Smith Faculty Opinion Article
November 20, 2009
The High Cost of Health Care Reform
Americans are rightfully dissatisfied with the high cost of health care and
the rough treatment they receive from private insurers, but the reforms
Democrats in Congress are cooking up will only make things worse
The law that will emerge from the House and Senate bills will include five
Universal Coverage and Community Ratings. Insurers can't deny enrollment,
cancel policies or charge higher premiums for preexisting conditions.
Tax Penaltieson businesses that do not provide employees with insurance, and
on individuals without employer insurance who choose not to purchase a plan.
Subsidies for low-income individuals and small businesses who can't afford a
A Public Plan to provide an assured option for those without employer
insurance and some small businesses.
Taxes on the wealthy and high-end health plansto pay the subsidies to low
income families and small businesses.
Together, those would get almost everyone insured, but many Americans fear
loss of their private health plans.
Many employers will calculate paying the tax for not covering employees is
cheaper than providing a plan, drop coverage and push employees into the public
Having seen how poorly the Veterans Administration administers its public
plan and endured moribund service at Post Office, many Americans believe a new
government agency will deliver worse service than the hassles and rationing now
imposed by Aetna and others.
Health care costs are at least 50 percent higher in the United States than in
Canada, Germany, France, and Britain. The U.S. system is handicapped by huge
malpractice costs, higher drug prices and physician fees, and expensive hospital
and insurance company bureaucracies foreign systems do not bear.
Overall, the bills moving through the House and Senate hardly dent those
problems. By requiring everyone to purchase a policy, the new law will drive up
demand and prices for doctor visits, hospital stays and drugs, and enrich health
Ultimately, the reforms that emerge will raise the cost of health care for a
typical family policy at least $1500 a year.
The Democrats in Congress and the White House are unwilling to take on the
malpractice lawyers, drug companies and health insurers who so generously
contribute to their campaign coffers.
In fact, the health care legislation likely to emerge will enrich those
special interests by throwing more cash at an inefficient system sorely in need
of real reform.
Just like the bank bailout that is making Democratic contributors on Wall
Street rich this holiday season, the Democrats' health care reform will reward
their pals and stick the ordinary citizen with the bill.
Peter Morici is a professor at the University
of Maryland School of Business and former Chief Economist at the U.S. International