Rx For Disaster: 83 Million of Us Won't Keep Our Insurance

COMMENTARY Health Care Reform

Rx For Disaster: 83 Million of Us Won't Keep Our Insurance

Jul 23, 2009 3 min read

Commentary By

Robert E. Moffit, PhD

Senior Research Fellow, Center for Health and Welfare Policy

Robert A. Book, Ph.D.

Former Senior Research Fellow in Health Economics

At tonight's press conference, someone should ask President Obama why he's endorsing, and not threatening to veto, the 1,018-page House health-care reform bill now being rushed to passage: It breaks nearly all his core promises about health-care reform.

"If you have health insurance, then you don't have to do anything," Obama said on Oct. 15, 2008. "If you've got health insurance through your employer, you can keep your health insurance, keep your choice of doctor, keep your plan. . . And we estimate we can cut the average family's premium by about $2,500 per year."

Both these solemn pledges, repeated often ever since and as recently as yesterday, are violated in the House bill. Its perverse incentives, plus the onerous regulations Congress plans to impose on employer-provided insurance, would cause more than half of those with employer-provided insurance to lose it -- 83.4 million Americans, according to The Lewin Group, a prominent, politically neutral health-care analysis firm.

And for those who do manage to keep their current insurance -- well, it won't cost $2,500 less, as Obama promised. Lewin estimates it will cost $460 a year more because of new cost-shifting from the government-run plan to private health plans.

That's right. The $1.3 trillion House health-care bill would cause millions of Americans to lose the insurance they have now -- while the rest of us would pay even more than we do now.

Most of those who lose their current insurance would be enrolled in Congress' newly created government-run health plan. The health benefits these Americans get would be decided by the Secretary of Health and Human Services, based on the recommendations of a newly created Health benefits Advisory Committee. The HHS team would decide, year by year, what health-care benefits you would and would not get in the government-approved package.

Change we can believe in, huh?

Congress would authorize the HHS secretary to pay doctors and hospitals who participate in its health plan on the basis of Medicare rates, plus 5 percent.

But Medicare rates are much lower than those in private insurance -- 19 percent lower for doctors and 32 percent lower for hospitals. So the plan means big cuts in payments to health-care providers. They'd try to cover part of their losses by charging more to the private plans still left.

Doctors would lose -- big time. Based on the projected number of people forced out of private insurance and into the public plan, the Lewin Group estimates that physicians will lose $13.4 billion in net income -- equivalent to an average pay cut of 6.3 percent.

Hospitals would be hit even harder, losing $67 billion in revenue. That's more than the total net cash flow of all the hospitals in the country. Facing bankruptcy, a lot of hospitals might have to close their doors.

It could get worse. The Lewin Group's estimate of the rise in premiums only accounts for the possibility that doctors and hospitals would try to raise prices on the privately insured to make up for their losses from patients in the new public plan.

But there's another reason why private insurance premiums might increase even more: The House bill also creates a new office with the Orwellian title "Health Choices Commissioner." After a five-year "grace" period, employer-sponsored private health plans would be subject to approval by this commissioner.

The commissioner would be empowered to set benefit levels, decide what services will be covered regardless of the preferences of patients and otherwise set standards for private health plans. These mandates are all likely to increase health-care costs and therefore private insurance premiums.

Those standards aren't specified in the bill and may never be debated in Congress. They are up to the discretion of the "Choices" commissioner -- who will, of course, limit your choices to "acceptable" plans only.

Your employer's health plan might not be deemed "qualified." In that case, your employer could be fined, and even prohibited from enrolling new employees until the commissioner is satisfied that the violation "has been corrected and is not likely to recur." More change you can believe in . . .

Faced with onerous new regulations and the possibility of heavy fines, employers might choose the simpler -- and legally safer -- route of dropping their health plans entirely and simply paying the new 8 percent payroll tax, which will be levied on employers who don't provide the government-approved health insurance.

In fact, for most employers, paying this tax will be cheaper than paying for the company-based insurance even at today's prices. If the Health "Choices" Commissioner's yet unspecified standards turn out to be sufficiently onerous, Americans could end up with single-payer health care -- universal government health insurance -- by default.

Perhaps that's the idea?

Faced with payments that don't cover their expenses, and fewer and fewer private insurers to shoulder the costs, expect even more hospitals to close and more doctors to choose early retirement or another profession.

But at least if they could find a doctor, the House bill would cover every American with something, right? No -- according to Lewin, 16.5 million Americans would still be left uninsured.

This is bad medicine, that will take an already ailing health-care system and render it severely dysfunctional.

Robert A. Book, Ph.D., is Senior Research Fellow in Health Economics in the Center for Data Analysis and Robert E. Moffit, Ph.D., is Director of the Center for Health Policy Studies at The Heritage Foundation.

First Appeared in the New York Post

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