THE PROGNOSIS FOR NATIONAL HEALTH INSURANCE

August 6, 2009

President Barack Obama's health care reforms will drastically alter U.S. health care policy by creating a public health insurance exchange, mandated minimum coverage, mandated coverage of preexisting conditions and required purchase of health insurance.  Moreover, his plans do not address the growing government health care wedge -- an economic separation of effort from reward, of consumers (patients) from producers (health care providers), caused by government policies -- and its role as the fundamental driver of health care costs, says the Texas Public Policy Foundation.

In fact, they will further increase the wedge, and can thus be expected to increase medical price inflation.  Specifically, the planned $1 trillion increase in federal government health subsidies over 10 years based on President Obama's principles will have the following consequences:

  • Overall, total federal government expenditures will be 5.6 percent higher than otherwise by 2019, adding $285.6 billion to the federal deficit in 2019.
  • An increase in national health care expenditures by an additional 8.9 percent by 2019.
  • An increase in medical price inflation by 5.2 percent above what it would have been otherwise by 2019.
  • A reduction in U.S. economic growth in 2019 compared to the baseline scenario by 4.9 percent for the nation as a whole.

The current net present value of funding health care reform based on President Obama's priorities would be $1.3 trillion (due to higher medical inflation and expenditures), or $4,354 for every man, woman, and child in the United States.  These figures include:

  • A net present value of all additional federal government expenditures through 2019 of $1.2 trillion, or $3,900 per capita, and
  • A net present value of all state government expenditures through 2019 of $138 billion, or $454 per capita.
  • Despite these costs, 30 million people would remain uninsured. The cost to reduce the number of uninsured by 16 million people is $62,500 in subsidy expenditures per person insured.

Source: Arthur Laffer, Donna Arduin and Wayne Winegarden, "The Prognosis for National Health Care," Texas Public Policy Foundation, August 2009.

 

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