Obama resurrects health care reform

President Obama today released his health care reform proposal in advance of the planned bi-partisan summit on health care reform set for this Thursday. In all fairness, Mr. Obama's plan is in reality, a hybrid plan crafted by Speaker Nancy Pelosi and Senator Harry Reid post the Massachusetts election.  The 'plan' as presented on the White House website bears a striking resemblance to the Senate version with some minor adjustments and of course, some new twists politically motivated (http://www.whitehouse.gov/health-care-meeting/proposal).

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  The plan calls for nearly $1 trillion in new spending and purports to reduce the budget deficit by $100 billion over the next decade and $1 trillion in the decade thereafter. 
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  Establishes an excise tax on high cost health plans that kicks-in at $27,500 but as in previous House and Senate versions, exempts union health plans.
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  Establishes an Insurance Rate Authority with the power to effectively regulate premium cost increases and for that matter, premium costs.  Essentially, this provision would establish price controls on private health insurance plans.
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  Provides tax credits to families with incomes below $88,000 in order to improve the affordability of coverage.  In addition, the President's proposal provides for additional government funding or subsidies to insurers to lower the cost of health insurance.
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  Requires all citizens to obtain health insurance or face a penalty or tax.
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  Creates the Health Insurance Exchange as a means for citizens to buy health insurance but does not provide for a government option.
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  Does not require small businesses to provide health insurance but does provide for an assessment or tax per worker if the employer does not provide health insurance.
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  Eliminates the right of insurers to apply pre-existing condition clauses and life-time maximums.
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  Provides for improved regulations to eliminate waste, fraud and abuse.
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  Expands access to Medicaid (eligibility) as a means of covering more citizens with limited incomes.
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  Improves the Medicaid match to all states, essentially continuing the ARRA provisions for enhanced Medicaid matching and provides for 100% assistance to all states for newly eligible Medicaid beneficiaries created as a result of new eligibility limits.
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  Provides for additional transfers from general funds to Social Security to cover any additional costs born within the Trust Fund as a result of the reform bill.

As I read through the President's proposal, it is apparent that his view on reforming health care is nearly identical to the Senate's view.  The same 'government' approach to reforming health care that polls consistently indicate the vast majority of Americans oppose is precisely what the President is proposing.  Moreover, the President's plan is loaded with the same economic flaws and policy nightmares that brought the original House and Senate versions to a screeching halt; plus he has added new nonsensical provisions.  Below is my quick summary of the major problems and illogical assumptions that riddle the President's proposal.

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  As in the House and the Senate versions, the President's proposal alludes to deficit reduction.  This is not only economically illogical but from a practical perspective, pure lunacy.  Unless additional taxes are raised, there is no way to create such a wide spread expansion of coverage without assuming additional costs. 
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  The President suggests, as he has in the past, that a major source of funding will come from savings via improved efficiency and enhanced protection against fraud and abuse.  Although no numbers are shared, studies consistently conclude that without significant program reforms in Medicare and Medicaid, such savings are minimal.  What is always puzzling to me is why is it necessary to invest $1 trillion in order to reap the savings, if the same actually exist?
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  The President proposes de facto price controls on insurance premiums.  I recall the Nixon and Carter era where price controls failed miserably.  The only outcome from price controls that is certain is a shortage of willing insurance companies, reduced benefits, access to care issues, and out and out rationing.  This provision is by far, the most baffling to me.
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  The President proposes to provide tax credits to families earning $88,000 or less per year in order to purchase health insurance.  I understand the rationale but the implementation defies economic reality.  How do you provide tax credits to people who pay virtually no income tax or no tax at all?
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  The proposal creates at least a dozen new government bureaucracies, none of which are discussed openly or in fact, funded.
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  Finally, nothing within the plan changes the cost-curve or for that matter, tackles the major economic problem within health care; the cost of entitlements, namely Medicare and Medicaid.  In reality, the President creates more entitlements and leaves all of the existing fundamental entitlement flaws in place.  I believe the report from the Medicare Actuary regarding the last round of health care reform (of which the President's proposal is alarmingly similar) concluded that reform actually increased the spending trajectory and creates more deficits faster as opposed to the present Medicare program pace, left unadulterated (http://www.kaiserhealthnews.org/Daily-Reports/2009/December/14/cms-actuary.aspx)