President Barack Obama has been prodding Congress to deliver on his campaign promise of a health care makeover. There are good reasons to wish that he wouldn’t do this. He is right to be concerned about health care, but so wrong if he thinks that Congress works better when it works in haste, or in uncertainty.
Until recently, the public had one thing in common with the Congress — and, no, this isn’t the setup for a David Letterman one-liner. The fact is that regarding health-care reform, Main Street and Capitol Hill were both in the dark as to exactly what the president wanted.
One of the things he said he wanted Congress to come up with was a health-care plan that provided coverage to the estimated 46 million Americans now uninsured, but would not add to the federal budget deficit. This is not an easy task — certainly not for a Congress that doesn’t like math, anyway.
Based on the president’s radio and YouTube address on June 6, though, it appears that as an outsider, he has now learned something about the Congress that he missed when he was a senator. It is not a place that good ideas come from. It is the place where good ideas go to die.
The address made it clear though, that now he is going to be more directly involved in, and more responsible for, the health-care reform process. At the very least, he seems willing to be more specific about the health-care structure he wants. This is a good thing.
What we know about this so far is that two key elements have been identified: employer mandates and government-provided coverage. The employer mandates would compel companies to provide health insurance coverage to their workers or pay a fine — and also compel workers to be insured. The proceeds from the fines could be used to underwrite some or all of the cost of government-provided health insurance coverage for those workers.
From an economics standpoint, the idea of the mandate has some interesting aspects. The reasoning behind it involves two separate ideas. The first is to stanch the bleeding — employers are cutting back and in some cases eliminating their health-care benefits because the recession has squeezed their sales and profits. It is true, of course, that a federal mandate to make businesses spend money they don’t have is not exactly an economic stimulus program. In fact, it could drive some businesses into layoffs or even over the edge, leaving their workers jobless as well as without health insurance.
The second part of the mandate would compel workers to be covered by health insurance. Behind every health insurance plan is the idea of a risk pool big enough to provide statistical probabilities that actuaries can count on. If young, healthier workers opt out of the risk pool, costs go up very rapidly — so they must be roped in and compelled to pay.
The other idea that Obama has put forth is government-provided health insurance. In one form this would be an option — a federal government program along the lines of those offered by a large number of states. As currently set up, many state workers can choose between plans run by private insurers and one that is run by the state. Actually, the states typically subcontract the administrative work out to private insurers who administer the plans, and the only significant difference is that the government plans are usually self-insured — that is, underwritten — by the state governments themselves.
Economists by their nature tend to be skeptical of the value of mandates. By their nature, mandates distort the market and reduce economic efficiency, which invariably means that consumers pay higher prices. And while government programs can often bury or dish off the costs of goods and services through magic accounting and taxpayer subsidies, that doesn’t mean the costs aren’t there.
But even if the case for government plans and mandates were strong, neither the president nor Congress has addressed the two critical health-care issues. The first is that costs are already incredibly high — $1 out of every $6 we make in the U.S. is spent on health care. And the second is that its costs continue to grow faster than the economy, year after year after year. Health care is eating us out of house and home.
In one way, Obama has acknowledged this problem, and his willingness to take responsibility for health-care reform is admirable. In the end, though, it isn’t a matter of either rhetoric or responsibility. Health care is a real problem, and solving it will come down to real words, real numbers and real people.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
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