Obama Should Focus on Health Care Prices Not Provision

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President Obama suggests that his dipping popularity is due to the difficult decisions that he has to make.  But if health care is any example, the problem is the choices he is taking, not the issues themselves.

Americans are protesting President Obama's health reforms

Americans are protesting President Obama's health reforms

Americans receive the best health services anywhere in the world.  That’s why patients from Canada, the UK and other nations with socialized medicine come here for treatment.

But Americans pay more for health care than they need to.  There are three steps that President Obama could take to fix the problem.

First, get rid of Congressional and State mandates.  Democrats don’t have a monopoly on knowing what is best for people.  As usual when politicians distort the market, costs rise.  Car insurance doesn’t cover oil changes but health insurance companies are forced to provide gilt-edged plans covering just about any medical condition.  The result is higher prices.

Moreover, Congress has forced insurance companies to take new patients with pre-existing conditions at higher premiums.  Not surprisingly, the insurance companies push many patients into this scheme who otherwise would have been accepted at regular rates, and thereby secure higher revenues.  Meanwhile, consumers have no incentive to pay insurance when they are healthy if they know they can obtain it when they are sick.  Talk about a way to screw up the price mechanism.

Second, remove barriers to competition.  Congress has established state monopolies that can command prices that otherwise simply would not fly.  That makes no sense.  Allow insurers to compete for customers across state borders and insurance premiums will drop dramatically.

Third, cap awards from healthcare lawsuits.  The threat of unlimited financial awards against healthcare providers is a market imperfection that Congress could easily eliminate.  Cap the rewards at reasonable levels and malpractice insurance will stabilize at lower levels, pushing medical costs down and the prices that are charged.

If the President really wanted to reduce health charges, he would pursue each of these solutions.  But none suit him politically.  Tort lawyers are one of the big three financiers of his party machinery (along with trade unions and non-governmental organizations) so he won’t limit their income-raising potential.  And his Democrat Party is ideologically wedded to federal mandates, which can best be maintained through monopolies.

What the President is really trying to do is expand government by completely taking over the health care industry.  So he wants to engineer medical coverage for all the uninsured, whether they want coverage or not, claiming this will reduce “costs” by forcing excess profits out of the system.  This fools nobody.  Providing millions of new patients with government run healthcare can only push costs up.

The President is also confusing costs and prices.  The problem with the U.S. healthcare system is the prices that are charged, often the insurance premiums, not the actual costs.

One-third of those without insurance don’t want to buy coverage, preferring to pay as they go.  The young in particular are often prepared to pay for their health care as and when they need it – and it often makes financial sense.  The same is true for the wealthy.  But many of these folks, and many of the remaining two-thirds, as well as many of those paying high premiums now, would buy limited coverage if it were available.

Americans want health reforms but President Obama has incorrectly defined the problem (health care instead of health care prices) and come up with the wrong solution (government take over rather than reducing market distortions caused by the government).

As he continues to pull the nation in the wrong direction on health care, expect President Obama’s popularity to continue to fall.  Public demonstrations against his leadership are now becoming commonplace.

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