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Healthcare Reform or Government Takeover?

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
September 22, 2009

1.  Reactions to the President’s Healthcare Speech

2.  Omissions & Falsehoods In President Obama’s Healthcare Speech

3.  A Re-Run of Clinton Nationalized Healthcare?

4.  Conclusions – So What Should We Think Now?

Introduction

President Obama addressed a rare joint session of Congress on September 9 when he spoke at length about his desire to substantially reform America’s healthcare system.  Whether you are among the apprx. 56% of Americans who now oppose the healthcare reform bill in the House, or you are among the apprx. 43% who support it (latest Rasmussen poll), it is important to know the facts – a number of which the president failed to address or misrepresented in his speech.

With opposition to the House healthcare reform bill rising almost daily over the last month or so, there was great anticipation ahead of the president’s speech.  Many in the media commented that Mr. Obama needed to “hit it out of the park,” and that the speech needed to be a “game-changer.”  Politicos on both sides of the aisle agreed afterward that the speech was delivered extremely well.  Unfortunately, it raised more questions than answers.

Many thought the president would soften his recent healthcare rhetoric and reach out to Republicans and Independents.  He didn’t.  He chose instead to shore up his base.  Many thought he would compromise on the so-called “public option.”  He didn’t, exactly.   And while President  Obama’s approval ratings rose a few points just after the speech, opposition to the Democrats’ healthcare reform bill has soared to new highs since then.

While I have refrained from writing at length on the healthcare reform debate, I feel the issue is just too important, and too politically charged, not to speak out.  In the pages that follow, we will delve into some of the biggest problems and challenges with the House healthcare bill, H.R. 3200 - America’s Affordable Health Choices Act of 2009.  Given that there is so much misinformation on healthcare reform out there, on both sides, maybe this will help.

Reactions to the President’s Speech

As noted above, the immediate reactions to the president’s healthcare speech on September 9 were almost unanimously favorable.  There is no question that Mr. Obama is a great orator.  But the real question is whether the president changed enough minds to breathe new life into the struggling healthcare reform bill stuck in Congress  To my surprise, George Stephanopoulos of ABC news (and a former Clinton aide) wrote a column entitled “Obama Speech No Game-Changer” soon after the speech.  

Whether you liked or disliked the president’s speech, it did change some minds favorably, but for only a few days.  A Rasmussen poll released a few days after the speech showed that, for the first time, a slim majority - 51% - of Americans favored the Democrats’ healthcare plan, while 46% opposed it.  But those approval numbers began to fall significantly last week. This from Rasmussen on September 16, one week after the speech: 

One week after President Obama’s speech to Congress, opposition to his health care reform plan has reached a new high of 55%. The latest Rasmussen Reports daily tracking poll shows that just 42% now support the plan, matching the low first reached in August. [As noted above, the latest numbers this week are 56% opposed and 43% in favor.]

Just a few days earlier, Rasmussen’s poll showed that those who “strongly favor” the plan were at 28%, while those who “strongly oppose” were at 38%.  Now, two weeks after President Obama’s speech, the latest numbers are only 23% strongly favor the plan and 44% strongly oppose it.  This is very bad news for Team Obama.

Conclusion: President Obama gave a great speech, as he is known to do, and it helped the healthcare ratings for a week or so.  But the reality is that a majority of Americans do not want this government healthcare plan, and that number is likely to rise even more as people learn more about the Democrats’ plan.

Misrepresentations, Omissions & Falsehoods
in President Obama’s Healthcare Speech

The number one problem with the Democrats’ massive healthcare reform proposal is a simple matter of supply/demand.  There is no way to provide healthcare insurance and coverage to 46 million people who do not currently have coverage, with the same number of doctors, nurses and hospitals/clinics, without rationing healthcare.  Even if the number is half that, some 23 million people (or even just 15-20 million as some argue), the problem is still the same.

The law of supply and demand also dictates that if we substantially increase the number of Americans covered (demand) with the same number of doctors, nurses and hospitals/clinics (supply), the cost of healthcare will increase, perhaps significantly, unless there is rationing.  We must look no further than Canada or Great Britain to see how this will happen. 

The question at the end of the day is, why can’t the president and the Democrats just admit that there will be rationing and just be straight with the American people?  In all of his healthcare speeches, President Obama totally avoids this simple supply/demand fact.  The president wants us to believe that we can insure and provide healthcare to at least 15-20 million more Americans and actually spend less.  No wonder that millions of Americans are up in arms over this!

