Commentary

Kerry Prescribes More Government-Run Health Care

Sen. John F. Kerry (D-Mass.) has started talking about health care for the first time since securing his party’s nomination for president. Americans should beware: Kerry’s platform represents perhaps the greatest threat to health care and patient sovereignty since the Clinton health plan.

Though Kerry claims he would reduce costs and expand access to medical care, his two-pronged health plan would have the opposite effects, for it would bring America several steps closer to a system of socialized medicine, with all the increased costs and rationing of care that follow. Kerry would nationalize significant portions of the private health insurance industry and subject what remains to tight bureaucratic control from Washington, D.C.

Kerry’s first swipe at patient sovereignty would be to enlarge existing government health programs. While former Clinton administration health official Ken Thorpe estimates these expansions would cover 18 million previously uninsured Americans, those individuals may be disappointed with what they get. Patients enrolled in government health programs often have difficulty finding doctors that accept government coverage. Oregon’s Medicaid bureaucracy admitted to such rationing when it lamented in its 2001 Oregon Heath Services Commission Report, “Having coverage does not always guarantee access” to medical care.

Worse, research by RAND Health suggests this expansion would induce as many as 18 million additional Americans to switch from private health coverage to the “free” government coverage. Not only would this leave millions with worse coverage than before, it would force taxpayers to bear costs that today are borne voluntarily by the private sector. Because it is often employers who decide to drop private health insurance when their workers become eligible for government programs, the Kerry health plan would take away many Americans’ current coverage against their will and leave them with poorer coverage.

The second prong of the Kerry health plan would draw much of the remaining private health insurance market into a nationwide “health alliance” created and tightly regulated by the federal government. Through various inducements, this health alliance would drain employers and individuals out of state-regulated markets, thereby advancing the trend toward greater federal regulation of health insurance at the expense of state regulation. This health alliance also would require invasive controls over the provision of medical care and ultimately bureaucratic rationing.

The primary inducement for participation in the health alliance would be a promised 10 percent discount on health premiums (or $1,000 for a family of four) that would flow from having taxpayers cover 75 percent of all health insurance claims above $50,000. In effect, this would nationalize the catastrophic health insurance industry.

What Kerry claims would be a reduction in health care costs merely would be a shift of existing costs from premium-payers to taxpayers — some $290 billion over nine years, according to Prof. Thorpe. Moreover, the proposal would lead to higher costs by making patients, doctors, employers, and insurers less responsible for their decisions about what medical care to consume, provide, and reimburse. To control spending, the federal government would be forced to impose bureaucratic controls that restrict what care patients may receive both above and below the $50,000 threshold. The health alliance soon would come to resemble Medicaid, where having “coverage” doesn’t mean you get medical care.

Other inducements include subsidies for small businesses, the near-elderly, and low-income individuals to enroll in the alliance’s nationalized catastrophic health insurance program.

In total, Prof. Thorpe estimates the Kerry health plan would cost $972 billion over nine years. This is about twice the cost of the recently enacted Medicare prescription drug benefit and would require a tax increase roughly equivalent to what the Treasury Department estimates to be the cost of repealing both Bush tax cuts.

The Kerry health plan does contain two market-friendly proposals. One, it proposes greater freedom for Americans to purchase prescription drugs from abroad, which would help eliminate foreign price controls and eventually reduce the cost of medicines through a more equitable international distribution of the costs of researching and developing new drugs. Two, it proposes to limit the ability of drug innovators to extend their patents by gaming the process for approving generic drugs. Unfortunately, Kerry fails to address the excessively slow and costly approval process for new drugs that leads to such gaming.

As a final note, Kerry’s website details numerous additional controls he would have the federal government impose on private health insurers and consumers. America would be better off sitting on its hands than enacting such sweeping socialization of its health care system.

Michael F. Cannon is director of health policy studies at the Cato Institute.