Democratic presidential frontrunner Joe Biden announced a plan on July 15 to “fix” America’s flawed health care system. In an announcement video on the topic, he doubled down in support of the last remaining vestige of the Obama administration’s failed legacy: Obamacare.
Biden’s Affordable Care Act 2.0 approach is certainly politically unpalatable, but more than that, it would be a crushing blow to an already severely overregulated health care industry.
Biden seems determined to embrace the very worst of Obamacare’s follies. His plan would increase federal subsidies within the Obamacare exchanges, further distorting the health care marketplace and obfuscating price signals.
Not only that, Biden would use Medicare to “negotiate” drug prices. For those who don’t speak political nonsense, that means Obamacare 2.0 would force health care providers into compliance with government-mandated price controls. Medicare recipients would be used as a cudgel to bludgeon the market into submission.
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As a result, providers would be forced to ration care — as they would be unable to afford the below-market rate that the government demands.
Equally troubling was the former vice president’s decision to embrace the original intent of Obamacare: to establish a public option within the health care marketplace. A public option would effectively destroy the private market for health care, as individual providers would be forced to compete with the near-unlimited resources of the federal government.
Under Biden’s plan, the government would gain further control over the health of everyday Americans by slowly suffocating the entirety of the private health care industry.
Despite the damage Obamacare has done to our health care system, this trend toward increased government control only appears to be growing in popularity. The Senate, for example, is currently considering adopting a bill called the Lower Health Care Costs Act of 2019, or the LHCC for short. This bill seeks to address a genuine problem within the health care industry, one that President Donald Trump pledged to resolve in May: surprise medical billing.
A consequence of patients with insurance receiving treatment from out-of-network doctors in emergency situations, individuals often receive enormous, unexpected health care costs following major procedures that they simply cannot afford.
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While surprise medical bills are certainly a problem worth tackling, some members of Congress seem content to allow the government to take the reins. Much like Biden’s Obamacare 2.0, the LHCC would mandate the implementation of price controls. The bill would dictate that all health care providers set a “median in-network rate,” for services, even when recipients are out of a particular provider’s network.
While called by a different name, the LHCC’s median in-network rate functions practically as a government-imposed price control. And just as with Biden’s new health care plan, the results would be equally disastrous, causing comparable doctor shortages from the loss of market pricing signals.
By delegating more authority to the federal government, both proposals will transfer power away from individuals and toward insurance companies. Which raises the question: Has no one learned from the unintended consequences of Obamacare?
Insurance companies received enormous windfall gains through the implementation of Obamacare. In 2013, as the government swooped in to impose a bevy of new regulations, they were more than happy to hike premiums, a move that increased their profits by an estimated 10 percent.
By all measures, Obamacare was a massive failure the first time it was tried.
There’s no reason to think that this time would be any different.
Whether they are refusing to pay patients’ ER bills or denying mental health treatment to their clients, insurance companies are notorious for skirting ethical boundaries to save a quick buck. And while the market provides a check against insurers’ worst tendencies, government edicts only exacerbate them.
Unlike some of his opponents who would make private insurance illegal, Biden’s plan would, through expanded subsidies and giveaways, enrich these very corporations that have already milked the existing system, creating more profit and higher margins post-Obamacare than pre-Obamacare. At the same time, the Senate’s LHCC’s price controls would incentivize insurers to not renew their more costly in-network contracts to continually push down the median in-network price-controlled rate.
Are these outcomes what policymakers really want?
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The litany of unintended consequences that result from government intervention illustrates just how dangerous both these health care proposals truly are. By all measures, Obamacare was a massive failure the first time it was tried.
Consequently, Biden and the Senates’ renewed embrace of key parts of its foundation is both politically baffling and economically concerning.
If enacted, this would represent an unmitigated disaster for the health care industry.
That cannot be allowed to happen.
Peter J. Ferrara served on the White House Domestic Policy Council under President Ronald Reagan, and as associate deputy attorney general for Attorney General William Barr under President George H.W. Bush. He is the Dunn Fellow Liberty Fellow in Economics at the Kings College in New York, a senior policy adviser to the National Tax Limitation Foundation, and a freelance author.
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