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Health Care Reform: Have The Clintons Been Retouching The X Rays?


Economic Viewpoint

HEALTH-CARE REFORM: HAVE THE CLINTONS BEEN RETOUCHING THE X-RAYS?

Once again, Americans are being sold a bill of goods by politicians. By collectivizing the delivery of health services, they are promising more care at a lower cost with no decline in quality. Before buying this fantasy, consider the four essential facts of health-care reform:

Clinton's plan amounts to a gigantic new entitlement with no credible means of financing, at a time of swollen budget deficits.

Once a plan is enacted, there will be no going back. Medical institutions will be permanently altered, and we will be saddled with a new health entitlement three times as large as Social Security and five times as large as Medicare. At a minimum, this entitlement will use up 17.2% of gross domestic product.

Financing will have to be found for the new entitlement. A payroll tax would take a big toll on employment. The remaining source of untapped private wealth is pension funds. Assistant Treasury Secretary Alicia H. Munnell has a plan ready that will end the tax deductibility of pension contributions and the tax deferral of pension fund earnings.

Misinformation, not full disclosure, will characterize the debate on health-care reform. The First Lady and President Clinton have set the tone by fanning insecurity while appealing to conscience with stories of the uninsured that pull at the heartstrings. Who can oppose a universal system that would cost less (without price controls or decline in access and quality) while maintaining consumer choice and fee-for-service insur-ance plans?

CRIMES OF THE HEART. But what the First Lady and the President are telling us about their health-care plan doesn't jibe with the contents of the 239-page document they have submitted to Congress. The Clintons argue that current health spending--at 14% of GDP--is too high, and that there are savings galore with which to provide universal care and cut the federal budget deficit. However, tables in the Clintons' plan show costs jumping to 17% of GDP by 1996, a figure many experts regard as understated.

The plan is coercive and undercuts choice in many ways. It requires most Americans to buy coverage through regional monopolies known as health alliances. The federal government is to set ceilings on how much each alliance can spend. The goal is to cap the health-care demand of those who are deemed to have too much access in order to free up supply for those who are currently deemed to have too little. The plan mandates "care based only on differences of need."

Moreover, no alliance can offer a plan that costs 20% more than the average price of all plans within the alliance. This rule, together with the spending ceilings, may preclude fee-for-service plans that allow patients to choose their doctors and medical services. Budgetary pressures and penalties for exceeding limits will push alliances to choose plans on cost, not quality.

A principal source of the claimed savings comes from "gatekeepers" who are empowered to limit patient access to expensive medical specialists. The plan calls for "new criminal penalties" for "the payment of bribes or gratuities to influence the delivery of health services and coverage." Whether this would apply to someone determined to disentangle a child, spouse, or parent from red tape within the plan would presumably be determined by an enforcement bureaucrat.

GEOGRAPHIC ROULETTE. The new criminal penalties suggest that the plan's architects know that not all will be well with their scheme to redistribute health care. The one-size-fits-all benefits package burdens every consumer with premiums covering services--such as alcohol and drug rehabilitation and abortion--that relatively few will use, while making other treatments more difficult to obtain. In addition, the reform requires that every health plan offered by an alliance accept every applicant at the same premium, regardless of age, lifestyle, and preexisting conditions.

To complete the redistribution, the plan forces high-income areas to subsidize the costs of low-income groups. It specifies that in setting up plan regions, states "may not subdivide a primary metropolitan statistical area." A region that comprises an inner city and the surrounding suburbs "is presumed to be in compliance."

In short, the homeless, the AIDS-infected, and babies born to drug addicts will drive up the premiums paid by employers and residents of regions containing inner cities. This will affect property values and business location decisions.

This isn't the half of it. Meanwhile, the Clintons claim that they can pay for reform with budget savings and new tax revenues. They envisage $238 billion in Medicare and Medicaid cutbacks--but simultaneously, their plan adds $152 billion in new prescription drug and long-term health-care programs. They also foresee $47 billion in "other federal program savings," $105 billion in new sin taxes, and $51 billion in new income taxes on projected higher wages that employers can pay once health insurance doesn't cost so much. Obviously, this is no financing at all, so say goodbye to your pension.PAUL CRAIG ROBERTS


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