Unbiased Analysis of Today's Healthcare Issues

Obama’s Health Care Speech Critique

Written By: Jason Shafrin - Sep• 09•09

Today, President Obama made a speech calling for healthcare reform. To sum up, Obama is proposing:

  • creating a health insurance exchange,
  • an individual mandate,
  • guaranteed renewability of health insurance,
  • subsidies for individuals and small businesses to purchase insurance, and
  • public option/co-op.

Below are some highlights from the speech [with my comments in brackets].

So tonight, I return to speak to all of you about an issue that is central to that future – and that is the issue of health care. [It's about time.]

Everyone understands the extraordinary hardships that are placed on the uninsured, who live every day just one accident or illness away from bankruptcy… These are middle-class Americans. [This is true. The poorest Americans--excluding illegal immigrants--receive health care coverage from Medicaid and thus are need not worry about health care coverage. The quality of Medicaid coverage is always up for debate, however. The middle-class, the self-employed, those who work for small firms are the ones least likely to have insurance.]

Many other Americans who are willing and able to pay are still denied insurance due to previous illnesses or conditions that insurance companies decide are too risky or expensive to cover. [This is one of the major problems with the current health insurance system. There is insurance for acute illnesses (e.g., a broken arm, a car accident), but those with chronic conditions face higher insurance premiums or may be dropped completely. What is needed may be health status insurance.]

We are the only advanced democracy on Earth – the only wealthy nation – that allows such hardships for millions of its people. [One must keep in mind that although health insurance is important, it is only a means to an end. That end is better health. Reducing illness rates through public health initiatives, clean water, better sewage disposal, better eating habits, and exercise may be more beneficial to improving health than simply expanding health insurance. Further, would giving all Americans low quality health insurance be better or worse than having some individuals with high quality insurance and others with none? Nevertheless, it is true that the U.S. has the highest rate of uninsurance in the developed world.]

More and more Americans worry that if you move, lose your job, or change your job, you’ll lose your health insurance too. [This is the problem of job lock and job stretch]

We spend one-and-a-half times more per person on health care than any other country, but we aren’t any healthier for it. [The U.S. spends 15.3% of GDP on health care. Here are medical spending rates for other nations.]

…those of us with health insurance are also paying a hidden and growing tax for those without it – about $1000 per year that pays for somebody else’s emergency room and charitable care. [This is true, but insured individuals overuse the emergency room more than the uninsured.]

Finally, our health care system is placing an unsustainable burden on taxpayers. When health care costs grow at the rate they have, it puts greater pressure on programs like Medicare and Medicaid. [Medicare's trust fund will run out of money in 2017. ] …Put simply, our health care problem is our deficit problem. Nothing else even comes close. [True.]

I believe it makes more sense to build on what works and fix what doesn’t, rather than try to build an entirely new system from scratch. [That's what the U.K. did when they developed their single-payer NHS.]

First, if you are among the hundreds of millions of Americans who already have health insurance through your job, Medicare, Medicaid, or the VA, nothing in this plan will require you or your employer to change the coverage or the doctor you have. [Although one should build on the existing health insurance infrastructure, the Obama plan does little to improve the existing government health insurance options. Since 16% of Americans already rely on the government for health insurance, reforming these programs is imperative.]

…it will be against the law for insurance companies to deny you coverage because of a pre-existing condition. As soon as I sign this bill, it will be against the law for insurance companies to drop your coverage when you get sick or water it down when you need it most. [Disallowing insurance companies to drop individuals with pre-existing conditions will do either one of two things. If insurance companies can raise prices, individuals with pre-existing conditions will simply face extremely high premiums. If insurance companies are not allowed to raise premiums, the premiums for healthier enrollees will have to cover this additional cost. Further, insurance companies may still have an incentive to provide poor treatment. For instance, the insurance company with the best AIDS clinic may get expensive AIDS patients. Thus, insurance companies may have a disincentive to provide high quality treatment to the sick. Additional commentary is available here. Risk-adjustment subsidies as practiced in Switzerland is one option to solve this problem. ]

And insurance companies will be required to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies [Most already do.]

…creating a new insurance exchange – a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices. [I am not exactly sure how insurance exchange would work. Would insurance companies give on flat premium for all individuals? Would premiums be based on age? Gender? Smoking habits? Pre-existing conditions?]

For those individuals and small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need. [This is what John McCain advocated. However, instead of vouchers for all, tax subsidies will be available to middle class Americans without employer provided health insurance. A voucher system, where all individuals would receive an amount to use towards insurance based on income has been popular among many economists.]

