Wednesday, August 12, 2009

Debating the President's Portsmouth Pitch

While the power hungry Obama was full of platitudes at his Portsmouth hand-picked townhall Tuesday, manipulating the American people and vilifying doctors, Keith Hennessey was carefully laying out the facts. This is the health care system I believe in. The rest is theft of private property:

Debating the President's Portsmouth Pitch
By Keith Hennessey, August 12, 2009

The President talked about health care reform at yesterday's town hall meeting in Portsmouth, New Hampshire. There is so much substance to debate that I have broken my response up into a bunch of small parts. I will spread my response out among a bunch of small posts over the next two days.

This is the first in a series of posts. I had written this as one piece, but it was way too long. So I am going to try it in lots of little nibbles. I will post one nibble every two hours over the next two days.

At a town hall meeting in Portsmouth, New Hampshire yesterday, the President said:

THE PRESIDENT: "(L)et me just say there's been a long and vigorous debate about this, and that's how it should be. That's what America is about, is we have a vigorous debate. That's why we have a democracy. But I do hope that we will talk with each other and not over each other -- (applause) -- because one of the objectives of democracy and debate is, is that we start refining our own views because maybe other people have different perspectives, things we didn't think of.

Where we do disagree, let's disagree over things that are real, not these wild misrepresentations that bear no resemblance to anything that's actually been proposed."

In the spirit of informed and vigorous debate, let's look at what the President said about the pending legislation at yesterday's Portsmouth town hall.

THE PRESIDENT: "Now, let me just start by setting the record straight on a few things I've been hearing out here -- (laughter) -- about reform. Under the reform we're proposing, if you like your doctor, you can keep your doctor. If you like your health care plan, you can keep your health care plan."

And yet here is what CBO said about the House bill:

THE PRESIDENT: "In addition, CBO and the JCT staff estimate that nearly 6 million other people who would be covered by an employment-based plan under current law would not have such coverage under the proposal. That figure includes part-time employees, who could receive subsidies via an exchange even though they have an employer's offer of coverage, and about 3 million people who would not have an employer's offer of coverage under the proposal. Firms that would choose not to offer coverage as a result of the proposal would tend to be smaller employers and those that predominantly employ lower-wage workers--people who would be eligible for subsidies through the exchanges--although some workers who were not eligible for subsidies through the exchanges also would not have coverage available through their employers. Whether those changes in coverage would represent the dropping of existing coverage or a lack of offers of new coverage is difficult to determine. (p. 5)"

According to CBO, the President's statement is incorrect for a portion of these 6 million people who as a result of the House bill would lose employment-based coverage they would otherwise have under current law. Some of those 6 million people would lose the opportunity to get employment-based coverage, while others would "represent the dropping of existing coverage." CBO reached similar conclusions. Here is a more detailed explanation of this problem ( that I wrote for an earlier draft of the Kennedy-Dodd bill, under which 10 million people would not have lost the health plan they would otherwise have under current law. CBO dialed this number down to 3 million for a later draft of Kennedy-Dodd.

This is an inevitable consequence of moving away from a system that is so heavily biased toward higher subsidies for employment-based coverage. My preferred plan ( would have a similar effect. Nonetheless, the President is overpromising, at least relative to CBO's view of the House bill.

This is the second in a series of posts on the President's comments about health care reform at yesterday's town hall in Portsmouth, New Hampshire. Here is the President again:

THE PRESIDENT: "You will not be waiting in any lines. This is not about putting the government in charge of your health insurance."

And yet section 3103 of the Senate HELP Committee bill ( would give the Secretary of Health and Human Services authority to appoint a Medical Advisory Council that would determine what items and services are "essential" for a "qualified health plan," and, by implication, which benefits are not essential. The House bill is parallel but less specific (, creating an "independent public/private advisory committee," in which the members are chosen by the government. In both cases, the recommendations would be packaged together and approved or disapproved en bloc by the Executive Branch and Congress.

These bills would give government officials, or people chosen by the government, authority to determine benefit packages, copayments and deductibles, relative premiums, as well as health plan expenses and profits. They would, in effect, turn health insurance into a utility, run by private companies, but with policies and rates set by the government. While privately-owned firms would be implementing the decisions, the key decisions would be made by government officials or people chosen by government officials.

THE PRESIDENT: "I don't think government bureaucrats should be meddling, but I also don't think insurance company bureaucrats should be meddling. That's the health care system I believe in."

Resources are constrained, and so someone has to make the cost-benefit decision, either by creating a rule or making decisions on a case-by-case basis. Many of those decisions are now made by insurers and employers. The House and Senate bills would move some of those decisions into the government. Changing the locus of the decision does not relax the resource constraint. It just changes who has power and control.

The health care system I believe in moves no more decisions into the hands of the government, and instead creates incentives for people to control more of these decisions and make these hard tradeoffs for themselves. Insurance would evolve from pre-paid medical care, as it is today for many, to a more traditional catastrophic protection model, as we now have for other kinds of insurance.