President Obama's Speech on Health Care Reform

Courtesy of Slate magazine's news summary from Thursday, September 10, I have attached the Los Angeles Times lead story on President Obama's speech to a joint session of Congress Wednesday night.

I watched the speech, and I thought that the president got off to a very good start. The first thing he did was to remind us of two of the main problems with the current system:

1. About 45 million people have no health insurance, and many, many people are without coverage from time to time;
2. Although most people are satisfied with the coverage they have (and that means about 265 million people), many are concerned that they could either lose their coverage, or that their insurance won't cover what they need it to.

Some time ago, I posted about an article in Commentary in which the authors identified three major problems of the health care system; President Obama dealt with two of them. (The third, the increasing cost of Medicare and Medicaid as the population ages, Mr. Obama, like everyone else, sidestepped. That is a scary subject. I'll refer to that later.)

I agree that these are major problems, and I agree that the "President's plan," which is actually embodied in five - that's five - bills in Congress addresses them to a substantial degree. The plan would provide coverage for many of those 45 million people. It would not guarantee coverage for illegal aliens, of whom there may be 10 million in the country. It would prevent insurance companies from denying coverage to people with pre-existing conditions, it would require many employers to provide health insurance for their workers, it would provide subsidies to help poor people pay for their insurance, and it would even require people who don't want (and would say that they don't need) health insurance to buy it.

These provisions, taken as a whole, also deal with the number two problem: concerns about losing one's coverage. The president's plan does not provide for full portability of health insurance from one employer to another, but it does take steps to ensure that people don't lose coverage when they lose or change their jobs. In particular, the provision about pre-existing conditions should reduce the fear that one could lose insurance coverage by accepting a better job.

Taken by themselves, these provisions are going to cost money: $900 billion over ten years, according to Mr. Obama's figures. If we assume that the average employer's policy on a worker costs about $12,000 per year, and that the 35 million additional people to be covered work out to about ten million households, that would come out to $120,000,000,000 ($120 billion) per year, or about $1.2 trillion over ten years, about 33% more than the president's estimate. The total may be reduced by providing low-ball (low-coverage, high-deductible) policies for a lot of the people who are currently without insurance.

The pre-existing conditions provision means that insurance companies are going to have to cover people they have intentionally avoided in the past. That is going to raise rates for everyone, because it is going to increase the risk the insurance providers are taking on. I'm not sure anyone knows how much the insurance companies are going to want to set aside to cover this increased risk.

One of the more interesting points is that this plan does not impose a government run health care system on the country. The U.S. Government is not nationalizing the health insurance companies or requiring them to transfer their policies to a government insurance agency. The proposed public option would be an insurer of last resort, and would probably have trouble competing with the private insurance firms. What remains unsaid is that a very large part of the health care costs in this country are already covered by U.S. Government agencies, and it is their fiscal problems that are going to break the system.

Some 80% of health care costs, that is, payments to doctors and hospitals, nursing homes and other providers, not insurance premiums, goes to pay for care for people over the age of 75. These people are, by and large, not covered by private insurance, but by a combination of Medicare and Medicaid. (Some of them receive services from the Veterans Administration.) In addition, the government pays for health insurance for its civilian and military employees and runs a system of military hospitals all over the world. So the government is already paying something like 80% of the charges incurred by the health care system, and is a significant provider of health care services. These costs are only going up, and the premiums for Medicare are not rising to meet them. What happens if millions of Americans are told that Medicare won't pay for Mom's bills at the home, and that they're going to have to pay for her care out of their own insurance, or out of pocket? Nice question.

Of course, the real question is which of the various Congressional proposals will make it to a conference committee, and what kind of Frankenstein's monster of a bill will be sent to the president for signature. (Remember that Victor Frankenstein was a doctor!) That's when we'll see how serious these people - both Republicans and Democrats - are about reforming health care.