About halfway through yesterday’s all-day healthcare
summit, Democratic Congressman James Clyburn of South Carolina
told another of the many insurance horror stories that peppered
the proceedings:
A gentleman was called in and he was very, very emotional. He
was getting ready to have transplant surgery. But he was told
that because he’s on Medicare, his post-operative treatment is
going to be limited to three years. After that, he’s going to
have to find some way to pay. He was very, very emotional.
Think about that for a minute. The patient is about to
receive a transplanted organ (the Congressman didn’t specify what
it was) and the horror is the government is only going to
continue to pay his medical bills for three years. If this is the
worst we can say about American medicine, are we really in that
bad shape after all?
Yesterday’s all-day event went much better than it might
have. There was no shouting, no screaming, no name-calling.
Despite the talk that Washington doesn’t work anymore, the
dialogue was very civilized. Deliberation seems to be alive and
well.
Except of course, for the fundamental difference, which
remains the same — Republicans want to reform and improve health
care without destroying its free-enterprise base, while Democrats
would be very happy to see the entire thing absorbed into a
government-controlled system, as half of it has been already
through the extension of Medicare, Medicaid and other government
programs.
What became most outstanding is that President Obama and
his teammates still do not have any real understanding of how the
current system works. Take for example the President’s constant
insistence that the problem is the insurance pools in which very
sick people must shop and that the solution is to “get everybody
into those pools” so that risks can be shared. That’s a very good
idea and a very simple principle of insurance — people who
aren’t sick pay for those who are sick. But “getting everybody
into those pools” is precisely what the current system is
designed to avoid.
Just as a guess, what percentage of the population do you
think now buys their insurance individually on the open market?
15 percent? 20 percent? The answer is 6 percent. The figure has
not changed for the last 15 years.
Only 6 percent of the population actually
buys their own insurance. (And for
this, we are painting the insurance companies as the villains of
this melodrama?) Fourteen percent of the population is on
Medicare, 14 percent on Medicaid. The other 66 percent do not
have insurance but health benefitsΒΈ,
which is not the same thing. Nine percent gets its benefits from
government employment, 4 percent from the military and the
remaining 43 percent get their benefits from private employment.
The last 15 percent (there is some overlap) has no coverage at
all.
President Obama kept talking about how it is these “large
pools” in big companies that make insurance cheap, but that is
not true. Large pools are only part of the equation. Equally
important is that these employees are getting their benefits
tax-free. This is a huge advantage not
available to the uninsured population. Because the government is
not getting its cut, employers are also eager to convey benefits
to their employees instead of wage increases because they have
more value. This is why, for many people, health benefits
constitute the major reason for employment. Wages transfer easily
from job to job but benefits do not.
Yet another advantage of company-run health benefits
programs is that they are exempt from state
regulations. There was a lot of talk at Blair House
yesterday about monopolies and how many states are served by only
one or two insurance companies. There was also talk about how the
government must mandate minimum coverage or people will not
realize their insurance doesn’t cover much. What no one said is
that all these mandates are now being imposed at the
state level and it is precisely this that limits
competition and makes insurance so expensive.
Corporate benefit plans, on the other hand, are all exempt
from state regulations under the Employees Retirement Income
Security Act (ERISA), which pre-empts state regulation. This is
why large corporations are able to provide insurance relatively
cheaply — because they don’t have to comply with state mandates
that insist that chiropractic, foot massage, alcoholic treatment
and all kinds of marginal medical services be included. Companies
can provide their employees with what they want — and it doesn’t
take any government oversight to do it.
So Obama’s premise is wrong. We’re not going to be able to
“get everybody into the pool” because doing that would mean
breaking up the system of employment-based health benefits that
is protected by ERISA. That 43 percent of the market is staying
put. The only thing that could crack this wall of protection
would be if benefits were highly taxed
and the federal “insurance exchanges”
were made so attractive that people were willing to give up their
employment-based benefits in exchange. Those are the things that
Obama has sworn won’t happen.
Instead, whatever “exchanges” are created will remain
isolated, populated only by the very sick and people who can’t
get coverage anywhere else. That’s what we have now. The only
thing that can make the exchange more attractive is if it is
highly subsidized. Several states tried this in the 1990s and
found it impossibly expensive — as several Senators testified
yesterday. It’s hard to believe the federal government will find
it any different.
Because the President does not recognize what makes health
benefits such a good deal for employees of large companies, he
also refuses to do what Republicans have been suggesting all
along — extend those same advantages to everyone else. Several
times, Obama talked about the Senators’ and Congressmen’s own
health plans — apparently thinking he was embarrassing them –
and asked why we couldn’t extend the same benefits to everyone
else? But of course that would mean everybody working for the
government — which might eventually happen if the Democrats stay
in power long enough.
Instead, these advantages could simply be identified and
passed on to everyone else. Give people an allowance of tax-free
money to spend on their own health benefits. Let them buy
insurance that is not weighted down with government mandates.
This is what health savings accounts do. Eight million people now
have them (almost as many as are covered by the military) and
they work very well.
Ah, but the President doesn’t like that, either. “All the
data says that the people who have health savings account have a
lot of disposable income,” he said yesterday. The implication is,
of course, that HSA’s are a rich man’s game and will leave the
poor to fend for themselves.
But then in the next minute he contradicts himself. The
uninsured, he said, are not the poor. The poor are covered by
Medicaid. The uninsured tend to be the self-employed and people
working for smaller companies that cannot afford to provide
benefits to their employees. Aren’t these precisely the people
who could benefit from health savings accounts? But instead, the
Democrats would prefer to mandate that
these smaller businesses provide health insurance to their
employees — even though they obviously can’t afford it. Could
there be a more efficient way of killing job creation in this
country?
The Republicans came off very well in yesterday’s summit.
They drew a line in the sand — solve the problem by enhancing
free markets — and stuck with it. If Democrats want to persist
in pushing their reform bill on the American people, let them.
Then let them stand by it in the November election.
