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Obama’s Healthcare Plan: The Pricewaterhouse Coopers Report

A few weeks ago, PricewaterhouseCoopers (PWC) released its study, “Healthcare policy in an Obama administration: Delivering on the promise of universal coverage.” (You can read about PricewaterhouseCoopers here).


Obama’s plan is modeled after the Massachusetts healthcare system. His (near) universal coverage plan comes, not from a public takeover of the healthcare industry public ownership of the means of production in that industry-socialized medicine, but from subsidizing small firms’ healthcare coverage expenses and requiring businesses of all sizes to provide healthcare coverage for workers or face a hefty fine. What is substantially different about Obama’s plan from the Massachusetts system is Obama’s plan does not force individuals to purchase healthcare coverage. What we do have to keep in mind, however, is that it is unlikely that the healthcare reform that goes through Congress and is signed by Obama is the exact one that Obama recommended.


PWC estimates that the federal government’s cost for this expanded coverage, mostly from subsidizing small businesses, would amount to $75 billion a year, at least initially. As with all entitlement programs, initial estimates of future costs are underestimated and often overlooked. Real costs for Medicare and Medicaid were about 10 times what was originally estimated. Let’s hope that the estimates for Obama’s plan come closer to the mark. Here is what happens: as more people are covered, demand for health care expands greatly, pushing healthcare costs up dramatically. This results in calls for price controls, which create shortages, along with political civil wars to drop coverage for certain procedures and certain medications.


Healthcare coverage for more people, while laudable, drives healthcare prices up for everyone and ignores consideration for how these more highly demanded services are to be delivered. Giving more people the ability to pay without increasing the number of healthcare providers merely puts more people into waiting rooms, without doing anything about actually getting people diagnosed and treated. We end up worse than the Canadians, with not only month-long waiting lists for specialties, but with month-long waiting lists to see primary care physicians. Massachusetts was able to handle this by getting more doctors and nurses from other states. This cannot be done so easily for the nation as a whole.


We often fail to see things from both sides. It is easy for us to put ourselves in the place of healthcare buyers, because most of us are. We have a difficult time seeing the big picture of both healthcare buyers and healthcare suppliers, but if we succeed in putting more people into waiting rooms without getting more doctors and nurses to into examining rooms and treatment rooms, we will see prices for healthcare take the express elevator through the roof. Then, political demands arise for a government takeover of the healthcare industry. As Steve Lieber, CEO of the health trade association Health Information and Management Systems Society (HIMSS), is quoted as saying: “Apply traditional economic principles. If you have an increase in demand, there should be some type of effort to address the supply side. It takes time to increase the number of physicians. As demand increases in that sense, it can be an economic incentive on the provider to become more efficient.” (p. 18)


However, the AMA and ANA control the accreditation of medical and nursing schools, and the licensing of doctors and nurses. There are several ways of increasing the supply of providers. Massachusetts, for instance, allows patients to designate a nurse practitioner or physician’s assistant as their primary care provider. They also required their medical schools to graduate a minimum number of primary care physicians. Of course, this does not keep these graduates from going out of state and obtaining more lucrative specialties.


Two things beyond the Massachusetts reforms are needed to really increase healthcare supply. First, is to require the medical schools and nursing schools to increase their graduation numbers. Second, with the political support from the AMA and the ANA and the current political frenzy over immigration, it is far too difficult for qualified doctors and nurses from overseas to come into the US and practice their professions—this needs to be reversed.

All-in-all, Obama’s plan is not the takeover of the healthcare industry that Hillary Clinton’s almost became. Still, without some rollback of the governmental regulations that provide unnecessary barriers to entry into the healthcare industry, his plan will cause prices to rise so substantially that the voters will demand a government takeover of the industry.




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