Some observers have called this a “convenient fantasy” on the part of President Obama and the Democrats.  How are we are going to save money by spending a lot more money – $1 to $2 trillion over the next ten years?  How are we are going to solve our exploding fiscal problems with a massive new federal bureaucracy that will control at least one-sixth of the national economy going forward? 

President Obama claims that the new government-run healthcare system “won’t add one dime to the deficit.” Unfortunately, presidential administrations and Congress are notoriously bad at forecasting the costs of their pet projects, especially entitlement programs that are intended to be permanent.

President Bush’s Medicare Prescription Drug program is a perfect example.  When it was passed in 2003, the White House and the Congressional Budget Office forecast that it would cost apprx. $400 billion over 10 years.  Guess what – the CBO now projects it to cost $1.2 trillion over 10 yearsDo we really think Congress and Obama’s cost forecasts are any better?  I doubt it!

Obama says the government will guarantee that you can keep your current insurance, even though his healthcare plan would encourage your employer to stop offering it; and when they do, you will have no option except the government-run plan.  The same is true should you get fired or decide to change jobs – the government-run option is the only option in H.R. 3200.

In addition, he says we aren’t going to insure any illegal aliens; however, in H.R. 3200 passed by the House Committee on Education and Labor, there were no citizenship verification provisions to assure that illegals can’t apply and get benefits.  Yet President Obama promises that the new healthcare plan will only cover American citizens.  (Maybe he plans to make them all citizens – amnesty - before the new system goes in place – think about it.)

At one point during his healthcare speech to a joint session of Congress, President Obama drew cackles for remarking that “there remain some significant details to be ironed out.”  No kidding!  Here again, Obama delivered a message that was strikingly similar to the one that has failed to resonate with the American people thus far.  The reason is that while Obama can paper over political and policy realities by speaking in broad strokes, it’s always the specifics that have caused him problems.  Healthcare is too big not to nail down the specifics!

As he has done before, Obama pledged to veto any bill that added to the federal deficit. But despite that commitment, the Congressional Budget Office projected that the House Democrats’ healthcare reform plan would cost over $1 trillion over the next decade and add a minimum of $239 billion to the deficit.

Obama again touted the cost-saving potential of “preventive care.”  Here, too, the independent Congressional Budget Office has determined that preventive measures would actually increase health care costs, and that a so-called Medicare Commission that Mr. Obama has suggested would have a negligible impact on curbing government healthcare spending.  Why are the president and the Congress ignoring these warnings from the independent CBO?

Back in May, President Obama went before the American Medical Association and declared, “No matter how we reform health care, we will keep this promise to the American people: If you like your doctor, you will be able to keep your doctor, period. If you like your health care plan, you’ll be able to keep your health care plan, period. No one will take it away, no matter what.”  He has made this exact claim in numerous other healthcare speeches.

In his latest speech before Congress on September 9, Obama offered a more nuanced pledge that “nothing in this plan will require you or your employer to change the coverage or the doctor you have.”  As noted above, this is simply not true if you lose your current coverage for any reason under H.R. 3200.

Regardless of whether or not the proposed healthcare legislation specifically requires that Americans give up their private coverage, there are still many changes to the system that could cause many people to lose it anyway.  For instance, one provision Obama backed in his latest speech - to tax expensive health plans - is explicitly aimed at encouraging employers to drop benefit-rich policies in hopes that it would help rein-in medical spending (ie – rationing).

At another point in his recent healthcare speech, Obama said that, “The middle-class will realize greater security, not higher taxes.”  How does this jibe with the preceding sentence in the paragraph just above? Then, at another point in his latest speech Obama gave an unwavering endorsement of a requirement that individuals either purchase health insurance, or pay a tax.  

Under the Senate version of healthcare reform/mandate proposed by Senate Finance Committee Chairman Max Baucus (D-MT), individuals would face a tax of at least $750 annually if they do not purchase health coverage.  How is this “greater security, not higher taxes”?

And while the Baucus healthcare proposal would provide subsidies to lower-income Americans, those subsidies would stop at 300% of the federal poverty level. What that means is that a family of four with a household income above $66,150 would face a tax of $3,800 if they do not obtain health insurance, while individuals with income above $32,490 would face a tax of $950.  Yet Obama argues that this is not a “tax,” if it’s something that is good for you.  Yeah, right!

This is a problem that Obama himself noted when he was campaigning against Hillary Clinton back when he said he opposed such mandates.  In a February 2008 debate referring to healthcare reform, he said, “In some cases, there are people who are paying fines and still can’t afford it, so now they’re worse off than they were. They don’t have health insurance and they’re paying a fine.”  He was referring to conditions under a similar healthcare mandate in Massachusetts. 

