April 7, 2008
By Greg D'Angelo
Democratic presidential contender Barack Obama is mostly right
when he says, "The reason people don't have health insurance isn't
because they don't want it, it's because they can't afford
Unfortunately, the Illinois freshman senator's big government,
bureaucratic reforms would only push health-care costs
Obama hopes to achieve universal coverage by an employer mandate
to provide coverage, sweeping expansions of existing government
programs, and creation of a new government health plan to cover the
remaining uninsured. These are standard liberal prescriptions, but
Obama has introduced a new ingredient into the mix.
Innocuously characterized as a federal clearinghouse for private
health insurance products and information, his proposed National
Health Insurance Exchange would be much more than that. The NHIE
would be a regulatory agency empowered to set benefits and
determine the terms under which Americans could get health
insurance coverage. In effect, under ObamaCare, Washington
bureaucrats would run the health insurance markets in every
The Heritage Foundation has long advocated a "health insurance
exchange" at the state level, but the Heritage HIE and Obama's are
two very different animals. The Heritage HIE works to foster
employers' defined contributions to health coverage tax free, and
to promote personal ownership and portability of insurance,
enabling individual workers to take their policy from job to
We propose state HIEs to sidestep the single greatest barrier to
affordability of health insurance: the federal tax code. The
current tax code imposes a tax penalty of up to 50 percent of the
cost of an individually owned policy, effectively pricing millions
of working families out of coverage.
Absent a change in federal tax and employment law, a statewide
health insurance exchange is the best way to help consumers get and
keep affordable and portable private health coverage.
But there's no need for a national HIE. Operating at the national
level, all President Obama would need to do to make affordable
coverage accessible to all Americans is to change the federal tax
code, offer health-care tax credits or direct assistance to the
needy, and allow Americans to purchase insurance across state
lines. This would create a real national market characterized by
personal choice, private competition and portability of coverage.
Such an approach would expand coverage as widely as ObamaCare
without creating a new federal bureaucracy. And it would represent
ObamaCare, however, merely adds big government, bureaucratic
features to the status quo. That's no way to guarantee
The tacit premise of ObamaCare is that inefficiencies can be
reduced and costs contained if only Washington exercises even
greater control in health-care decision-making and funding.
Yet experience shows that replacing competition with federal
regulation and restricting consumers' choices is a prescription for
higher - not lower - costs.
Sen. Obama's advisers see it differently, of course. Their "best
guess" is that their plan would save $200 billion annually by
investing in health information technology, reducing industry
overhead, better disease management and care coordination, and
"payments for excellence." It's a heavy list, but the actual
savings are lighter than air.
Independent health economists aren't buying Obama's projected
savings. "The numbers don't seem to work very well" because "the
(savings) are just dramatically overstated," John Sheils of the
Lewin Group told The Los Angeles Times.
Sheils calls the claim that ObamaCare would save the typical
family up to $2,500 annually "nonsense." MIT health economist
Jonathan Gruber agrees there is "zero credible evidence to support
Equally unrealistic are suggestions that the plan would cost only
$50 billion to $65 billion annually. Analysts have pegged similar
plans as costing twice as much ... or more.
ObamaCare is clearly a triumph of hope over economic reality. To
extend health coverage to all Americans, the senator from Illinois
should go back to the drawing board and embrace real change -
health insurance markets driven by personal choice and real
Gregory D'Angelo is a policy analyst at the Heritage
Foundation's Center for Health Policy Studies.
First appeared on the McClatchy Tribune wire
Democratic presidential contender Barack Obama is mostly right when he says, "The reason people don't have health insurance isn't because they don't want it, it's because they can't afford it." Unfortunately, the Illinois freshman senator's big government, bureaucratic reforms would only push health-care costs higher.
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