David R. Henderson  

Obama's Contradiction on Health Care

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Obama Speaks... Monogamy and Heterogeneity...

Here are two segments of Obama's speech this evening. They were within two paragraphs of each other:

Despite all this, the insurance companies and their allies don't like this idea. They argue that these private companies can't fairly compete with the government. And they'd be right if taxpayers were subsidizing this public insurance option. But they won't be. I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. But by avoiding some of the overhead that gets eaten up at private companies by profits, excessive administrative costs and executive salaries, it could provide a good deal for consumers. It would also keep pressure on private insurers to keep their policies affordable and treat their customers better, the same way public colleges and universities provide additional choice and competition to students without in any way inhibiting a vibrant system of private colleges and universities.[bold is mine]
Finally, let me discuss an issue that is a great concern to me, to members of this chamber, and to the public - and that is how we pay for this plan. [bold is mine]

So let me get this straight. The "public option" will be self-financing, with no taxpayer money, but the best analogy he comes up with is of tax-financed universities. Then, two paragraphs later, he has "great concern" about how to pay for the government option. He then goes on to say that if it needs to be paid for, he'll cut spending elsewhere. Aside from the implausibility of government cutting any spending, if his first pledge was right and if he believed it, he wouldn't have any concern about paying for the government option.


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COMMENTS (14 to date)
ed writes:

Your point about "public" universities receiving tax money is a good one.

But your other point is mistaken; the plans call for large subsidies for individuals to buy insurance, which may be spent on public or private plans. The analogy would be something like pell grants, which would cost tax money even if the public universities were not subsidized directly and thus had to compete evenly with private plans.

GabbyD writes:

"...if he believed it, he wouldn't have any concern about paying for the government option."

i think ur right, prof. he doesnt have any concern about paying for it.

in the very next sentence, he promises:

"Here's what you need to know. First, I will not sign a plan that adds one dime to our deficits – either now or in the future. Period. And to prove that I'm serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don't materialize. ..."

he says no EXTRA TOTAL spending will occur coz of this reform.

whether its true or not, i'm not sure.

but this is what he said.

David writes:

He also stated at some point that he expects his plan to cost $900 billion over 10 years. Excuse me, but if this program paid for itself why does he expect it to cost that much?

He also claimed that the program won't add "a dime" to the deficit and he won't sign a bill that does add to the deficit. My first reaction was that this was excellent news because that will never happen! However, he later went into how tax/revenue increases are going to be part of the bill in order to pay for it. Oh well.

Robert Speirs writes:

If millions of people who can't afford to pay for health care are, thanks to the new plan, going to receive health care, isn't this going to cost some money? And since, by definition, the ones to be receiving the new health care can't afford to pay for it, who will? Does Obama even understand this himself? If he does, how stupid does he think Americans are?

If you've half a mind to be a liberal, that's all it takes.

mark writes:

I think the discrepancy can be explained by remembering that "the public option" is different from the "expand Medicaid" and "subsidies to buy insurance" aspects of the bill. Even if the public option vehicle were truly self sufficient or nonexistent, the bill still calls for tens of billions of spending each year that need to be funded.

Karl Smith writes:

I don't mean this as a personal criticism, I really don't, but if at this point in the conversation David Henderson doesn't realize that the public plan and the cost of health care reform are two totally different issues then is there really any hope / point in trying to address public opinion?

What has to be our estimate of what the average person understands? It of course would be ideal if we had a full conversation in which the majority citizenry were participating and understood the issues. But, to the extent that this is impossible should the reaction be to work on it anyway or abandon the project?

"They argue that these private companies can't fairly compete with the government. And they'd be right if taxpayers were subsidizing this public insurance option. But they won't be. I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects."

The same was said about Fannie Mae and Freddie Mac. They were government sponsored entities that were considered to be "off-budget" of the government. And, for some strange reason, they had to pay around 40bps less than similarly-held investment grade bonds. You can devise any nomenclature that you want, but the fact remained that the government paid that difference with its implicit guarantee of the bonds.

