America can’t afford Obama’s ‘public option’

President Barack Obama says he wants Congress to put national healthcare reform legislation on his desk by the time the August recess begins. He is a man in a hurry. He is presiding over an administration that now has a significant ownership stake in two automobile companies and numerous financial institutions.

President Obama and his subordinates are devising plans to regulate private sector executive pay (for folks other than labor union officials). Now our new president wants to move more – if not all – of healthcare into the public sector. Our president is quite ambitious – but not necessarily prudent.

Of the many approaches to healthcare reform being drafted at the Capitol, the one that would have the most far-reaching consequences is the requirement that would mandate a “public option” to private health insurance.

President Obama tries to cloak this major expansion of government with an aura of innocence by saying its only purpose is to keep private health insurance “honest.” The president can do that with the regulatory powers at the disposal of his administration. What is at play here is far more than “honesty.”

Another proposed feature of the healthcare reform legislation is a provision to tax employer-provided healthcare benefits. This proposal is designed to offset a portion of the cost of the new entitlement.

What it will likely do is drive more individuals who currently have private insurance into the “public option.” The benefits would be taxed as ordinary income, which means Social Security and Medicare payroll taxes will apply to it – in addition to standard income taxes. Employers will have to pay their matching portion of the Social Security and Medicare taxes. That will push many employers closer to dropping health insurance coverage that is already a burden to provide.

President Obama has been careful not to claim that the “public option” will save money. To make such a claim, one would have to ignore years of experience with Medicare and Medicaid.

The cost of these two programs continues to escalate explosively. Instead of paying for the rising costs by cutting other areas of the budget or raising taxes, the federal government continuously pays medical providers less to treat the indigent and the elderly. The “public option” will, no doubt, utilize that cost “control” measure as well as another – rationing care.

Long before the first vote is cast on national healthcare reform in this session of Congress, the public should demand that the House and Senate agree to the Congressional Budget Office’s estimate of the cost of the program – and then clearly identify the funding source that will be used to pay for it.

The projected budget deficit for the next fiscal year is already $1.8 trillion. Put another way, 41 cents of every dollar being spent in the next budget will be borrowed. Trillion-dollar budget deficits are projected for most of the next decade.

What the country does not need is another multi-trillion dollar entitlement program to add fuel to the fire.

One of the largest contributors to rapidly rising health insurance costs is the fact that the cost of services and procedures is rarely known by consumers who have little say-so regarding the care they receive. Instead of moving more toward government mandated and operated healthcare, we should be moving rapidly in the other direction.

Consumers of healthcare services – public and private – need the transparency of cost information, financial incentives, and personal empowerment to decide what works best for them. Throwing trillions of dollars more at a system modeled on failures just doesn’t make sense.