That’s why under my plan, individuals will be required to carry basic health insurance. [An individual mandate. See my previous comments here, here and here.]

My guiding principle is, and always has been, that consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company. [Even in the private market for health insurance, there is little competition.]

…making a not-for-profit public option available in the insurance exchange [see my comments here.  In general, those who support a public option point to the European and Canadian systems and cite how much more efficient these systems are than the U.S. Those who oppose a public option point to the European and Canadian systems and cite how much more inefficient these systems are than the U.S.  A public option could improve health care quality if it is well-run and is fiscally sustainable over the long run (e.g., Veterans Affairs). However, if it provides poor quality of care (e.g., Medicaid) and is fiscally unsustainable (e.g., Medicare), than the public option will not improve the American health care system.

…private companies can’t fairly compete with the government. And they’d be right if taxpayers were subsidizing this public insurance option. But they won’t be. [This is likely true in the short run. The government could fairly price health insurance and compete with private insurance. However, if the public option become most attractive for the sickest, poorest individuals, the average cost to cover beneficiaries will rise relative to the costs of private insurance companies. Then the government will be faced with a choice: either price health insurance more in line with individual or group risk (i.e,. raise premiums) or use tax dollars to subsidize care. If they did the former, the public plan would be little different than a private insurer. If they do the latter, the public plan would receive a subsidy. ]

First, I will not sign a plan that adds one dime to our deficits – either now or in the future [read: I will increase taxes. That is the only way to pay for the small business/individual subsidies proposed]

Second, we’ve estimated that most of this plan can be paid for by finding savings within the existing health care system [Every politician mentions this, but few can achieve it. We'll see how well Obama does, but I am skeptical.]

…unwarranted subsidies in Medicare that go to insurance companies. [read: payments for Medicare Advantage will decrease.]

I don’t believe malpractice reform is a silver bullet, but I have talked to enough doctors to know that defensive medicine may be contributing to unnecessary costs. [I am not sure what the exact proposal is...damage caps? The claims won in malpractice suits are not the cause of high health care costs; many patients are seriously injured by medical errors and deserve compensation. However, the defensive medicine many doctors practice to avoid lawsuits, does lead to unnecessary tests and drives up costs]

Add it all up, and the plan I’m proposing will cost around $900 billion over ten years – less than we have spent on the Iraq and Afghanistan wars [read: this plan is really expensive but, hey, it costs less than than two wars put together.]

“What we face,” [Ted Kennedy] wrote, “is above all a moral issue; at stake are not just the details of policy, but fundamental principles of social justice and the character of our country.” [read: Ted Kennedy supported my plan if you don't like it you're trampling on his grave.]

I understand that the politically safe move would be to kick the can further down the road – to defer reform one more year, or one more election, or one more term. [This is 100% true. Obama the politician should just do nothing and let Medicare run out of money and let the next politician deal with the crisis. Obama the statesman has decided use his office to enact these reforms. Whether or not you agree with Obama's plan, it is admirable for him to go out on a limb to attempt to solve our some of our health care problems. He does, however, "defer reform" for Medicare, since no significant changes to benefit packages or funding was proposed.]

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14 Comments

  1. David Austin says:

    Many of your comments are thoughtful, insightful and true. However there are several that seem less well constructed.

    “…and that is the issue of health care. [It's about time.]”
    –meaning what? that he’s dragging his feet? the lazy bum, spending his time on other trivial issues like the sorry economy the Republicans left us with after eight years and Bush’s war(S). Not sure exactly what you meant, but to me it sounds a bit sarcastic. I hope I am wrong.

    “…about $1000 per year that pays for somebody else’s emergency room and charitable care. [This is true, but insured individuals overuse the emergency room more than the uninsured.]”
    —according to your link to the research done by Newton, Keirns, Cunningham, Hayward, and Stanley (2008), their conclusion was: “Some common assumptions regarding uninsured patients and their use of the ED are not well supported by current data.” AND, their stated objective was “to compare common unsupported statements about uninsured patients presenting to the ED [Emergency Dept] with the best available evidence on the topic.” Since all they did was pull text string searches from articles in MEDLINE, it would be fair to say that a much of those data are in greater or lesser part, anecdotal.

    “…And insurance companies will be required to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies [Most already do.]”
    —presuming that having to pay increasingly prohibitive co-payments is “no extra charge” you are right. However the underinsured, persons with only catastrophic coverage and many HMOs limit the scope of even routine checkups, the president is correct [again].

