Clarification: Health 'Co-ops' Are Government Care

WJO
MICHAEL O. LEAVITT

Responding to a building wave of opposition to the "public option," the Obama administration is now signaling that it may dress up government health care in yet another set of clothes. This time, it will be called a health insurance "co-op." Sen. Kent Conrad (D., N.D.) is floating the idea, Sen. Max Baucus (D., Mont.) has offered his initial support, and Sen. Chuck Schumer (D., N.Y.) has listed three conditions it needs to meet. Mr. Schumer's conditions are a national structure, federal financing, and a ban on federal appointees who have ties to the insurance industry. This "co-op" would be federally controlled, federally funded, and federally staffed. Expressing his opposition to smaller organizations and his demand for a national "co-op," Mr. Schumer says, "It has to have clout; it has to be large." He adds, "There would at least be one national model that could go all over the country," which would require "a large infusion of federal dollars."

I'm quite familiar with real co-ops. As a teenager, I filled my family's tractor with fuel purchased at a farmer's co-op, which was organized by local people to solve a common problem. My family got its electricity from a rural electric co-op. I was later a director of an "insurance reciprocal," a form of a co-op. Co-ops are a part of American culture: people uniting to solve common problems. What the Democrats are proposing bears little resemblance to this.

The Democrats are insisting that their version of a "co-op" wouldn't be government-run health care, but I ran Medicare and Medicaid as secretary of Health and Human Services, and I know this isn't true. When Washington provides the money, names the directors and ultimately pays the bills, government controls health care. Lobbyists will lobby, Congress will respond, and bureaucrats will decide who gets care, what drugs are prescribed, what procedures are covered, and how much money providers can charge. This is true for Medicare, it's true for Medicaid, and it would be true of Mr. Conrad's "co-ops."

Sen. Chuck Grassley, the ranking Republican on the Senate Finance Committee, is from Iowa farm country. He knows co-ops, and hopefully he also knows a plan for a government takeover when he sees it. He's said he's against a "public option," no matter what it's called. Yet Senate Finance Committee Chairman Baucus, describing what he wants out of "co-op" legislation, spoke plainly, as reported by Politico earlier this summer, when he said, "It's got to be written in a way that accomplishes the objective of the public option."

Our health-care system needs real reform. We need to abolish the unfair tax that favors employer-sponsored insurance over self-purchased insurance. We need to foster a more vibrant private market with greater competition and choice. We need to make prices transparent and give consumers more freedom to pursue health-care value.

Every American needs to have access to affordable health insurance. But we don't need a "public option" that would jeopardize the employer-provided insurance of millions—an option that employers would be able to choose at their employees' expense. And we don't need the government running a bunch of so-called "co-ops," rationing care at taxpayers' expense.

The Democrats are getting worried that the Trojan Horse they have offered in the form of a "public option" has been spotted for what it is. So now they are looking for a new way to get government-run health care through the gates.

Let none of us be co-opted by their latest ploy.

Mr. Leavitt, former secretary of Health and Human Services (2005-2009), has served as the administrator of the Environmental Protection Agency and as governor of Utah (1993-2003).


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AUGUST 20, 2009, 5:56 A.M. ET

ObamaCare's Contradictions
The President does both sides now on his health insurance plan.

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Over the past week, President Obama has held three town-halls to make the case for his health-care plan. While he didn't say much that he hasn't said a thousand times before, his remarks did offer another explanation for the public's skepticism of ObamaCare. Namely, the President contradicts himself every other breath. Consider:

He likes to start off explaining our catastrophe of a health system. "What is truly scary—what is truly risky—is if we do nothing," he said in Portsmouth, New Hampshire. We can't "keep the system the way it is right now," he continued, while his critics are "people who want to keep things the way they are."

However, his supporters also want to keep things the way they are. "I keep on saying this but somehow folks aren't listening," Mr. Obama proclaimed in Grand Junction, Colorado. "If you like your health-care plan, you keep your health-care plan. Nobody is going to force you to leave your health-care plan. If you like your doctor, you keep seeing your doctor. I don't want government bureaucrats meddling in your health care."

Mr. Obama couldn't be more opposed to "some government takeover," as he put it in Belgrade, Montana. In New Hampshire, he added that people were wrong to worry "that somehow some government bureaucrat out there will be saying, well, you can't have this test or you can't have this procedure because some bean-counter decides that this is not a good way to use our health-care dollars."

So no bureaucrats, no bean-counters. Mr. Obama merely wants to create "a panel of experts, health experts, doctors, who can provide guidelines to doctors and patients about what procedures work best in what situations, and find ways to reduce, for example, the number of tests that people take" (New Hampshire, again). Oh, and your health-care plan? You can keep it, as long your insurance company or employer can meet all the new regulations Mr. Obama favors. His choice of verbs, in Montana, provides a clue about what that will mean: "will be prohibited," "will no longer be able," "we'll require" . . .

