Following on my previous post, one other note about Paul Krugman’s column from Monday. He especially complains about Blue Dog opposition to the employer mandate, saying that without such a mandate the Obama health plan would collapse.
That mandate would impose a new 8-percent payroll tax on employers who do not provide health insurance, except for the very smallest. Expecting an 8 percent increase in labor costs not to have any effect on employment is fairytale economics, and the Blue Dog Democrats are right to reject it. This new payroll tax will result in slashed jobs, lost opportunities, and reduced wages.
Most fundamentally, Krugman is completely wrong to suggest that real health reform is impossible without an employer mandate. We don’t need Obama’s thorough government takeover of health care to achieve essential health policy goals. We need reforms, first, to assure a true government safety net for the uninsured, and second, to reduce the costs of health insurance.
The key to a true safety net is state uninsurable risk pools, which already exist in the majority of states. At modest cost, these provide coverage for the relatively tiny portion of the population who are uninsured and become too sick to buy private insurance. Medicaid should also be sent back to the states with federal block grants, as was done so successfully with the old AFDC program in 1996. Each state could then adopt a new Medicaid program providing a surer safety net, preferably based on vouchers for the poor to buy private health insurance.
The best solution to the problem of high health costs would be Health Savings Accounts, with savings to finance all but catastrophic health care over a high deductible. That would provides true market incentives for patients, doctors, and hospitals to control costs. Allowing insurers to sell across the nation and between states would also increase competition and reduce costs. You could also reduce costs sharply by repealing state regulation mandating the guaranteed issue of health insurance, regardless of how sick the buyer is; by implementing “community rating” that would require insurers to charge the same for everyone regardless of health condition; and by repealing the state health insurance mandates — there are some 1,900 of them — that now force consumers to buy health benefits they may not want.
But of course these reforms wouldn’t give the government more power over health care, which is what the Obama health plan is really all about — and which is what Krugman is really after, too.
— Peter Ferrara is director of Entitlement and Budget Policy for the Institute for Policy Innovation, among other posts. He served in the White House Office of Policy Development under President Reagan, and as associate deputy attorney general of the United States under the first President Bush.