During his speech two weeks ago, Obama advocated the creation of a plan to be offered on a government-run insurance exchange that would be “administered by the government just like Medicaid or Medicare.”  He said that the reason we need such an option is that, “by avoiding some of the overhead that gets eaten up at private companies by profits, excessive administrative costs and executive salaries, it could provide a good deal for consumers.”

Yet later in the same speech, he argued that he could pay for most of his proposal with cuts to Medicare that would not have any impact on benefits to seniors.  Say what?  The reason, he explained, is that we could save money by reducing “the hundreds of billions of dollars in waste and fraud…” in Medicare - the very government-run program he touts as a model for the creation of a new government-run healthcare program.  Do they really think we are that stupid?   

While acknowledging that the new plan would be run by the government, Obama tried to argue that it wouldn’t be subsidized by taxpayers, but only funded by the premiums it collects.  Sorry, but I must point out that any new government plan would require taxpayer money to fund huge start-up costs - at the least, and should it run into financial trouble, it’s hard to believe that lawmakers would allow it to fail without pumping taxpayer money into it, just as they did in the cases of Fannie Mae and Freddie Mac (and those were allegedly private companies).

President Obama speaks in such broad circles and contradictions.  You can keep your current plan and doctors, but not really; your taxes will not go up, but they probably will have to; we won’t cover illegals, but there’s no way not to; etc., etc.  No wonder the number of Americans who oppose government-run healthcare is now at a record high – 56%!

A Re-Run of Clinton Nationalized Healthcare?

A recent article on Forbes.com, just after the president’s latest speech before Congress, caught my attention and further explained the current healthcare debate as follows:

Before a tense and packed House, the President told Congress:

‘Millions of Americans are just a pink slip away from losing their health insurance, and one serious illness away from losing all their savings... And in spite of all this, our medical bills are growing at over twice the rate of inflation...’

That’s President Clinton, sixteen years ago almost to the day, in a speech about a complex health-care plan built on government expansion, with billions in hidden costs. Last night, a President--who was only 32 then--is now in the White House, out to prove that nothing has changed in the minds of the Democratic leadership since the Clinton debacle.

President Clinton’s health-care legislation didn’t fail in 1994 because people didn’t want better health care. The White House plan failed because it was too bureaucratic, too complicated, and too expensive.

Last night, President Obama’s response to sixteen years (and one angry August recess) worth of bi-partisan doubt was to double down and bet even more political capital on the same approach. It’s as if he expected Americans to tune in, and suddenly realize their mistake.

This was supposed to be the Administration of the post-partisan rational center. Arguments were supposed to work with this White House. While many critics of President Obama’s health-care plan have been too extreme, some rational criticism should have broken through. The speech was brilliant--unless you’ve actually read the [healthcare] legislation behind it, which contradicts many of the President’s restated “commitments.”

Last night, the President said that, “Nothing in this plan will require you or your employer to change the coverage or the doctor you have.” Countless observers have already shown that this is not true, as proposed new regulations mandating a whole range of benefits, setting community rating schemes, and banning individual incentives will radically change many existing plans.

Last night, the President said his reforms would fight rising costs, not add to the deficit, and reduce government waste. Countless observers have already shown that the President is wrong, among them the Congressional Budget Office, which calculates that the plan will increase costs and explode the deficit. And, as I observed in the Washington Examiner, government waste will grow under ObamaCare, since the House bill creates a sea of new Washington-based programs, offices, and bureaucracies (53, by one count) to micro-manage your health insurance, your hospital, and even your family doctor.

Last night, the President said competition from a government-run insurance plan was needed to “give Americans a choice.” And the President has been shown to be wrong there, too. Federal employees have over 230 private alternatives to choose from in their existing health exchange…; a public plan would just add one new option (a government financed and price controlled one, at that). [Emphasis added, GDH.]

It’s not that President Obama wants to turn the health-care policy clock backwards sixteen years. It’s worse than that. It’s as though the last sixteen years never even happened. It’s like a health-care Groundhog Day where Americans wake up to the same tired arguments for government-run care every morning, simply because Democratic Presidents can’t resist testing the same pick-up lines on an unwilling America.

And the lines are wearing thin. The President (yes, Obama this time) told Congress that “our collective failure to meet this challenge--year after year, decade after decade--has led us to a breaking point.” Has it really? When President Clinton conjured similar fears about pink slips and millions losing coverage to Congress in 1993, 15.3% of Americans were uninsured. In 2007, the percentage of Americans without insurance was...15.3%. A solution to this problem is needed, but the fact that it hasn’t grown worse is a sign that Congress has time to think, and little reason to panic.

