The Wall Street Journal
About those lower insurance costs we promised . . . .
When President Obama signed his health-care reform last month he declared it will lower costs for families and for businesses and for the federal government. So why barely a month later are Democrats scrambling to pass a new bill that would impose price controls on insurance?
In now-they-tell-us hearings on Tuesday the Senate health committee debated a bill that would give states the power to reject premium increases that state regulators determine are unreasonable. The White House proposed this just before the final Obama- Care scramble but it couldnt be included because it violated the procedural rules that Democrats abused to pass the bill.
Some 27 states currently have some form of rate review in the individual and small-business markets but they generally dont leverage it in a political way because insolvent insurers are expensive for states and bankruptcies limit consumer choices. One exception is Massachusetts: Governor Deval Patrick is now using this regulatory power to create de facto price controls and assail the states insurers as cover for the explosive costs resulting from the ObamaCare prototype the Bay State passed in 2006.
National Democrats now want the power to do the same across the country because they know how unrealistic their cost-control claims really are. Democrats are petrified theyll get the blame they deserve when insurance costs inevitably spike. So the purpose of this latest Senate bill is to have a pre-emptive political response on hand.
ObamaCare includes several new cost-driving mandates that take effect immediately including expanding family coverage for children as old as 26 and banning consumer co-payments for preventive care. Democrats are bragging about these benefits but they arent free and their cost will be built into premiums. And those are merely teasers for the many Washington-created dysfunctions that will soon distort insurance markets.
In Massachusetts Mr. Patrick says his price-control sally will be followed by reviewing what doctors and hospitals chargeor in other words for price controls on the medical services that make up most health spending. ObamaCare will gradually move in the same direction.
Or maybe not so gradually judging by the study released last last week by Richard Foster the Obama Administrations Medicare actuary. Mr. Foster predicts net national health spending will increase by about 1 annually above the status quo that is already estimated to be $4.7 trillion in 2019. This is one more rebuke to the White House fantasy that a new entitlement will lower health costs.
Although several provisions would help to reduce health care cost growth their impact would be more than offset through 2019 by the higher health expenditures resulting from the coverage expansions Mr. Foster writesand thats assuming everything goes according to plan. He considers it plausible and even probable that prices in the private market will rise as greater demand due to subsidized coverage runs into the relatively fixed supply of doctors and hospitals.
Most of ObamaCares unrealistic savings come from cranking down the way Medicare calculates its price controls and Mr. Foster writes that theyll grow more slowly than and in a way that was unrelated to the providers costs of furnishing services to beneficiaries. He expects that 15 of hospital budgets may be driven into deficits thus possibly jeopardizing access to care for beneficiaries. Isnt reform grand?
The official who will preside over this fiscal trainwreck is Donald Berwick the Harvard professor and chief of the Institute for Healthcare Improvement who the White House has nominated to run Medicare. Dr. Berwick explained in an interview last year that the British National Health Service has developed very good and very disciplined scientifically grounded policy-connected models for the evaluation of medical treatments from which we ought to learn. He added that The decision is not whether or not we will ration carethe decision is whether we will ration with our eyes open. And right now we are doing it blindly.
In fact the real choice with medical care as with any good or service is between rationing via politics and bureaucratic lines or via a competitive market and prices. As Democrats are showing by trying to pass a new insurance bill they want all U.S. health care to function like price-controlled Medicare. Dr. Berwicks job as the countrys largest purchaser of health care will be to find ways to offset the higher insurance and medical costs that ObamaCares subsidies and mandates will cause which will inevitably mean political rationing of care.
In a 17-minute 2600-word answer to a question about tax increases in Charlotte North Carolina earlier this month Mr. Obama mentioned that what weve done is weve embedded in how Medicare reimburses how Medicaid reimburses all these ideas to actually reduce the costs of care. The embedding via price controls is already underway.