    “Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company. [Even in the private market for health insurance, there is little competition.]”
    — since you left out the next two paragraphs of the president’s speech, you neglect to suggest that he might be quoting these figures to support the public option which he includes in his speech soon after these numbers. To wit, “Now, I have no interest in putting insurance companies out of business. They provide a legitimate service, and employ a lot of our friends and neighbors. I just want to hold them accountable. The insurance reforms that I’ve already mentioned would do just that. But an additional step we can take to keep insurance companies honest is by making a not-for-profit public option available in the insurance exchange.” I believe THAT was what he was driving at.

    ““What we face,” [Ted Kennedy] wrote, “is above all a moral issue; at stake are not just the details of policy, but fundamental principles of social justice and the character of our country.” [read: Ted Kennedy supported my plan if you don't like it you're trampling on his grave.]”
    — rather, read “What we face is above all a moral issue”. That’s it. Fairly straightforward. Nothing particularly insidious about that statement, but read into it what you will if you can’t see it for what it is.

  2. RxCxar says:

    What a wonderful synopsis. I plan on sending this to my friends and relatives rather than struggling to explain to them myself. Anyway you can get this to our elected representatives?

    A few comments:
    – Is it legal anywhere to drop someone with existing coverage once they get sick?
    – You were overly nice about them finding savings in the existing system.
    – Was it a good idea for him to compare the costs of health care reform (not the President’s job) with national defense (part of his job)?

  3. Ben says:

    MediaCurves.com just conducted a national study with 951 viewers of President Barack Obama’s speech to Congress in which he focused on his plan for healthcare reform. Results showed that more than half of all political parties reported that the speech was “somewhat or extremely effective. The study also found that the majority of Democrats reported that they have a better perception of healthcare reform after viewing Obama’s speech, while Republicans’ perceptions are relatively unchanged and Independents were split on their reactions to the speech. More in-depth results can be viewed at http://www.mediacurves.com/Politics/J7550-HealthcareSpeech/Index.cfm
    Thanks,
    Ben

  4. Sally McBee says:

    My husband and I each own our own small businesses, of which we are each the sole employee. We have Blue Cross/Anthem health insurance, which I am guessing is one of the largest, if not the largest, health insurer in the US. We are also both extremely healthy and in great physical condition. Our policy definitely DOES NOT cover any routine or preventative care for either of us. We have a $5000 deductible (in addition to paying more than $1000 a month), and so we pay for all check-ups, mammograms, and colonoscopies. In fact, I had to wait two extra years for my routine colonoscopy because we first had to pay off the $2500 charge for my husband’s routine colonoscopy. So when you glibly say that “most already” cover these things, you need to realize just how many small business owners there are out here with very few insurance options. When the president says he intends to make changes for small business owners, we are listening because we are almost at the point when we can no longer afford to have insurance. (We are forced to do our own preventative care at the gym.)

  5. Norris Hall says:

    OK. So we spent $100 billion dollars a year (and 4000 American lives ) for the last 7 years to bring freedom, democracy and a better way of life to the people of Iraq. We 1. built their bridges, roads, schools, hospitals,
    2. trained and equiped their army and police force,
    3. gave cash rewards to help small businesses get off the ground,
    4. helped bring clean drinking water to towns without
    5. rebuilt their electrical grid,
    6. paid bribes to their Awakening Councils so they wouldn’t shoot as our soldiers,
    7. even flew Iraqi citizens with difficult medical needs to the US, treated them for free, and few them back home.

    Every single one of the Republicans voted year after year to borrow our childrens money and give whatever President Bush asked and they did it eagerly…money our children will have to repay

    So…

    Can someone tell me …If it was worth doing all this for some people half way around the globe who we don’t even know and who , I am sure, will never repay us (despite sitting on top of the third largest oil reserves in the world)….

    Why all of a sudden are these same politicians…and their supporter so concerned that we NOT SPEND ANYTHING TO bring relief to the millions of Americans who are uninsured or underinsured.
    Why all of a sudden are these politicians and their supporters “concerned” about the defiict.
    Why are they sayiing “health care is NOT a right”

    Sounds like they like the Iraqi people more than Americans.

    If you help feed and cloth your neighbor but let your own kids run around the streets hungry and naked…I’d call you a bad parent.

    So what are you called if you are eager and willing to open up your wallet to Iraqis but get tough when it comes to Americans who need health insurance or health care?

