It used to be said that there is no such thing as a free lunch. But when it comes to health care reform, President Obama appears to be offering up a free breakfast, lunch, dinner and bedtime snack.
At the core of the president’s proposal is the idea that he can provide more health care services to more people and have it cost less. A neat trick – but one that flies in the face of economic reality, not to mention common sense.
For example, the president wants to require insurance companies to cover people with pre-existing conditions, that is, people who are already sick. Doing so will cost money. And where will that money come from? Insurance companies will simply raise premiums for the rest of us.
Similarly, the president would mandate that all insurance plans provide a new government-designed minimum benefits package. In addition to the usual coverage for hospitalization, physician services and so on, all insurance plans would also have to include coverage for prescription drugs, rehabilitation services, mental health and substance-abuse treatment; preventive services and maternity, well-baby, and well-child care, as well as dental, vision, and hearing services for children under age 21. If that’s not enough, he would also establish a new federal commission headed by the surgeon general, which will have the power to develop additional minimum benefit requirements. There is no limit to how extensive those future required benefits may be.
Those additional benefits may or may not help consumers, but insurers are not going to provide them for free. In fact, some—like mental health and substance-abuse treatment—can add as much as 10 to15 percent to the cost of a policy. The president would also limit the size of deductibles and co-payments and would prohibit lifetime limits on the amount of benefits that insurance companies pay.
Indeed, some estimates suggest that the president’s plan could add anywhere from 75 to 95 percent overall to the cost of insurance premiums, especially for young and healthy people.
The president also wants to subsidize insurance coverage for millions of Americans, some of whom are uninsured, but millions of whom already have insurance today. The health care bills currently making their way through Congress include subsidies for families earning as much as 300 percent of the poverty level, $66,000 for a family of four. That’s the main reason these plans cost $900 billion or more.