Smith Faculty Opinion Article

By Dr. Peter Morici, Professor of International Business E-MAIL WEB SITE

September 29, 2009 

Health Care Reform is a Loser for President Obama

Public opposition threatens to crush President Obama’s health care reforms and wound his presidency, because his plans would do more harm than good.

The bills moving through Congress reveal the basic elements of his preferred approach.

Universal Coverage and Community Ratings—everyone plays and pays what they can; insurers must accept all applicants, can’t charge higher premiums for preexisting conditions, or cancel policyholders.

Subsidies for Those Who Cannot Fully Afford Premiums

A Public or Nonprofit Insurance Option—a plan for those who can’t buy private insurance and additional competition for private insurers.

Employer Mandates—an 8 percent payroll tax on businesses that don’t offer health insurance to employees.

Proponents of reform argue covering all Americans and greater emphasis on early diagnosis and prevention will lower health care costs. Yet, House legislation requires additional taxes exceeding $500 billion. The system can’t be more efficient if it needs more money to pay for it.

House and Senate legislation would cut Medicare funding by at least $150 billion. If real savings were possible without diminishing services, the Congress would have already taken those. Naturally, seniors are frightened.

Employers could calculate paying the 8 percent tax is cheaper than their current plans, drop coverage and push employees into the public plan.

The president would require that all employers offer the public option. Folks who now select from a menu offered by employers know full well how employers can steer them into less-expensive, less-desirable plans by manipulating the choices. Enter the public option.

Long waits and arbitrary treatment at the Veterans Administration and IRS have convinced many Americans they simply don’t want government agencies determining what treatments they receive or how fast those are delivered.

Reforms are need. Health care costs are 50 percent higher in the United States than in Canada or Europe. Culprits include huge malpractice costs, higher drug prices and physician fees, hospital and insurance bureaucracies, and lavish executive salaries foreign systems don’t carry.

From the start, President Obama gave malpractice lawyers a pass, so the concessions from other big interests are minimal.

By further subsidizing health care, Obama’s reforms will drive up demand and prices. The typical family will see premiums rise at least $1000 a year.

According to a recent Rasmussen poll, more 56 percent of Americans now oppose these plans, and disapproval is particularly strong among seniors.

President Obama’s failure to sell the plan is grounded in facts not a right-wing conspiracy and conservative efforts to discredit a liberal president.

Obama is losing his credibility to lead but he has no one to blame but himself.

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.