Ocean State Policy Research Institute

OSPRI will certainly have much more to say on the subject but today I'd like to focus on just one quote from the president - and no, it's not the famous June 15th quote where he said, "If you like your healthcare plan, you'll be able to keep your healthcare plan, period," which was followed on June 19th with a release stating, "White House officials suggest the president's rhetoric shouldn't be taken literally." That one is just too easy to ridicule. I'd like to look at one with a little (very little) more meat.

On July 20th at the Children's National Medical Center in Washington, president Obama said, "The (healthcare) reforms we seek would bring greater competition, choice, savings and inefficiencies to our health care system."

As a true believer in free markets I get a big kick out of the first assertion - that the president's plan would increase competition. There are currently about 1300 companies competing for your insurance business and Obama thinks that by adding one more (the government plan) we will achieve competition nirvana.

Obama also claims the plan will increase choice. I suppose short sided thinkers believe 1301 insurance companies are more than 1300 and even with my public school education I can understand the math. But despite that education, I also understand that when the government creates a purchasing option it will naturally eliminate private insurance because they won't be able to compete with the heavily subsidized government plan.

The Lewin Group, a non-partisan research organization praised by both Democrats and Republicans, estimates that 70% of insurance companies will be put out of business almost immediately. Assuming that that is the full extent of the demise of the insurance industry (which I don't believe) then one must also assume that 391 choices (30% of the 1300 insurance companies plus the government plan) provides greater choice than 1300. Obama must have been a New Math student.

Our president also claims the plan will create greater savings. There are three plans being considered - the House, Senate and Senate Finance. The Congressional Budget Office (CBO) estimates that the House bill has a $1.3 trillion 10 year cost (2009 to 2019), the Senate bill would cost $1 trillion, and the Senate Finance bill would cost $900 billion.

And there is more to the story. All the bills don't even start until 2013. So the 10 year estimate is really only seven years of spending. Furthermore, years 2013 to 2015 start slow and have a much lower average yearly cost. That means the spending curve is incredibly steep from there on out. Seventy five year actuaries estimate the cost at $9.2 trillion (and that assumes you put the $9.2t in the bank and are earning 3% interest - do we have a spare $9.2t laying around?). These costs are above and beyond Medicaid and Medicare expenditures (and we all know how unsustainable those are).

Proponents of the plan point to preventative care as the vehicle for savings. Unfortunately, the American Diabetes Association, the American Heart Association, the American Cancer Society and the CBO all admit that expanding preventative care will only produce savings enough to cover about 10% of the new preventative care expenditures.

By the way, they start collecting the new taxes to pay for this care in 2010, three years before we start spending it. So, deficit estimates are also skewed.

With those kinds of "savings" who needs enemies.

Obama also said his healthcare plan will create greater inefficiencies. Nope, that's not a typo. He really said it and I think we can all agree with him (you can see the video HERE). I can't think of a better example of a Freudian slip.

But even assuming he did mean "efficiencies," what they really mean is rationing. Removing Fee for Service plans is a good way to eliminate duplicate services, but personally, I would prefer that the consumer had the power to shape the plan with purchasing choices rather than give that power to the government.

Besides, America is such a litigious society, who doesn't believe that rationed care won't lead to lawsuits as people start suffering personal damage because of those limited services. There are no efficiencies there.

So what do we do? Well, the exercise of our free speech is a good start (assuming you aren't afraid of being placed on the government watch list). But we, and by "we" I mean Rhode Islanders, can do much more.

Obama is using Medicaid as the vehicle for ObamaCare. Indeed, in the stimulus bill an additional 6.2% of funding was provided for Medicaid with the condition that states couldn't alter eligibility for the program (thus laying the groundwork for this plan). But Rhode Island has a global Medicaid wavier that provides a five-year 12 billion dollar grant in exchange for the freedom to design our own program.

So, as the rest of the nation plays defense against the socialization of our healthcare system, Rhode Island is the only state with the ability to play offense. And I suggest that we utilize an east coast offense and aggressively push that ball down the field. We need to define our state as a land of people that (1) does not force citizens to purchase products that they don't want, (2) does not accept the cultural implications of putting the middle class and affluent on healthcare welfare, and (3) does not restrict market efficiencies by altering that market with government intervention.

We can increase competition by lowering the trade walls built by each state that restrict consumers from purchasing insurance offered in other states (think Article 1 section 8 of the US Constitution). We can increase choice by taking those choices away from employers (who empower HMO's to make them) and giving that power to the consumer - not the federal government. We can increase savings by allowing those new competitive and self-interest forces to work. But if we want to increase inefficiencies then we should do exactly what the president suggests. Efficiencies, on the other hand, are possible with the above suggestions.

Call me a radical, but I do believe in the power of the free market as a solution to our healthcare problems. And if anyone actually believes that the current healthcare system operates in the free market then they just don't understand the terms. Nearly half of all healthcare dollars come from the government (thus they come with regulations).

I'll admit that I don't have the Rhode Island apathy gene so perhaps I am more optimistic than most. I also admit that we do have a large apathetic population. But it can be awakened in a time of crises. And that's another thing I can agree with Obama on - we are in a healthcare crisis.

Onward and upward,