Wanted: Honesty on Health Care

The president's health care lies might be injurious to your health

President Barack Obama walked into the Oval Office with a veritable halo over his head. In the eyes of his backers, he could say or do no wrong because he had evidently descended directly from heaven to return celestial order to our fallen world. Oprah declared his tongue to be "dipped in the unvarnished truth." Newsweek editor Evan Thomas averred that Obama "stands above the country and above the world as a sort of a God."

But when it comes to health care reform, with every passing day, Obama seems less God and more demagogue, uttering not transcendental truths, but bald-faced lies. Here are the top five lies that His Awesomeness has told—the first two for no reason other than to get elected and the next three to sell socialized medicine to a wary nation.

Lie One: No one will be compelled to buy coverage.

During the campaign, Obama insisted that he would not resort to an individual mandate to achieve universal coverage. In fact, he repeatedly ripped Hillary Clinton's plan for proposing one. "To force people to buy coverage," he insisted, "you've got to have a very harsh penalty." What will this penalty be, he demanded? "Are you going to garnish their wages?" he asked Hillary in one debate.

Yet now, Obama is behaving as if he said never a hostile word about the mandate. Earlier this month, in a letter to Sens. Max Baucus (D-Mont.), and Ted Kennedy (D-Mass.), he blithely declared that he was all for "making every American responsible for having health insurance coverage, and making employers share in the cost."

But just like Hillary, he is refusing to say precisely what he will do to those who want to forgo insurance. There is a name for such a health care approach: It is called TonySopranoCare.

Lie Two: No new taxes on employer benefits.

Obama took his Republican rival, Sen. John McCain (R-Ariz.), to the mat for suggesting that it might be better to remove the existing health care tax break that individuals get on their employer-sponsored coverage, but return the vast bulk—if not all—of the resulting revenues in the form of health care tax credits. This would theoretically have made coverage both more affordable and portable for everyone. Obama, however, would have none of it, portraying this idea simply as the removal of a tax break. "For the first time in history, he wants to tax your health benefits," he thundered. "Apparently, Sen. McCain doesn't think it's enough that your health premiums have doubled. He thinks you should have to pay taxes on them too."

Yet now Obama is signaling his willingness to go along with a far worse scheme to tax employer-sponsored benefits to fund the $1.6 trillion or so it will cost to provide universal coverage. Contrary to Obama's allegations, McCain's plan did not ultimately entail a net tax increase because he intended to return to individuals whatever money was raised by scrapping the tax deduction. Not so with Obama. He apparently told Sen. Baucus that he would consider the senator's plan for rolling back the tax exclusion that expensive, Cadillac-style employer-sponsored plans enjoy, in order to pay for universal coverage. But, unlike McCain, he has said nothing about putting offsetting deductions or credits in the hands of individuals.

In other words, Obama might well end up doing what McCain never set out to do: Impose a net tax increase on health benefits for the first time in history.

Lie Three: Government can control rising health care costs better than the private sector.

Ignoring the reality that Medicare—the government-funded program for the elderly—has put the country on the path to fiscal ruin, Obama wants to model a government insurance plan—the so-called "public option"—after Medicare in order to control the country's rising health care costs. Why? Because, he repeatedly claims, Medicare has far lower administrative costs and overhead than private plans—to wit, 3% for Medicare compared to 10% to 20% for private plans. Hence, he says, subjecting private plans to competition against an entity delivering such superior efficiency will release health care dollars for universal coverage.

But lower administrative costs do not necessarily mean greater efficiency. Indeed, the Congressional Budget Office analysis last year chastised Medicare's lax attitude on this front. "The traditional fee-for-service Medicare program does relatively little to manage benefits, which tends to reduce its administrative costs but may raise its overall spending relative to a more tightly managed approach," it noted on page 93.

In short, extending the Medicare model will further ruin—not improve—even the functioning aspects of private plans.

Lie Four: A public plan won't be a Trojan horse for a single-payer monopoly.

Obama has repeatedly claimed that forcing private plans to compete with a public plan will simply "keep them honest" and give patients more options—not lead to a full-blown, Canadian-style, single-payer monopoly. As I argued in my previous column, this is wishful thinking given that government programs such as Medicare have a history of controlling costs by underpaying providers, who make up the losses by charging private plans more. Any public plan modeled after Medicare will greatly increase this forced subsidy, eventually driving private plans out of business, even if that weren't Obama's intention.

But, as it turns out, it very much is his intention. Before he decided to run for office—and even during the initial days of his campaign—Obama repeatedly said that he was in favor of a single-payer system. What's more, University of California, Berkeley Professor Jacob Hacker, who is a key influence on the Obama administration, is on tape explicitly boasting that a public plan is a means for creating a single-payer system. "It's not a Trojan horse," he quips, "it's just right there."

But even if Obama wanted to, it is simply impossible to design a public plan that could compete with private insurers on a level playing field and without "feeding off the public trough" as Obama claims.

At the very least, such a plan would always carry an implicit government guarantee that, should it go bust, no one in the plan would lose coverage. This guarantee would artificially lower the plan's capital reserve requirements, giving it an unfair edge over private plans. What's more, it is simply not plausible to expect that the plan wouldn't receive any start-up subsidies or use the government's muscle to negotiate lower rates with providers. If it eschewed all these things, there would be no reason for it to exist—because it would be just like any other private plan.

Lie Five: Patients don't have to fear rationing.

Obama has been insisting, including during his recent ABC Town Hall event, that the rationing patients would face under a government-run system wouldn't be any more draconian than what they currently confront under private plans. This is complete nonsense.

The left has been trying to address fears of rationing by trotting out an old and tired trope, namely, that rationing is an inescapable fact of life because every system rations whether by price or fiat. But there is a big difference between the two. If I can't afford caviar and champagne every night, any rationing involved is metaphoric, not real. Genuine rationing occurs when someone else controls access—how much of a particular good I can consume.

By that token, Obama's stimulus bill has set in motion rationing on a scale unimaginable in the land of the free. Indeed, the bill commits over $1 billion to conduct comparative effectiveness research that will evaluate the relative merits of various treatments. That in itself wouldn't be so objectionable—if it weren't for the fact that a board will then "direct financing" toward approved, standardized treatments. In short, doctors will find it much harder to prescribe newer or non-standard treatments not yet deemed effective by health care bureaucrats. This is exactly along the lines of the British system, where breast cancer patients were denied Herceptin, a new miracle drug, until enraged women fought back. Even the much-vilified managed care plans would appear to be a paragon of generosity in comparison with this.

Obama has repeatedly asked for honesty in the health care debate. It is high time he started showing some.

Shikha Dalmia is a senior analyst at Reason Foundation and writes a biweekly column for Forbes, where this column originally appeared.