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8 | Letter from America
justifiable reason for the American health system winds appear to be blowing against points two insurance company or Medicare. The cost is
to be roughly twice as expensive as the UK’s and three as a result. If we were to handicap the then “socialised” across the country in the form
while simultaneously leaving a large minority of odds of success we would bet that the health bill, of higher insurance premiums and taxes for all.
the country uninsured or underinsured. The when it finally reaches the President’s desk, will Many libertarian-leaning think tanks have
question, of course, becomes whether Mr. be absent these two components. proposed “consumer directed health care” as a
Obama’s plan is the best way forward. It is our The remaining points are far less controversial. possible remedy in the belief that patients would
view that it is not because it doesn’t address the Laws vary from state to state on insuring new be more conscious of the cost of their care if
root causes of the country’s out-of-control health patients with pre-existing conditions, and while properly incentivised. Former President George
care costs. In the end, it promises to add we oppose government meddling in private W. Bush, despite his serial incompetence while in
considerable cost to the existing system without industry, we see this point as relatively benign office, managed to stumble on to a good idea
fixing the problems it was designed to fix. compared to points one and two. Similarly, the with Health Savings Accounts (”HSAs”) coupled
exchange for comparison shopping is really a to high-deductible policies. The high deductibles
What Exactly is ObamaCare? non-factor barely worth mentioning. Expansion and tax-advantaged savings accounts gave
Despite all of the hype surrounding the of Medicaid – the state-funded health scheme for patients every incentive to ration the medical
President’s plan, it is surprisingly hard to get a low-income Americans – is always a contentious services provided. These plans were a major step
coherent answer about what it actually is and issue, as are all welfare programs in the United in the right direction, though for them to be
what it proposes to do. At time of writing there States. We would oppose any expansion of effective in lowering costs at the national level
are competing versions of the bill working their Medicare on the grounds of cost, but we would they would have to be used by a much larger
way through congress. Most versions, however, view this as “nothing new under the sun.” And share of the population.
share a core set of points. finally, the increase in taxes on high-income The former president also proposed making
The Wall Street Journal summarises the basic earners was always a priority of the Obama employer-provided insurance “taxable” (though
features of the various ObamaCare proposals, Administration. With or without health reform with an offsetting tax credit) in order to make
and we have relayed them below. ObamaCare this was, unfortunately, a virtual certainty. Americans better realise the true cash value of
wi
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ll: the benefits that they have come to view as “free.”
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Create federal subsidies to buy insurance ObamaCare: The Prognosis We view this as another major step in the right
Establish a public health insurance option to It remains to be seen what, if any, bill emerges direction. The model of employer-provided
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compete with private plans from the current negotiations. But it is our view health insurance is a relic of World War II wage
Require that Americans have health insurance that all of the proposals on the table will controls (companies began offering health
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under penalty of fine ultimately fail because they do not address the insurance because they were not permitted to
Prohibit insurers from rejecting customers real underlying problems that make American raise wages during the war), and it serves little
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over pre-existing conditions health care so expensive. Yes, more people would purpose today. In fact, it is harmful to America’s
Establish an “exchange” where people can have coverage. But we’re all still paying far too competitive position. US companies are
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comparison-shop much! burdened with enormous benefits expenses that
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Cap out-of-pocket expenses If Mr. Obama were truly interested in making many of their foreign rivals are not; this was a
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Expand Medicaid health care affordable and accessible, he would contributing factor to the demise of General
Raise taxes on higher-income earners (and start with addressing the way that doctors are Motors and Chrysler.
perhaps the middle class too) in order to pay compensated. Doctors are not paid for “results;” President Obama’s health proposals, in
for all of this they are instead compensated based on a fee-for- contrast, do little more than make the woefully
The first point is essentially another welfare service model in which they are incentivised to inefficient status quo more available and, alas,
programme, of which this country has several. order every redundant and unnecessary more expensive. This is not true reform by any
We will not comment on the pros and cons of procedure under the sun. If doctors were paid stretch of the imagination.
welfare; that is best left for another article. But based on results or even based on the conditions In the end, the United States has a choice of
we will comment on the unintended treated, they could take a more holistic – and three possible options. We can keep the current
consequences of a subsidy. A federal subsidy will cost effective – approach. (Private insurers often system, which is neither a free market system nor
increase demand for health care (because more use Medicare’s pricing as the basis for their own; a socialised system but rather a Frankenstein’s
people will have access – which is, of course, not reforming Medicare is thus the first step to monster pieced together with the worst aspects
a bad thing), but it will do nothing to lower making health insurance more affordable.) of both – this is by far the worst option. We
costs. More people will have insurance but we Fear of malpractice lawsuits adds fuel to this could also choose to go the route of the UK and
will all continue to pay outrageous prices. fire. Doctors would rather err on the side of Canada and opt for full socialisation. Given the
The second point is the most contentious providing too many services as a way of embarrassingly inefficient way in which
because many believe it is a back door to fully “proving” that they left no stone uncovered. Medicare and Medicaid are managed, this too is
socialised medicine, and there is some truth to Writing for the Financial Times, Mort a bad option for the United States.
this argument. A state-funded insurance scheme Zuckerman succinctly sums up the issue: “The This leaves the final option – eliminating the
would have an enormous advantage in pricing cheapest malpractice insurance for a physician fee-for-service model and employer-provided
over private sector competitors, as it would have seems to be ordering multiple tests or CAT scans. insurance and replacing them with an expanded
no shareholders to be accountable to. The end We have volume without value.” version of the HSA scheme. To appease
result would be that most or all private insurance This means that health reform, if it is to be Democrats concerned about the plight of the
providers would leave the market – leaving the effective, must also involve tort reform – poor and uninsured, a modest subsidy could be
state as the only viable insurance provider. When something that is anathema to the Democrats incorporated into the plan for lower-income
combined with the third point – requiring and one of their major supporters: the legal earners. This should result in greater
Americans to purchase insurance, in this case lobby. responsibility by doctors and patients alike, and
from the state – you have, in effect, socialised The patient, unless he is paying cash, is usually unlike ObamaCare it wouldn’t run the risk of
medicine. This is something that most unaware of the true expense of the medical bankrupting the country and saddling future
Americans oppose at this time, and the political services received, as the tab is paid by his generations with unpayable debts.
September 2009 Investment International www.investmentinternational.com
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