HillaryCare Blooms
All the Democratic health plans spurn market-based reforms.
Saturday, June 2, 2007 12:01 a.m. EDT
The HillaryCare experiment ended badly in 1994, but Democrats are back in the universal health-care laboratory. All the party's major Presidential candidates have or will introduce plans, and last week Hillary Clinton presented the first part of hers. The former First Lady joked that she's "tangled with this issue before" and has "the scars to show for it." But the lesson she seems to have learned is political, not substantive--that is, make any plans for government control gauzy and incremental, not grandiose.
Mrs. Clinton will unroll her universal plan later this year; last week's speech focused on lowering health-care costs, which stand at $1.9 trillion for 2005. She says she can trim that by "at least" $120 billion. A big lump of that figure comes from digitizing and integrating medical records. Not a bad idea, probably: A 2005 RAND study suggests it could produce $77 billion in net savings a year with 90% adoption. Computerized record-keeping is so unobjectionable that it's also a pet issue of Newt Gingrich, among other Republicans.
Mrs. Clinton also nodded at medical malpractice reform. She neglected, however, to support the proposals that would actually reduce costs, such as punitive damage caps and specialized medical courts. These, not incidentally, are also the programs most vigorously opposed by the tort bar.
Her main thrust addressed prevention to reduce the incidence of diabetes, heart disease and other chronic conditions. Mrs. Clinton would do so by mandating that insurers re-orient their policies to cover prevention, at least when dealing with the federal government--no doubt with other mandates to follow.
This was only the first of Mrs. Clinton's promises to crack down on the "marketing and schemes" of the insurance industry. She decried companies, for instance, that "discriminate" against those with pre-existing conditions, and would require that "anyone" be allowed to join a plan, whenever. This is called "guaranteed issue"; it allows people to wait until they're sick before seeking insurance, making it less affordable for everyone else.
Guaranteed issue is precisely one of the mandates that makes insurance so expensive in states like Massachusetts, New York and New Jersey. Policies might be more affordable if the insurance market were deregulated; now, the market is balkanized by 50 separate sets of state regulations, inhibiting innovation and economies of scale. But for the Senator from New York, it's easier to blame nefarious business.
Mrs. Clinton also took some predictable swipes against the pharmaceutical companies for the cost of prescription drugs. She would allow Medicare to negotiate lower prices and allow for reimportation from foreign countries. These drugs, of course, are cheaper because foreign governments impose price controls on pharmaceuticals that mostly originated in the U.S.
The Senator also discussed at length her proposal to create a regulatory pathway for the approval of generic copies of biotechnology medicines. Not only is such a program shot through with serious scientific and intellectual-property concerns, but the best research indicates that the savings range for follow-on biologics falls between 5% and 13% over the original drugs. The U.S. spent $52.7 billion on biologics in 2005, so the potential savings are small while what Mrs. Clinton suggests could hamstring the most innovative medical sector.
Earlier this week, Senator Barack Obama offered his own full-dress plan, which promises to "provide coverage for all." The Presidential hopeful latched on to many of the same worn-out policy ideas as Mrs. Clinton--guaranteed issue, drug reimportation and more severe insurance regulation. As it turns out, though, Mr. Obama's program isn't necessarily universal. He would retain the private insurance system while creating a parallel public health plan based on the one currently available for federal employees; a sliding subsidy would be provided to those with lower incomes. The campaign says this will cost the federal government between $50 billion and $65 billion per year, and will be paid for by repealing the Bush tax cuts of 2001 and 2003.
The Obama plan has been roughed up on the left because it doesn't mandate 100% coverage outright, aiming instead to cut down the number of uninsured. The John Edwards camp calls the program "simply inadequate." For his part, Mr. Edwards has offered a universal plan that would require businesses to cover their employees or else pay into a government fund to provide coverage; and he'd create a new, expanded federal entitlement program modeled after Medicare. Mr. Edwards estimates it will cost between $90 billion and $120 billion a year--and some experts say the price will be higher than that--which he proposes to fund by raising taxes. At least Mr. Edwards is somewhat honest about cost, as opposed to the free-lunchism of Mrs. Clinton and Mr. Obama. Put simply, a universal health-care system can't be financed with savings from computerized medical records.
What's most striking is that all these Democratic proposals spurn market reforms and the tax code, which is biased toward health spending. Because third-party businesses--but not individuals--can deduct health expenditures, the tax code insulates those with private insurance from the real costs of their treatment decisions and then prices uninsured Americans out of the market. Instead of aggrandizing more power to the government, changing this arrangement would devolve more control to patients and their doctors, and reduce overall spending as part of the bargain.
In any event, it will be interesting to see in the coming months how Mrs. Clinton negotiates what she calls "the moral imperative" to extend universal coverage to all Americans. Given that most of her proposals so far would raise, not lower, the cost of health care, she might want to go back to the drawing board.
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