And ever since, the American people have been finding out what’s in it. There’s a reason that not a single Democrat in a competitive race is touting his or her support for Obamacare.
Two of the central promises made by the President and his supporters were that Obamacare would keep health costs down and that if you liked your plan you could keep it. He told a joint session of Congress that people who say otherwise are “lying.”
That’s when Joe Wilson made his famous outburst. Although I deplore the breech of decorum, I did have the satisfaction of informing Joe recently that I had sighted a bumper sticker in my district that read, “Joe Wilson was right.”
For my part, I warned that the same government that paid $400 for a hammer and $600 for a toilet seat wasn’t likely to keep our health care costs under control.
Since then, the President’s own actuary has admitted that Obamacare will inflate the cost of healthcare in America by at least $311 billion beyond what it would otherwise have been over the next ten years, boosting those costs to a staggering 21 percent of GDP by 2019.
Caterpillar tractor estimates that the cost to that single company will exceed $100 million; John Deere made a similar estimate of a $150 million hit to its bottom line; AT&T estimates its added costs at $1 billion. Those costs will ultimately come out of employees’ paychecks.
In fact, when House Democratic leaders accused the companies of lying and threatened them with subpoenas, the CEO’s explained that the Securities and Exchange Commission requires them to make truthful and accurate financial estimates under severe legal penalties – unlike Congress – and that they welcomed the opportunity to discuss their actuarial analyses in a national forum. The Congressional leaders quickly and quietly dropped their plans for a public hearing on the matter.
The second promise the President made that day was that if you like your health plan, you could keep it. Many of us warned at the time this was patently untrue – that under the bill, any change in the terms of a plan would trigger the full mandates in the law, effectively cancelling the health plan.
Companies that had been offering coverage for the children of employees have been quietly withdrawing from the market in advance of provisions taking effect that require them to maintain children through age 26 on their policies.
Now we’re learning that many Medicare Advantage plans are folding because of the new law, and companies like McDonald’s are announcing that they will discontinue their existing health plans because they cannot affordably provide them and meet the mandates of the new law.
The Administration’s response in advance of the election has been to grant waivers to politically well-connected companies – literally placing the government in the position of picking winners and losers. This should disturb anyone who values a nation that once could claim to be a government of laws and not of men.
At the time, many of us warned that socialized healthcare systems produce exactingly consistent results: massive cost overruns followed by a brutal rationing of care. Within months, the President appointed Donald Berwick as the new head of the Center for Medicare and Medicaid Services, by virtue of a recess appointment that bypasses Senate confirmation. Berwick is one of the world’s outspoken advocates of the government rationing of health care.
None of these developments should surprise any us. They were all clearly and loudly forewarned by the opponents of Obamacare at the time – and utterly ignored by the majority of Congress and the Administration. House Democratic leaders like Barney Frank candidly admitted that Obamacare was “the best way to reach single-payer,” that is, a full government monopoly on healthcare. In other words, the willful purpose of this act is ultimately to destroy the private health insurance market.
Perhaps the most dangerous provision of this bill is the assertion by the federal government that it now has the power to force every American to purchase products that the government believes they should purchase, whether or not they need them, want them, or can afford them.
If this precedent prevails, the federal government will have assumed authority over every aspect of individual choice in the care of our families and ourselves and can logically be extended to what foods we eat or to what physical activities we engage in.
Nor is this brave new doctrine limited to health care. Once the precedent is firmly established that government may order individuals to make purchases in the marketplace, what limitation remains on its power to order any other of our decisions as consumers? As Congressman Scott Garrett pointed out, what is to stop the government in the next recession from ordering every American to buy a car from “Government Motors” because “that would be good for the economy.”
Twenty state attorneys general are now challenging this act and their suit will decide whether our Constitution still protects our individual freedom to live our own lives and make our own decisions.
Eight days from today, the American people will render their judgment on the direction that this Administration and Congress have taken us over the past two years. A large part of that verdict will be due to Obamacare.
I believe that in the opening days of the 112th Congress, a Republican House will pass a repeal of Obamacare. If that repeal fails to pass the Senate, or if the President vetoes it, I believe the House will refuse to fund those provisions of Obamacare that violate the Constitution or that increase the costs and reduce the availability of health insurance to the American people.
But it shouldn’t stop there. Fundamental changes need to be made in our health care system to bring costs under control and to restore to individuals the power that comes with being a consumer in a free market.
We need to address the cost drivers that are pricing health care out of the reach of most Americans.
We’ve got to stop ignoring the 800-lb gorilla in the room: the trial lawyers lobby and the role of predatory litigation on the healthcare system. It’s not just the unpredictable jury awards. The main problem is the cost of defensive medicine – the ten tests that a doctor must now order even though he’s certain only one is really necessary – for fear that if sued, he has to be able to say, “we did absolutely everything we could – including batteries of unnecessary tests.”
