Frontpage Interview’s guests today are Sally Pipes and David Gratzer.
Sally Pipes is the president and CEO of the Pacific Research Institute and author of The Top Ten Myths of American Health Care.
David Gratzer is a Manhattan Institute senior fellow and the author of The Cure: How Capitalism Can Save American Health Care.
FP: Sally Pipes and David Gratzer, welcome to Frontpage Interview.
Sally Pipes, let me start with you.
Your thoughts on Obama’s speech?
Pipes: President Obama gave a very passionate 48-minute speech to Congress and the nation tonight, his 29th address on health care. He made it very clear about his goals for achieving universal coverage. It is clear that he believes that the government should control the health care sector.
He reiterated what is contained in most of the bills in the House (3) and Senate (1). He focused on putting controls on the insurance industry that would outlaw dropping coverage in the midst of an illness, putting annual or lifetime caps on what can be paid, and denying coverage for pre-existing conditions. He also mentioned the individual mandate, an employer mandate, and tax subsidies for those who cannot afford coverage. Then he said he supports the public option for those who cannot get insurance.
His oft-repeated statement that if you like your insurance and your doctor, nothing will change. I disagree. With an 8 percent payroll tax or levied fines on employers who do not provide coverage, employers will find it cheaper to drop coverage and pay the tax or the fine. As the Lewin Group forecast, about 119 million Americans will lose their employer-based coverage and be shifted into the public option, the government-run plan. This is almost one-third of Americans not the five percent he mentioned.
In reassuring the American people that his health care reform will be deficit neutral, he did say it would cost about $900 billion over 10 years. How would it be paid for? He said it would come from reducing fraud and abuse in the Medicare and Medicaid programs. It is interesting that these are government programs and they are fraught with such abuses and have not been eliminated. I doubt that $900 billion will be saved.
The President's speech reaffirmed his goal of achieving universal coverage by expanding the role of government in our health care system. It will be expensive, a global budget will have to be set, demand for care will not be met, and in the end, we will all be covered under the public option. The late Senator Ted Kennedy who the President quoted in the end of the speech will have his wish. We will all be covered under "Medicare for All." We will suffer long waiting lists, rationed care, and lack of access to the latest diagnostics and treatments.
FP: Ok, thank you.
Gratzer: From the point of view of delivery, it was a great speech -- no question about that. The President was eloquent and concise. The personal stories were moving; there were moments of humor; the tone was excellent. Tonight before Congress, millions of Americans were reminded of why they voted for this gentleman. He is superbly intelligent and well informed on this issue.
It reminds me of President Clinton's 1993 speech, also before Congress, also to tout a heath-care plan. Actually, several phrases were echoed tonight that we heard back then. And you'll remember the result: the Clinton White House proposal moved up in the polls -- but the gains proved transient.
The problem for Democrats then as now: the details.
FP: Ok and what about the details? As an expert on this issue, what do you think of the plan he has outlined? And tell us what you find significant in Ms. Pipes’ comments.
Gratzer: The plan as he outlined tonight? It sounds great, as Sally notes -- more choice of health plans, sensible regulation of the insurance industry, trimming of Medicare spending to curb future deficits, to name a few of his core ideas.
All of these proposals seem tempting, especially since he keeps telling us -- as Sally notes -- that insured Americans would face no problems.
But the details are another matter. Goodness, even the President acknowledged tonight that "some significant details to be ironed out."
Sally hits on the impact of the taxes needed to fund all this. Fair and important points. I'd make a different argument; the proposals as they are presently structured would be ruinous to our health-care system.
Take the idea of public insurance, modeled after Medicare, to compete with private insurance companies.
After months of hype for a vague proposal, it’s no surprise that almost three quarters of Americans polled said it couldn’t hurt to have the choice of a public health insurance plan – even if less than a third actually planned to use it.
But it can hurt to have the choice, and it can hurt badly. A new public insurance would be backed by the faith and credit of the United States taxpayer and supported by a Congress with a vested interest in stacking the “honest” competition. Indeed, the House bill would exempt the public plan from state taxes and regulations, require minimal capitalization, and establish Medicare-style rates of paying providers. Over time, the public plan – able to offer artificially low premiums compared to taxed, regulated, capitalized and non-price controlled private plans – would be a magnet for enrollment and accomplish what it has done in other countries: crowd out private insurance, reduce private investment, restrain national medical capacity, and shift more health decisions into the hands of government-appointed bureaucrats. The Lewin Group, a well-regarded consulting firm, has suggested that as many as 115 million Americans could go from private to public coverage.