  6. [...] The Healthcare Economist, annotating Obama’s health care address: We are the only advanced democracy on Earth – the only wealthy nation – that allows such hardships for millions of its people. [...]

  7. [...] didn’t listen to the speech, but here’s an analysis by a friend of mine who studies healthcare for a [...]

  8. Richard VanHyfte says:

    I am very sceptical over reform on the basic numbers. Insuring more people for less money and (likely) fewer doctors, will have to mean worse, or faster and cheaper coverage. We need to cut actual costs, such as in tort reform and FDA costs (see fdareview.org). We also have to ensure that technological advancement does not stop, which it will if our new program only covers the most inexpensive methods. New technologies cost more initially, so will go undeveloped.

    Also, I personally know too many Canadians, and a couple of Norwegians, that had their lives saved because they came to the US for treatment which would have been too late in their own countries. Those systems may balance out due to the unhealthy dying off.

    We need to start by cutting costs and encouraging the medical professionals to enter the field. When we have enough professionals available, perhaps competition will help lower costs. If not, at least we will have treatments available.

    Quite frankly, I feel much less safe now than I did last year. If the proposed system would work as it is visualized, it would still not be much of an improvement, and certainly be worse for the currently insured.

  9. John St. John says:

    Re Mr. Austin’s response to your comment about the President’s intent to require insurers to cover “with no extra cost” various preventive procedures. Mr. Austin references “increasingly prohibitive copayments”. Does he mean that copayments have increased over the years, or does he mean that the amount of an insured’s copayment increases with the amount of services used?

    For decades I’ve been the legal representative for several Taft-Hartley trust funds (these are collectively-bargained plans that provide benefits to unionized employees much in the same way as traditional insurance companies, but are nonprofit). I am also among the chronically ill–over the last 10 years I’ve averaged about three hospital admissions per year, and I have some kind of health care appointment at least once a week. I’ve learned a lot about health benefits and the way the health care system works.

    It’s true that copayments (the amounts an insured patient pays out-of-pocket when he or she has an office visit) have increased over time. But the increase in those those copayments has been less than the increase in the cost of the underlying office visit which the insurer must pay. It’s been years since any of the plans I represent, or my own insurance company, have increased copayments despite rising health care costs.

    Further, none of the plans I represent charge any special copayment for diagnostic services. Nor does my own insurance plan require any such copayment. Two weeks ago I had a CRT scan. No charge was made to me for this. Generally, copayments aren’t charged when the diagnostic service is authorized by the patient’s physician.

    Further, I don’t know of any health plan that increases the amount of a copayment with increasing frequency of use. My office visit copayment ($10 for my family doctor, $20 for a specialist) is the same regardless of the number of visits I have. In fact, some plans limit out-of-pocket expenses than an insured may have to pay in any year. So I question the reference to “increasingly prohibitive copayments”

    Also, a word about that $900 billion that this is going to cost us. If as the President says the amount will not be borrowed, then as you say it will be paid through an increase in taxes. In 2008 the total income tax paid by individuals and corporations was $1.45 trillion. If the additional taxes required for health care reform are apportioned among the taxpayers in the same way as the 2008 income tax lliability. then each taxpayer’s share of the $900 billion will be about 62% of his, her, or its 2008 income tax payment.

    And if you think the cost will be limited to $900 billion over the next decade you will almost certainly be wrong. Historical long-range estimates of the cost of Medicare and Medicaid have been a fraction of the actual cost. There’s no reason to expect this to change.

  10. [...] Health Care Speech Video extracts, full video, and transcript (see a critique by Healthcare Economist). Healthcare Napkins All Slide show explaining the reason and purpose of health care insurance [...]

  11. Andy says:

    Have to go to class, so can’t read to far into the discussion. However, I think one of John St. John’s points should be expressed in a different manner. Sure, each taxpayer’s share of the $900 billion will be about 62% of his, her, or its 2008 income tax payment. That is a lot of money, sure, but it’s not “paid” in one lump sum. It’s paid, I assume, over the course of decade. So yes, it is 62% of of one year’s worth of income tax, but it’s not paid over the course of one year.

  12. [...] his healthcare speech, President Obama cited Intermountain Healthcare in Utah and the Geisinger Health System in rural [...]

  13. [...] proposals is that he will expand insurance coverage to many more Americans.  The major drawback, as I have pointed out in the past, is that Obama’s reform do little to cut [...]

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