When selling his vision for health care reform to the American people, President-elect Barack Obama promised: “I will establish a new national health plan, similar to the plan available to federal employees and members of Congress, that gives every American the opportunity to buy affordable health coverage.” The Heritage Foundation has long been an advocate for organizing a national health exchange based on the same model that delivers care to members of Congress; the Federal Employees Health Benefits Program (FEHBP). The problem is that both Obama’s plan and the plan recently released by Sen. Max Baucus (D-MT) contain key differences from the FEHBP that will completely undermine its success.
Under the FEHBP, national and local private health plans compete on a level playing field for the business of members of Congress and thousands of federal government employees. The FEHBP has relatively few mandated benefits, which allows for both more choice in the types of plans available and keeps a lid on costs. The Obama plan, in particular, moves away from this model by significantly increasing the number of mandated specific benefits. This would send already rising insurance premiums through the roof. Worse, the Obama plan clearly intends to bring price controls into the health care sector. Obama promises Americans will be charged “fair” premiums and “minimal co-pays.” Presumably, Congress would define these terms. This would put the federal government in the business of deciding what constitutes a fair price and a proper co-payment for benefits and services, leading to some type of centralized rate setting or standardization of payments for providers. In the FEHBP, prices are market-based. No price regulation is imposed on plans or services.
Much more distressing, though, is the creation in both the Baucus and Obama plans of a government-run health care plan that would compete alongside the private plans. The FEHBP contains no such government entrant into the marketplace. The government-sponsored health exchange would naturally write the rules of competition to benefit the government plan. Imagine if baseball umpires and the New York Yankees both worked for George Steinbrenner. The Red Sox or Rays wouldn’t stand a chance. If you think a government entrant in the marketplace will not inevitably turn into a monopolistic financial disaster, then we’ve got two failed mortgage financing giants we’d like to sell you.
Responding to a campaign supporter in New Mexico this summer, Obama said, “If I were designing a system from scratch, I would probably go ahead with a single-payer system.” The Obama plan does not scrap our entire health care system in favor of a brand new government-run system, but it is definitely a deliberate first step down that path.
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