The public option -- as the Administration calls it -- would be a Trojan horse for socialized medicine.
FP: Sally Pipes, let me turn to you.
What do you think will happen if Obama doesn't get the votes he needs to get the Public Option?
Pipes: He will probably say that reform should proceed with the consumer protections against insurance companies, the individual and employer mandates, and the tax subsidies but, if insurance companies do not reduce their costs, then that will be the trigger to implement the public option. And, David Gratzer has outlined in his comments the negative side effects of the public plan. These are very important points he has made and the American public needs to be aware of them.
FP: How exactly could Obama's plan hurt seniors -- as is often said it will?
Pipes: His plan is definitely going to hurt seniors even though he denied this in the speech. The major cuts to Medicare will result in seniors finding it more difficult to get doctors as doctors will not want to accept them because of the low reimbursement rates. The President also said that the private insurance plan for seniors who are on Medicare is very expensive. He is referring to the very successful Medicare Advantage program that seniors love. I believe it will be eliminated as a way to cut costs.
He also talked about the Independent Medicare Advisory Commission which will be established. This Commission will determine payments to doctors and hospitals and will, I believe, ultimately make it more difficult for seniors to get the care they need.
FP: What is the lesson of the Canadian example?
Pipes: The President keeps saying his reforms are not the Canadian-style single payer system. However, I believe that costs will not be reduced under his plan, private insurers will be crowded out of the market because of the costly mandated benefit plans, the public option will be priced cheaper, and we will all be left in the public option. Then the government will find that costs are still too high and that a global budget will have to be set. In Canada, that is 10 percent of GDP. But, the demand for care is much greater than what government is prepared to spend. As a result, Canadians suffer long waiting lists--17.3 weeks from seeing a primary care doctor to getting treatment by a specialist--and rationed care. Seniors are denied care based on cost.
FP: What kind of reform is needed then?
Pipes: We all agree that we want affordable, accessible, quality health care for all Americans. The question is how do we achieve that goal? There are two competing visions.
One relies on increasing the role of government in our health care system from the 47 percent already in the hands of government. This is the system that the President supports. As David Gratzer points out "the details are another matter. David went on to say that even the President acknowledged that "some significant details need to be ironed out." The other relies on patient-centered solutions--empowering doctors and patients. We need to reform the federal tax code so that those who go into the individual market can get their health insurance with pre-tax dollars just like those who get their insurance from their employer. People should be able to buy insurance across state lines so they can get the type of policy that fits their individual or family needs. As well, there are over 2000 mandates across the country that add between 20-50 percent to the cost of a premium. These should be reduced and then insurance costs would go down. The President refereed to medical malpractice reform and that is good. The cost of defensive medicine in this country is $210 billion a year.
Universal choice in health care will lead to universal coverage. As P.J. O'Rourke says "If you think health care is expensive now, just wait until it is free."
FP: David Gratzer, final thoughts?
Gratzer: Two points.
First, we need to do this right, not quickly.
The President told Congress last night that “our collective failure to meet this challenge – year after year, decade after decade – has led us to a breaking point.”
But has it really? When President Clinton conjured similar fears about pink slips and millions losing coverage to Congress in 1993, 15.3% of Americans were uninsured. In 2007, the percentage of Americans without insurance was, well, 15.3%. A solution to this problem is needed, but the fact that it hasn’t grown worse is a sign that Congress has time to think, and little reason to panic.
Second, while we can all agree that costs are too high, that too many lack insurance, that quality is too uneven, there is an alternative to government expansion.
Sally has nicely outlined some specific proposals. I'd simply point out the larger vision: in five-sixth of the economy, we value individual choice and competition. And there -- that is in the rest of the economy -- prices fall with time and quality rises. Health care needs to be reformed along those lines.
FP: Sally Pipes and David Gratzer, thank you for joining Frontpage Interview.