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Health Care and the Mortgage Market


The latest misleading ad from the Obama campaign is unintentionally quite revealing. They call it “Article,” referring to an article by John McCain (i.e by his campaign) about the McCain health plan in the latest issue of Contingencies magazine. Over images of Fannie and Freddie logos, the ad asserts that McCain wants to do to health care what “Bush/McCain policies have done to our economy,” by which they mean deregulation. The ad says:

McCain just published an article praising Wall Street deregulation; said he’d reduce oversight of the health insurance industry too, “just as we have done over the last decade in banking.”

The line they quote comes in a passage of the article in which McCain argues for allowing the purchase of health insurance across state lines. He writes:

I would also allow individuals to choose to purchase health insurance across state lines, when they can find more affordable and attractive products elsewhere that they prefer. Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation. Consumer-friendly insurance policies will be more available and affordable when there is greater competition among insurers on a level playing field.

The ad of course doesn’t quote all of that, but merely suggests McCain is endorsing some supposed deregulation of Wall Street. It mischaracterizes both the origins of the financial crisis and the McCain health care plan. But unintentionally, it actually points to a similarity between the real causes of the financial crisis and Obama’s health care plan.

As Kevin Hassett’s much-discussed analysis of the financial crisis demonstrates, so-called “government sponsored enterprises” like Fannie and Freddie have played a major part in precipitating the crisis. These intricate private/public arrangements too often end up combining the worst disadvantages of public and private entities in a complex market, confusing political and economic priorities and signals, and thus causing or exacerbating market failures. But in several different forms, this public/private mix model is actually crucial to a lot of liberal thinking about domestic policy in recent years, and it is a key element of Barack Obama’s health care plan, which would have a public coverage option play among the private insurance companies, all managed by his largely public National Health Insurance Exchange. As you can see from his own contribution to the same issue of Contingencies, it is Obama, not McCain, who would bring something of the logic of Fannie and Freddie to the health insurance market.

One consequence of the trillion dollar bailout of the financial sector, though, is that it makes Obama’s health care plan essentially impossible to pay for, so at least it doesn’t matter much.


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