Thursday, September 10, 2009

Health care speech reaction

I didn't watch President Obama's speech as there was more interesting TV viewing on at the time. I have, however, read the transcript. While I won't go through line by line, there are some specific passages worth highlighting:

President Obama:
Others are self-employed, and can't afford it, since buying insurance on your own costs you three times as much as the coverage you get from your employer.
Michael Cannon addresses this:
Absurd. CBO: “Premiums for employment-based plans are expected to average about $5,000 per year for single coverage and about $13,000 per year for family coverage in 2009. Premiums for policies purchased in the individual insurance market are, on average, much lower—about one-third lower for single coverage and one-half lower for family policies.”
President Obama:
Many other Americans who are willing and able to pay are still denied insurance due to previous illnesses or conditions that insurance companies decide are too risky or expensive to cover.
This argument is illogical. If someone is willing and able to pay for coverage then why would the insurance companies deny them? Do they not want the money? Is it done out of spite? If Obama had simply said Americans can't afford the premiums that would be one thing, but he specifically says they can.

President Obama:
There are now more than thirty million American citizens who cannot get coverage.
Again, Cannon:
30 million "cannot get" coverage? Mark Pauly and Kate Bundorf estimate that as many as 75% of the uninsured could afford coverage.
I assume this is a reference to the paper “Is Health Insurance Affordable for the Uninsured?” Journal of Health Economics 25.4: 650-673 (July 2006).

President Obama:
More and more Americans worry that if you move, lose your job, or change your job, you'll lose your health insurance too.
This is a product of the government's promotion of linking health care to employment via the tax code. The easy way to fix this is by revising the tax code.

President Obama:
One man from Illinois lost his coverage in the middle of chemotherapy because his insurer found that he hadn't reported gallstones that he didn't even know about. They delayed his treatment, and he died because of it. Another woman from Texas was about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne. By the time she had her insurance reinstated, her breast cancer more than doubled in size. That is heart-breaking, it is wrong, and no one should be treated that way in the United States of America.
I will assume these anecdotes are true. If so, this is obscene. The way to solve this is to leverage punishing legal settlements against these companies so that denial of care will put a major dent in the bottom line. This is, incidentally, why I haven't really been pushing medical malpractice reform too hard on this blog -- sometimes large settlements are a good thing that help correct a wrong. I don't believe that lawsuits per se are the problem in this country, but frivolous ones that could be greatly reduced with a loser pays law.

President Obama:
Then there's the problem of rising costs. We spend one-and-a-half times more per person on health care than any other country, but we aren't any healthier for it. This is one of the reasons that insurance premiums have gone up three times faster than wages. It's why so many employers - especially small businesses - are forcing their employees to pay more for insurance, or are dropping their coverage entirely. It's why so many aspiring entrepreneurs cannot afford to open a business in the first place, and why American businesses that compete internationally - like our automakers - are at a huge disadvantage.
This surge in spending has taken place because of the widespread usage of health insurance, promoted by the government, which divorces the consumer from financial costs. Why, then, is Obama's solution to further extend use of the insurance model? And again, the fact that employers are harmed by insurance costs is largely thanks to a tax code that encourages a linkage between the two.

President Obama:
Since health care represents one-sixth of our economy, I believe it makes more sense to build on what works and fix what doesn't, rather than try to build an entirely new system from scratch.
Then why oh why are current reform efforts based on failed efforts such as the Massachusetts model? What works is choice, competition and changed incentives, all of which are sorely missing.

President Obama:
Our overall efforts have been supported by an unprecedented coalition of doctors and nurses; hospitals, seniors' groups and even drug companies - many of whom opposed reform in the past.
Translation: I bought off the special interests.

President Obama:
First, if you are among the hundreds of millions of Americans who already have health insurance through your job, Medicare, Medicaid, or the VA, nothing in this plan will require you or your employer to change the coverage or the doctor you have. Let me repeat this: nothing in our plan requires you to change what you have.
I'm so tired of this argument. While technically true, it's dishonest. No, the legislation will not mandate that anyone change their care. What it will do, however, is shift incentives so many employers will end up using the public option.