Since President Clinton spoke of health inflation in 1993, health costs continued to rise faster than wages, but President Obama refuses to acknowledge years later that the U.S. health inflation rate is almost identical to rates in government-run systems [in other countries]. Rising costs must be attacked, yes, but if rationed health management can’t stop health inflation in Britain or Ireland, will a rush to President Obama’s version of HillaryCare do any better?

Conclusions – So What Should We Think Now?

Some surveys indicate that a majority of Americans think we need reform of our healthcare system.  This explains, in part, why President Obama and the Democrats are so hell-bent on passing a massive overhaul of our healthcare system this year. Yet plenty of other surveys show that appx. 80% of Americans are happy with the healthcare insurance and care they have now.  So what gives?

What gives is that liberal presidents dating back to Theodore Roosevelt have tried to nationalize healthcare, and every attempt has failed.  The simple fact is that virtually all Americans would favor healthcare that costs less – what else is new?  Likewise, a majority of Americans would like to see healthcare insurance available to everyone – somehow.

But as has been consistent for over 100 years, a majority of Americans do not want to see the federal government take over healthcare – doctors, nurses, hospitals, etc. - and be in a position to mandate what care we can and cannot receive.

The problem is, the current president and the Democrats in the majority in Washington feel otherwise.  They see government-run healthcare as a giant power grab, as I have discussed previously.  They believe that the government is a better arbiter of our healthcare needs than we are.  And they see Obama’s presidency as the best opportunity they have had in years to ram it down our throats, even if it means by a simple Democrat majority “reconciliation” (51%), which they just might be arrogant enough to pull off.  Nancy Pelosi and Harry Reid have all but promised to do this if necessary to pass their healthcare plan.

On most political issues, I would argue that the party in power should go ahead and try to ram it down our throats, and suffer the political backlash in the next election, in this case the 2010 mid-terms and the 2012 general elections.  But when it comes to healthcare reform, if it passes, there is almost no chance to roll it back once it is in place.  This is precisely why the Democrats don’t want their takeover of healthcare to be implemented until 2013!

President Obama and the Democrats in Washington know this.  They thought they had it during President Clinton’s administration, but the American people fought back and stopped it.  Now they see their odds even better with President Obama in office, although public opposition is now growing daily, 56% oppose/43% approve as this is written.  So, it remains to be seen what will happen this year.

As it stands now, most of the political observers I read believe that some form of government-run healthcare will pass this year or next under President Obama.  Even some moderate to conservative analysts I read have concluded that the time has come to provide some form of health insurance to all Americans.  But the question is, as always, how to pay for it?

Sadly, I have not seen a single comprehensive healthcare reform proposal from the Republicans or other non-Democratic groups, and that disappoints me greatly.  Streamlining the complex insurance licensing process so that insurance companies can offer policies across all state lines is not being discussed, in what would seem to be a slam-dunk starter for reforming healthcare. 

Likewise, letting small businesses band together to buy insurance to cut costs is not on the table.  Serious medical malpractice (tort) reform is also AWOL.  Providing tax credits/subsidies for low-income Americans to purchase health insurance is not on the table either.

Plus, if we can reform Medicare and trim hundreds of billions in waste, as President Obama suggests, why not do that now and use those savings to subsidize health insurance for low income Americans?

I am also puzzled as to the rush to pass healthcare reform at any cost.  We’re talking about reforming an industry that makes up 16-17% of the world’s largest economy.  Doesn’t that merit taking the time necessary to do it right?  Evidently not, if you’re a Democrat.

At the end of the day, I just don’t get it.  Have we reached the point where there is no alternative to a massive government-run healthcare system?  I don’t think so.  But it remains to be seen if we can derail the Democrats’ plans for nationalized healthcare.

Finally, I recognize that this has been a polarizing editorial on my part.  I will get roundly criticized for it by my moderate/liberal readers, and those who favor government-run healthcare, which I can handle as always.  But the issue of nationalized healthcare is just too important for all of us – and for the economy – for me to remain silent.

Very best regards,

Gary D. Halbert

 

SPECIAL ARTICLES

Has Obama misread the tea leaves? (excellent read!)
http://www.realclearpolitics.com/articles/2009/09/10/the_goldilocks_principle_in_american_politics_98233.html

Does Obama lie?
http://www.realclearpolitics.com/articles/2009/09/18/does_he_lie_98363.html

Obama omits crucial details on healthcare
http://article.nationalreview.com/?q=ZTI2YmFlYmVkYjgwZmQ0NTk2MjUzNzZhYTgyOTVmMTY=

Federalization of college loans teaches health care lesson
http://washingtontimes.com/news/2009/sep/18/back-door-to-a-public-option/


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Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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