(The following is the opinion of the author and not necessarily that of Automatic Merchandiser, VendingMarketWatch.com or Cygnus Business Media.)
Every industry has been affected by rising health care costs, and many business owners are anxious to see something done to curb this drain on resources. The refreshment services industry has been affected in some unique ways which VendingMarketWatch.com has examined in detail, but the most immediate way in which health care costs affect our readers is the same as other businesses: rising costs. President Obama's speech last week was a big disappointment in that it demonstrated one of two things: 1) He has little grasp of how to address the problem, or 2) He does not care to be straight with the taxpayer on this very crucial subject. The rhetoric of the debate has confused health care needs with the rights and responsibilities of health insurance customers and providers. Leaders should be doing a better job of clarifying this distinction, as it central to the health care debate. Many of us are too young to remember when there was no government health insurance (Medicare and Medicaid). Some may not realize that public health insurance is a relatively new benefit. It was proposed in 1945 by President Truman and signed into law by President Johnson 20 years later following extensive debate. Today, we are burdened with a new set of needs that may or may not call for a new entitlement.
Health care costs have increased. The baby boomers are aging, and more people need more care. People are living longer thanks to improved care, so more will continue to need more care. New medicines have been introduced, some of which are very expensive. New medical technologies have been developed, some of which are very expensive.In the last two years, a recession has thrown more people out of work, swelling the ranks of the uninsured.The needs are real, but what are the responsibilities of government to address them? Last week, President Obama introduced a plan for a new entitlement, although he never actually used the word. More importantly, he did not give a credible explanation how the government will pay for it. There may be need for a new entitlement. The danger is that an entitlement without sufficient funding could make health care even less available and affordable. What Obama proposed last week is 1) a public option, for which he offered no credible funding explanation, and 2) increased regulation of the private health insurance industry, which will reduce customer choices and further increase costs.
No requirement to change existing plans Obama was most emphatic in stating, repeatedly, "Nothing in our plan requires you to change what you have."He does not specifically propose to abolish private insurance. But just because consumers are not required to change an existing plan does not mean they won't be affected by a new public option and new regulations.He made it clear he wants a public option that will take effect in four years. This is a plan that will compete in the market place against private plans. It will bring a new player to the health insurance market.The public option may well win business from commercial carriers, particularly at the beginning when the premiums rolling in will outpace claims being paid out. Will commercial carriers be able to compete? Let's consider. Say an existing provider loses customers to the public option. That provider may have to increase rates to stay in business. The provider might eventually go out of business, forcing customers to shop around for another, more expensive plan. Will the public option be better than the plans it pushes out of the market? Given the lack of details, there is no way of knowing this. And if it is a viable option, how long will it remain such? The cost for a public option: Then there is the question of how much the public option will cost and how it will be paid for. Obama pegs the cost at $900 billion over 10 years and claims it won't add "a dime" to the federal deficit. He says "most of these costs will be paid for with money already being spent - but spent badly - in the existing health care system." He claims that "not a dollar of the Medicare trust fund" will be used to pay for the plan, then goes on to say "reducing the waste and inefficiency in Medicare and Medicaid will pay for most of this plan." As a baby boomer, this concerns me. While Obama is making new plans for Medicare, he seems to have forgotten that according to The Wall Street Journal, Medicare funds will be exhausted in 2017.
New rules for private plans: Obama also wants new rules for existing carriers which will have to affect costs, which ultimately get passed to policy holders. Unless he also plans to dictate how much the carriers can charge for their policies, these proposals will simply raise costs and limit options.Here is a sampling of rules he presented:No denial of coverage for preexisting conditions. This sounds good, but higher risks incur higher costs. Insurance carriers contain costs by limiting risks. What good is a policy that a policyholder can't afford? No cap on out of pocket costs. Again, the policy can limit out of pocket costs, but this affects the carrier's cost, which ultimately gets passed back to the policy holder in a higher premium. Mandatory coverage, with no extra charge, for routine checkups and preventive care, like mammograms and colonoscopies. Carriers will provide coverage for free? Obama also states that in addition to rooting out the waste and inefficiency in Medicare and Medicaid, additional funding will come from charging insurance companies a fee for their most expensive policies. He claims this will somehow encourage the insurers to provide greater value for the money.Obama's grasp of business economics is scary. The most expensive health insurance policies are the ones that provide the most coverage. An additional fee on the most expensive policies (which have yet to be defined) will simply make them more expensive. Who eventually pays?One can't but wonder if the intent isn't to weaken private insurance to promote the public option.
An honest solution?: If, as Obama says, there is agreement in Congress on about 80 percent of what needs to be done, the lawmakers have done a poor job of serving their constituents. One can sympathize with the enormity of their challenge, but as taxpayers, we are entitled to a government that addresses our needs responsibly.As taxpayers, health care consumers and business owners, we should demand an honest assessment and solution to the health care problem.Ignoring the problem is not responsible. What many may not realize is the government's ability to make it worse.