Meet The New Obama Health Care Plan

by Pejman Yousefzadeh on February 22, 2010

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It is much like the old Obama health care plan:

President Barack Obama is making a fresh attempt to rescue his health care overhaul by proposing a measure that would allow the government to deny or roll back egregious insurance premium increases that infuriate consumers.

Coming just days before a White House health care summit with congressional leaders of both parties, Obama’s legislative proposal, which will be unveiled later Monday, likely represents the president’s last chance to salvage his signature issue.

A White House official, speaking on condition of anonymity because details have not yet been officially released, said the insurance rate proposal would give the federal Health and Human Services Department – in conjunction with state authorities – the power to deny substantial premium increases, limit them, or demand rebates for consumers.

In this initiative, the administration seemingly is playing directly to the same kind of public skepticism that has endangered the medical care system remake all along. Health care reform was a front-burner issue for Obama and majority Democrats in Congress until a little known Republican, Scott Brown, shocked the political establishment last month by defeating Massachusetts Democrat Martha Coakley in a special election to choose a successor for the late Sen. Edward Kennedy.

Recent premium hikes of as much as 39 percent sought by Anthem Blue Cross in California have given Obama a new argument for his sweeping health care remake, stalled in Congress since Democrats lost their 60th Senate seat in a special election last month in Massachusetts.

The proposal for tighter oversight of insurers is modeled on legislation proposed by Sen. Dianne Feinstein, D-Calif., and will be part of a broader plan the White House plans to post on its Web site at 10 a.m. Monday, ahead of Thursday’s health care summit.

Until now, Obama has argued what should and should not be in a health care overhaul, but the legislation itself has largely been left up to majority Democrats in Congress to draft. It’s the most detailed proposal yet to come from Obama.

His plan is expected to require most Americans to carry health insurance coverage, with federal subsidies to help many afford the premiums. Hewing close to a stalled Senate bill, it would bar insurance companies from denying coverage to people with medical problems or charging them more. A tax on high-cost health insurance plans objected to by House Democrats – and labor unions – would be scaled back. The expected price tag is around $1 trillion over 10 years.

The shout-out to House Democrats and labor unions comes as no surprise whatsoever. Equally unsurprising are the efforts to stop insurance rate increases via federal fiat. I wouldn’t like having my health insurance premiums go up any more than would the next person, but price controls are price controls, and price controls do not work. The agencies seeking to enforce those controls eventually fail at their appointed tasks, and when they do, inflation skyrockets. In the meantime, the supply and demand picture is utterly distorted. Why does anyone think that the story will be different for insurance rates?

Mark Kleiman, I see, is happy with the politics of the Obama move, but apparently misses the following in the report he links to:

The president’s new provision also seemed to offer Republicans an opening for a new line of criticism — that Mr. Obama and Democrats are anticipating the possibility of hefty price increases for health insurance even after their big legislation is adopted.

[. . .]

The new rate board would be composed of seven members, including consumer representatives, an insurance industry representative, a physician and other experts like health economists and actuaries, the White House said. The board’s annual report would offer guidance to the public and states on whether rate increases should be approved.

But the focus on rate increases is also spotlighting questions about whether the Democrats’ plans do enough to control rising health costs. Anthem and other insurers say they do not.

And it is unclear if the new powers or the rate board would have much long-term impact. The Democrats’ legislation ultimately seeks to sharply curtail the existing individual insurance market in which companies like Anthem Blue Cross now sell their policies. Instead, such policies would be heavily regulated by the federal government and sold through new insurance exchanges, where consumers could compare prices and benefits packages and choose policies that best fit their needs.

So at best, this is all a gimmick and a scam. While this would explain Kleiman’s approval of the plan, it’s hard to see what the rest of us should be excited about, especially when one reads that the CBO cannot provide a cost estimate, and when, as we know, the CBO gets strong-armed nowadays to say what the President, and Congressional Democratic leaders, want it to say.

And of course, the story Kleiman ever-so-triumphantly links to points out that the White House thinks that the whole idea of using states as laboratories where good policy ideas can come to the fore, is just no longer en vogue:

Leaders of the National Governors Association meeting in Washington on Sunday expressed frustration that they had been largely shut out of negotiations over the future of the health care system, even though they would be responsible for carrying out many of the changes envisioned by federal officials. They said they wanted more of a voice in shaping those changes.

“It’s important that governors be at the table and bring our perspective to the debate,” said Gov. Jim Douglas of Vermont, a Republican who is chairman of the National Governors Association.

Mr. Douglas said governors were deeply involved in discussions with Congress and Mr. Obama on the economic stimulus law adopted early last year. But he said, “We have not had that kind of relationship in the current debate” on health care.

Gov. Phil Bredesen of Tennessee, a Democrat, said: “Governors have something unique to contribute. Washington, D.C., is full of think tanks, theoreticians and advocacy groups. Governors are the ones whose feet are on the ground. We have a sense of what will work and what won’t work. Our perspective is not the only one. But we can bring some practicality to this discussion.”

Mr. Douglas, Mr. Bredesen and two other governors — Joe Manchin III of West Virginia, a Democrat, and Michael Rounds of South Dakota, a Republican — spoke at a news conference at the winter meeting of the governors association. They and other governors plan to convey their concerns to Mr. Obama at a White House meeting on Monday.

Dollars to donuts says that their concerns will go in one ear, and out the other.

More from Keith Hennessey, who is kinder to the Obama plan than I am, but wonders where the political coordination between the White House and Congressional Democrats went.

UPDATE: More on this issue from Michael Cannon.

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