President Obama:
Under this plan, it will be against the law for insurance companies to deny you coverage because of a pre-existing condition. As soon as I sign this bill, it will be against the law for insurance companies to drop your coverage when you get sick or water it down when you need it most. They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime.

We will place a limit on how much you can be charged for out-of-pocket expenses, because in the United States of America, no one should go broke because they get sick. And insurance companies will be required to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies - because there's no reason we shouldn't be catching diseases like breast cancer and colon cancer before they get worse. That makes sense, it saves money, and it saves lives.
This thinking fails econ 101 and is nothing more than the president offering impossible free lunches. Someone has to pay for all of the services that he proposes insurance companies provide without cost, who will it be? Is Obama so naive as to think it will come out of their profit margin? The only way this can possibly be achieved is by raising fees elsewhere. Does the president not realize that those states with the greatest number of mandates for what has to be covered by health insurance also have the highest premiums? Has no one from his economic team explained basic microeconomic concepts to him? Unbelievable.

Then look at the very language he employs: against the law, no longer be able, place a limit, be required. Sweet land of liberty...

President Obama:
Now, if you're one of the tens of millions of Americans who don't currently have health insurance, the second part of this plan will finally offer you quality, affordable choices. If you lose your job or change your job, you will be able to get coverage. If you strike out on your own and start a small business, you will be able to get coverage. We will do this by creating a new insurance exchange - a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices. Insurance companies will have an incentive to participate in this exchange because it lets them compete for millions of new customers.
Here's an easier way of doing this: let people buy insurance across state lines, allowing them access to over 1,000 insurance plans, and then go online at to figure out what works best for them. Simple and costs the government nothing.

President Obama:
Now, even if we provide these affordable options, there may be those - particularly the young and healthy - who still want to take the risk and go without coverage. There may still be companies that refuse to do right by their workers. The problem is, such irresponsible behavior costs all the rest of us money. If there are affordable options and people still don't sign up for health insurance, it means we pay for those people's expensive emergency room visits...That's why under my plan, individuals will be required to carry basic health insurance - just as most states require you to carry auto insurance. Likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers.
First off, this really shows how divorced Obama is from reality. "Refuse to do right by their workers"? Does the president not realize this is far more likely a function of not being able to afford health insurance for their workers than simple greed? Such statements are based on nothing more than perceptions of businessmen as fat cats, raking in the money while offering a pittance to workers. It's public policy based on cartoonish stereotypes.

As for the comparison with auto insurance, I defer to Coyote:
Oh, jeez, I sure wish that were true. Auto insurance covers only catastrophic damages, such as totaling your car or incurring serious liability by hurting someone. It does not cover regular repairs, preventative maintenance, etc. Also, state-mandated auto insurance has a range of coverage caps — if you want a higher cap, you can pay for it. No one expects their company to pay their auto insurance, and if a company were to provide it it would be considered a taxable benefit. Compared to our current health insurance system, auto insurance-like health insurance would be a brilliant improvement.
President Obama:

So let me set the record straight. My guiding principle is, and always has been, that consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company. Without competition, the price of insurance goes up and the quality goes down.
Absolutely correct -- and maddening because the solution is so simple: allow people to buy insurance across state lines! Why is this not on the table?

President Obama:

Despite all this, the insurance companies and their allies don't like this idea [of the public option]. They argue that these private companies can't fairly compete with the government. And they'd be right if taxpayers were subsidizing this public insurance option. But they won't be. I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects.

This is a fairy tale. First off, if this were to be true it would be about the first program in the history of government that is self-sufficient. Second, you have to believe government can provide insurance cheaper and more effectively than the private sector, a contention for which there is absolutely no supporting evidence.

While there's much more, this is already quite long and I'll stop. More reaction to the speech here, here and here. Also see here for a good quote by Arnold Kling on the elimination of fraud, waste and abuse.

Update: Good point:
Here are some excerpts from the speech that I thought were noteworthy:
Instead of honest debate, we have seen scare tactics.

Then, a few minutes later:

Everyone in this room knows what will happen if we do nothing. Our deficit will grow. More families will go bankrupt. More businesses will close. More Americans will lose their coverage when they are sick and need it most. And more will die as a result.

By far the biggest scaremonger on this issue has been Obama himself.

Might be worth reading the whole thing.

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