Maybe you're starting to fret about all those bureaucrats and bean-counters again. You shouldn't, according to Mr. Obama. "The only thing I would point is, is that Medicare is a government program that works really well for our seniors," he noted in Colorado. After all, as he said in New Hampshire, "If we're able to get something right like Medicare, then there should be a little more confidence that maybe the government can have a role—not the dominant role, but a role—in making sure the people are treated fairly when it comes to insurance."

The government didn't get Medicare right, though: Just ask the President. The entitlement is "going broke" (Colorado) and "unsustainable" and "running out of money" (New Hampshire). And it's "in deep trouble if we don't do something, because as you said, money doesn't grow on trees" (Montana).

So the health-care status quo needs top-to-bottom reform, except for the parts that "you" happen to like. Government won't interfere with patients and their physicians, considering that the new panel of experts who will make decisions intended to reduce tests and treatments doesn't count as government. But Medicare shows that government involvement isn't so bad, aside from the fact that spending is out of control—and that program needs top-to-bottom reform too.

Voters aren't stupid. The true reason ObamaCare is in trouble isn't because "folks aren't listening," but because they are.
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REVIEW & OUTLOOK

* AUGUST 20, 2009, 1:33 P.M. ET

Single Payer for Kids
What happens when private companies compete with Uncle Sam.

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Democrats are planning to use the autumn budget reconciliation to bring America further down the road to a single-payer system—and not just in health care. Responding to a White House request, pending House legislation would make the federal government the dominant lender in the $100 billion market for student loans.

Not that Congress has traditionally kept its hands off this business. As in health care, intervention in the education market has gone hand-in-hand with rising costs. While government accounts for 41% of health-care spending, the feds guarantee or issue roughly 80% of student loans, subsidizing the rates and also offering a slew of grant programs. Not by coincidence, higher education costs have risen much faster even than in the health-care market. From 1982 through 2007, college tuition and fees increased 439% in nominal dollars, almost triple the rise in median family income, according to the National Center for Public Policy and Higher Education.

Now the plan is to squeeze out what remains of the private market. Until now, there were three options for students needing to borrow for college: private loans, government loans and loans made by private lenders but guaranteed by the government. The plan for the fall is to outlaw this last category—more than half the current market—while tightening the noose around the small share that remains free and poses no threat to taxpayers. Simply put, we are watching in student loans exactly what ObamaCare's harshest critics have forecast for health care: a "public option" that ultimately destroys all competition.

Federally guaranteed loans have long offered roughly the same rates whether issued by a private lender or directly from the government. Turned off by customer service that's good enough for government work, students have voted overwhelmingly for the private lenders. But by next summer all new guaranteed loans would have to come direct from Uncle Sam. Many colleges see an administrative train wreck. Sarah Bauder, who heads the financial aid office at the University of Maryland, recently warned Members of Congress that "The perils and costs associated with moving entirely to one loan system for students need to be re-evaluated." She notes that the Department of Education doesn't apply the same rigorous procedures as private lenders to prevent defaults.

Ms. Bauder warns of possible "disruption to our students." Some disruption would be worth it if Congress was moving toward a true market economy. Yet the legislation from Rep. George Miller (D., Calif.) goes in the opposite direction. Along with outlawing government-backed loans issued by private lenders, the bill also strengthens the power of the "public option" versus pure market loans. Mr. Miller ramps up so-called Perkins loans to $6 billion from $1 billion, offering a fixed rate of 5% for borrowers who had largely been using the private loans. For another category of federal loans, Mr. Miller allows students to enjoy a variable rate if interest rates fall, and a cap in the event that they rise. This kind of heads-borrowers-win, tails-taxpayers-lose offer will be difficult for a private company to match.

Mr. Miller has also locked in low fixed rates for the most popular types of Stafford loans—as low as 3.4% for some undergraduates. If inflation and interest rates surge after the Federal Reserve money-creation festival, taxpayers will still have to subsidize these loans even if Uncle Sam has to pay much more to borrow.

In another 2008 change, a Miller bill placed new paperwork requirements on private loans. While rigging the rules for their public option, Democrats also proclaim that it's cheaper to have the federal government run this business. That's because government accounting makes federal lending appear to be a winner by ignoring long-term risks. Interest-rate and default risks are not fully priced into the government's cost estimates. The government also doesn't include the foregone tax revenue when private firms are replaced by the feds.

Georgia Representative Tom Price has tried to shine a light on all of this. Early last year the Republican won a committee vote to require the government to report the direct loan program's impact on the national debt and to conduct audits. Mr. Miller killed the reporting requirement with a floor amendment. Then in a House-Senate conference, Mr. Miller and Senator Ted Kennedy (D., Mass.) wiped out the new auditing rules. If taxpayers really benefit, wouldn't the program's backers want more transparency, not less?

What we have here is Congress aiding, abetting and obfuscating a government takeover of an industry. Hill sources tell us that then-Senator Barack Obama's aides were steadfast in urging Democrats to enact the 2008 law. Now President Obama is explicit about wanting the government to take the dominant role in student loans. It has grown difficult for Mr. Obama to deny that he favors a single-payer system. The question is how much of the U.S. economy will have to live under it.


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