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Morning Bell: Do You Trust Congress to Compete Fairly?

Posted By Conn Carroll On October 17, 2008 @ 9:03 am In Ongoing Priorities | Comments Disabled

The federal government’s decision to become both a market player and regulator in U.S. residential real estate was a major cause of the financial crisis. Fannie Mae and Freddie Mac, using their government-given advantages (including lower capital requirements, guaranteed access to federal credit, and a federal guarantee of their debt [1]), established a massive mortgage duopoly. Barack Obama now wants to do for health care what the left has done for the housing market: concentrate as much decision-making power in Washington so that all health care decisions are politicized and magnified.

Obama likes to sell his health care plan [2] as similar to the Federal Employees Health Benefits Program (FEHBP) that is available to all members of Congress. But there are fundamental differences between Obama’s plan and FEHBP, as Heritage scholars Bob Moffit and Nina Owcharenko detail in an analysis of Obama’s health care proposal [3]:

  1. The Obama plan imposes a standardized benefits struc­ture on both the new government plan and every private health plan that participates in the pro­posed National Health Insurance Exchange. There is no comprehensive, standard benefit package in FEHBP.
  2. The Obama plan creates a gov­ernment-run health plan in the National Health Insurance Exchange. No federal agency offers a government health plan through FEHBP. Only private health insurance plans compete in that program, and even more importantly, they compete on a level playing field.
  3. The Obama plan would require price controls, including “fair” premiums and “minimal co-pays.” Either Congress or some government bureaucrat would have to define these terms. This would put the federal government in the business of deciding what constitutes a fair price and a proper co-payment for benefits and ser­vices, leading to some type of centralized rate set­ting or standardization of payments for providers. By contrast, prices are market-based in FEHBP. No price regulation is imposed on plans or services.

In addition to having the power to set prices and control benefit packages, the government plan would also enjoy a huge advantage in the marketplace since employers and tax­payers would subsidize the new government plan and cover any related risks — a unique advantage unavailable to the private health plans in the exchange. Remember, Congress will have ultimate control over Obama’s new government-run health plan and the new health exchange.

It is impossible to imagine how political incentives, not just economic and medical incentives, could not end up paving the way for a government monopoly over health care [4]. At a minimum, the pri­vate plans could be reduced to operating simply as administrative agents of the federal plan. In either case, without any realistic market options, would-be consumers, patients, individuals and families seeking value for their health care dollars would be the biggest losers.

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URL to article: http://blog.heritage.org/2008/10/17/morning-bell-do-you-trust-congress-to-compete-fairly/

URLs in this post:

[1] including lower capital requirements, guaranteed access to federal credit, and a federal guarantee of their debt: http://www.heritage.org/Research/Economy/bg2127.cfm

[2] likes to sell his health care plan: http://www.barackobama.com/issues/healthcare/

[3] detail in an analysis of Obama’s health care proposal: http://www.heritage.org/Research/HealthCare/bg2197.cfm

[4] It is impossible to imagine how political incentives, not just economic and medical incentives, could not end up paving the way for a government monopoly over health care: http://www.heritage.org/Research/HealthCare/wm1836.cfm

[5] U.S. and Iraq have reached agreement: http://www.ft.com/cms/s/0/896f4c9e-9bd8-11dd-ae76-000077b07658.html?nclick_check=1

[6] Unions in Ohio: http://toledoblade.com/apps/pbcs.dll/article?AID=/20081016/NEWS09/810160418/0/NEWS

[7] banks that were forced to accept taxpayer dollars will hoard those dollars: http://www.nytimes.com/2008/10/17/business/17bank.html?ref=todayspaper

[8] no longer be able to afford to slash greenhouse gas emissions: http://www.nytimes.com/2008/10/17/world/europe/17union.html?ref=todayspaper

[9] the largest cost-of-living adjustment since 1982: http://www.washingtonpost.com/wp-dyn/content/article/2008/10/16/AR2008101600381.html

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