ObamaCare Mulligan

http://online.wsj.com/article/SB10001424052748704133804575198322718759844.html

APRIL 26, 2010
ObamaCare Mulligan
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 couldn't 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 don't 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 state's 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 they'll 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 aren't 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 charge—or 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 Administration's 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 writes—and that's 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 ObamaCare's unrealistic "savings" come from cranking down the way Medicare calculates its price controls, and Mr. Foster writes that they'll 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." Isn't 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 care—the 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. Berwick's job as the country's largest purchaser of health care will be to find ways to offset the higher insurance and medical costs that ObamaCare's subsidies and mandates will cause, which will inevitably mean political rationing of care.

In a 17-minute, 2,600-word answer to a question about tax increases in Charlotte, North Carolina earlier this month, Mr. Obama mentioned that "what we've done is we've 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.