The exact same thing will happen again if a public option were to go forward.

JDW
http://demandequilibrium.blogspot.com/

Zillion writes:

I like how he thinks that the public option will "[avoid] some of the overhead that gets eaten up at private companies by profits, excessive administrative costs and executive salaries."

Really? Are government-run entities well-known for avoiding overhead, particularly administrative costs and salaries?

Boonton writes:

The argument against the public plan, though, is likewise flawed. It can only put private insurance out of business if Congress votes massive subsidies. If they don't (because the voters don't think the public plan is all that great, for example), it becomes a minor player.

He also stated at some point that he expects his plan to cost $900 billion over 10 years. Excuse me, but if this program paid for itself why does he expect it to cost that much?

$900B / 10 years = $90B a year. GDP in 2008 was about $14.265T. No it's not free, not even inexpensive but relatively speaking it's not an unmanageable cost....and not unreasonable to compare to the ongoing costs of Iraq and Afghanistan which didn't even seem to produce cheap oil at the end of the day.

Debbie Smith writes:

Obama says that "overhead...gets eaten up...by profits;" isn't this the other way around - don't profits actually get eaten up by overhead costs???

He apparently lacks the fundamental knowledge of running anything, a business or even a government program, successfully...and we want to entrust his government with such a large segment of the US economy? What are we thinking?

John Thacker writes:

He also contradicted himself when addressing illegal immigrants.

He claimed that forcing the young to buy health insurance would save money because young people being without insurance "costs all the rest of us money," in that "we pay for those people's expensive emergency room visits."

However, he then claimed that "the reforms I'm proposing would not apply to those who are here illegally." Why? Illegal immigrants aren't turned away from emergency rooms either. If forcing citizens without health insurance to buy it saves us all money because we don't pay for their expensive emergency room visits, wouldn't forcing illegal immigrants to do so also save us money?

Logical consistency from a politician may be too much to ask for.

Boonton writes:

From what I understand the 'lie' was that while illegals could technically buy a private insurance plan or a gov't plan (should the public option pass), they wouldn't get gov't help. Since either are likely to be kind of expensive I think most illegal immigrants would not be buying insurance. Even so, I think most people, when they say they don't want a plan that covers illegals, means they don't want any subsidies going to them. The GOP has taken an additional step of introducing an amendment (that got defeated) that would have prevented any type of plan that could cover them, even private. I suppose the GOP wants to see if they can make their negatives with Hispanics top their negatives with African Americans.

I don't quite see the point of making it illegal for illegal aliens to buy their own insurance? It's not like they don't get health care if they show up at an ER. At least with insurance they will be able to cover a chunck of the cost.

John Thacker writes:
The GOP has taken an additional step of introducing an amendment (that got defeated) that would have prevented any type of plan that could cover them, even private.

No, what the GOP offered was an amendment that would go further to verify immigration status, FWIW. The reason you don't see the point is that you're apparently ill-informed.

It's not unreasonable to expect that illegal immigrants will be covered-- the Courts have found that illegal immigrants must be covered under (subsidized) public education, and surely health is important. Besides, as I pointed out above, Obama's position of not including illegal immigrants is inconsistent with his position that forcing young people to buy insurance will save us money on emergency room costs. Illegal immigrants also have emergency room access.

Boonton writes:

There was a requirement that Medicaid patients prove their citizenship status, only a handful of illegals turned up but many citizens ended up losing coverage because they couldn't quickly produce the required documents, the program was dropped. If this is the nature of the 'liar' heckle, then the facts seem more on Obama's side. Just because the bill may not have as many annoying proof requirements as you would like doesn't mean its fair to say the bill covers illegals.

Do you have any stats on total unreimbursed ER expenses from illegals versus total healthcare spending? (Here I'm also real skeptical of the idea of 'cost'. An illegal alien goes to an ER with a broken leg, gets a cast and leaves without ever paying. What does this cost? Whatever the hospital says it costs. But if the hospital says this cost $7,000 does it really or is the hospital just saying it would like to get $7,000 for the patch job?)

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