Obama's Health Care Plan: Put Up And Shut Up

Shikha Dalmia, 09.10.09, 06:50 PM EDT

The president's speech was the policy equivalent of the middle finger.

For several months now, the American people--as if exhorted by the ghost of William F. Buckley (no particular hero of mine)--have been standing athwart the Democratic agenda of socialized medicine, yelling, "Stop!" But President Barack Obama showed them the policy equivalent of the middle finger Wednesday night.

If there was anything bipartisan about the speech it was that he embraced every bad big-government idea from both sides. If he prevails, the American public won't get "choice and competition" as he proclaimed, but a one-size-fits-all government-prescribed health care plan that it dare not refuse and dare not challenge.

Perhaps the most striking--and disturbing--thing about the speech was the unblinking confidence Obama exuded while breaking key campaign promises he made to voters. He had raked poor Hillary Clinton over the coals for admitting that her road to universal coverage was paved with an individual mandate. "Everyone would be forced to buy coverage, even if you can't afford it," warned Obama in an ad. "You pay a penalty if you don't."

Yet, there he was last night scolding "individuals who can afford coverage but game the system by avoiding responsibility." Never mind that the prime gamers are not the uninsured (whose unpaid bills cost "the system" less than $40 billion every year) but the underinsured covered by Medicare and Medicaid (whom private insurers cross-subsidize to the tune of over $90 billion annually because the government refuses to pay the full cost of their care). Still, he hectored: "Improving our health care system works only if everybody does their part."

Obama didn't say exactly how he would make "everyone do their part"--a question he posed repeatedly to Hillary. But his buddy Sen. Max Baucus, D-Mont., has some rather well-developed ideas on that score. Baucus has proposed a bill that would force the uninsured to pay fines on a sliding scale of income, with those making 300% of the poverty level having to cough up as much as $3,800 a year. In short, Americans would have to pay Uncle Sam for the privilege of remaining uninsured. If there were truth-in-labeling laws for Congress, it would be required to call this bill TonySopranoCare.

Which brings us to the second promise Obama broke Wednesday night: That he would impose no new taxes on anyone making less than $250,000. The penalties that the uninsured--all of whom, I would wager my grandma's life support, make under $250,000--would face are certainly a tax.

He also endorsed a business tax--err, fee--on employers who don't provide adequate coverage that, under a House bill, would be about 8 % of payroll. They will pass this on to their employees in lower wages. And he signed up for an excise tax on high-end insurance plans--many of which are enjoyed by plain union folk, not those rich and famous making over $250,000. Under the Baucus bill, this tax would be as much as 35% of the cost of the plan. One would have thought that if the shame of breaking an explicit promise didn't prevent Obama from imposing this last tax, then the logical absurdity of trying to reduce soaring insurance costs by taxing insurance plans would.

It gets worse. In exchange for these bitter tax pills, Obama promised Americans would get eternal health care "security and stability." To deliver that, he would of course ban insurance companies from denying coverage to those with pre-existing conditions--tantamount to forcing fire insurance companies to write coverage on a burning building. He would also prohibit insurers from putting any limits on the coverage they offer and cap what they can require patients to pay out-of-pocket.

In other words, Obama would encourage unlimited health care consumption by patients while eliminating the last vestige of price consciousness. But the reason America is facing unsustainable health care cost increases is precisely because its third-party system of insurance doesn't encourage prudent consumption by patients. Indeed, if Obama really can tame health care costs by making patients even less cost-conscious, I have an even better idea for him: Simply pass a law banning anyone from falling sick and mandate good health for all. If he can suspend the laws of economics, perhaps he can also transcend the laws of physiology.

The fact of the matter is that not too many health care underwriters will survive such crippling mandates. Many of them will fold, causing further consolidation in the insurance marketplace--not more competition and choice. Last night the president declared--in the spirit of grand compromise--that he would be willing to wait a few years to give private insurers a chance to make more affordable plans available to all Americans. Only if they fail would the so-called public option, the government-run insurance plan so beloved of the left, be triggered. But that's a rigged deal: The same legislation that sets up the trigger is putting in place the conditions that will eventually pull it. Obama is not backing off on his goal of eliminating private insurance--only offering a brief deferment.

The one Republican idea that Obama did endorse--caps on medical malpractice awards or tort reform--will actually hurt rather than help patient choice. Big medicine has long blamed the unnecessary tests and procedures these awards encourage for rising health care costs. But several studies have shown that this so-called practice of defensive medicine is a smaller driver of costs than excess physician salaries. By capping these awards, Obama will leave patients even less recourse against physician negligence--hardly the American way.

Obama lambasted the critics who claim his reform plan amounts to a government takeover of the health care system. But the plan he laid out Wednesday night will control every aspect of the medical transaction. It will tell patients when, what and how much coverage they must buy; it will tell sellers when, what and how much coverage they must sell. This is not a government takeover of health care? Then Tony Soprano is just a decent, hard-working businessman.

Shikha Dalmia is a senior analyst at ReasonFoundation and a biweekly Forbes column