We need to remove punitive damages from the civil courts that they were never designed to handle. We need to adopt the English rule that the loser pays all court costs in civil trials. This by itself would discourage the practice of filing frivolous lawsuits knowing that for an innocent defendant, the cost of settling an unjust complaint is less than the cost of prevailing at trial.
We’ve got to restore competition to the market by restoring to consumers the freedom to shop across state lines for the product that best meets their own needs. We don’t require Californians only to shop at California retailers or only to bank at California banks – why in the world do we force them only to purchase California insurance?
We’ve got to restore freedom of choice to individuals. Most people don’t own their own policies – their employer does because we give the employer enormous tax breaks and incentives to purchase plans for his employees. Yet, we don’t extend those same advantages to the employees themselves so that they can purchase a plan that they can choose according to their own needs – a plan they can keep regardless of who is their employer and a plan that they can fire if it no longer adequately serves their needs.
We’ve got to address the pre-existing conditions issue realistically, and this is where we desperately need a grown-up discussion. How is it that an insurance plan can afford to charge you just one percent of the cost of a catastrophic illness? It’s because you only have a one percent chance of contracting that illness. Insurance covers risk – not certainty. If you already have that catastrophic illness, the cost of covering that risk is not one percent – but 100 percent. Insurance is only affordable when it is insuring risk – not certainty.
This process also incentivizes healthy behavior if we allow it to work. If you’re obese and you smoke, your health risk is higher and your insurance costs more. Your choice is to pay a higher premium and continue to overeat and smoke, or to go on a diet, quit smoking and pay a lower premium. But that should be your choice – not the government’s.
Can you imagine the cost of auto insurance if, after an accident, you had a legal right to walk into any auto insurer and say, “I just totaled my car; now write a policy to cover that accident.”
We need to allow policies to be written around pre-existing conditions. A few years ago, a fellow came to me who had started his own business. Because his employer owned his policy, he had to go into the individual market. No one would write him a policy because he had a pre-existing condition – bursitis. He said, “I don’t care about the bursitis – that’s a nuisance I can take care of myself. I’m worried about a catastrophic illness or injury – just write me a policy for that.” And he was told, “We’d love to write you such a policy, but we can’t. It’s against the law.”
If we could allow such policies to be written again, we would dramatically reduce the number of people being denied insurance for pre-existing conditions, leaving only a much, much smaller remainder whose pre-existing condition is genuinely life threatening. Those few cases could then be dealt with through an assigned-risk pool in the same way we provide car insurance to uninsurable drivers.
But most of all, we’ve got to be honest in this discussion.
John Stossel once pointed out that in no other field do we purchase insurance for everyday expenses. We purchase insurance only for those things that could bankrupt us.
We don’t buy car insurance to cover all of our routine maintenance, fill-ups, oil changes, scratches and tire rotations. The reason is that these are costs that we incur anyway – why would we want to pay a middleman for those services? Indeed, if our employer guaranteed all the oil changes and fill-ups we could possibly want, we’d probably want a lot more.
At the root of the debate over Obamacare is the Marxist notion that all profit is waste, and if we can just take profit out of health care, we can reduce costs and improve services.
This is nonsense. Profit is NOT waste – profit is the essential element that holds costs down, that spurs and pays for research and development, that drives innovation and efficiency and even courtesy to customers. Take profit out of health care and you will have just learned the difference between FED-EX and the Post Office.
We hear that health care is just too important to leave to the private sector – that health care is essential and must be provided by government. Well, I can think of something that’s much more essential than healthcare – FOOD. What a nightmare our world would be if the government ran our grocery stores! Or, if our employer chose our grocery store for us!
Almost every day I get a letter from somebody saying, “My health plan stopped carrying this or that service,” or, “My health plan just increased premiums again” and “you’ve got to get a gun and force them to do this or that.” Yet I have never gotten a letter from anyone that says, “My grocery store stopped carrying Wheaties and you’ve got to force them to put it on their shelves.”
Why is that? What keeps your grocery store from raising its prices 29 percent today? The next grocery store down the street. It’s because you have the freedom to choose. Yet because of perverse tax incentives and ruinous regulation, we’ve taken that freedom away from the vast majority of American healthcare consumers, and we’ve got to restore it.
That doesn’t mean we abandon those who can’t afford health care just as we don’t abandon those who can’t afford food. But we should provide for health care needs of the truly needy the same way as other basic necessities – through vouchers or tax credits that retain their freedom as consumers.
Freedom works, and it is time we put it back to work. And that includes for our healthcare.