Obama's Health Plan

Resident Fellow Scott Gottlieb, M.D.
Resident Fellow
Scott Gottlieb, M.D.
Scott Gottlieb, M.D., reviews Critical by Tom Daschle.

When ex-senators write books, they are usually gazing into a rearview mirror, offering wistful anecdotes from a life in politics or settling old scores. But Tom Daschle, the former Senate majority leader, isn't looking back in "Critical: What We Can Do About the Health-Care Crisis." He is looking forward--to a Democratic ascendancy. Given his support for Barack Obama and the likelihood of his prominence in an Obama administration, his views are worth looking at closely and, well, critically.

One of the attractions of "Critical" is that it provides a more detailed blueprint of the Democratic approach to overhauling American health care than either Mr. Obama or Hillary Clinton has offered on the campaign trail. One of Mr. Daschle's co-authors, Jeanne Lambrew, handled the powerful health-care desk at the Office of Management and Budget for the Clinton administration and now works at the Center for American Progress, an influential Democratic think tank. Mr. Daschle is similarly fluent in his party's thinking on health-care policy.

One alternative to empowering government agencies would be simply to help individuals buy affordable private insurance.

The most important proposal in "Critical" is the creation of a "Federal Health Board," explicitly modeled on the Federal Reserve Board. Its duties would include "recommending coverage of those drugs and procedures backed by solid evidence. It would exert influence by ranking services and therapies by their health and cost impacts."

Mr. Daschle predicts that the board would change the entire health-care market by forcing expanded Medicare, Medicaid and veterans programs to follow its lead. Private health insurers would follow along, too, in part for the political cover such a move would give them to make unpopular but cost-conscious decisions not to pay for certain benefits.

What about the uninsured? Mr. Daschle wants to open to all Americans the Federal Employee Health Benefits Plan--a menu of private-insurance options now accessible only to government workers. He would offer, in addition to the current plans, a government-run program, presumably similar to Medicare, although he provides few details. There would also be some form of means-tested premium support (or tax benefits) for Americans who couldn't afford one of the available plans.

Of course, "Critical" includes plenty of laments about the problems of our current system, from overused drugs to insufficient preventive care. Mr. Daschle also includes the familiar paean to Medicare's "lower administrative costs" without acknowledging the central irony: Most of Medicare's costs are borne by doctors and hospitals that must meet the requirements of a host of regulations; if they do not, they may face federal investigations and lawsuits for noncompliance. Private health plans don't have the luxury of burdening doctors and hospitals in this way. Thus Medicare has a mere handful of mostly generalist clinicians reviewing its coverage and payment decisions. A large private health insurer would have to employ hundreds to accomplish the same task.

Despite the fresh enthusiasm Mr. Daschle shows for his federal health-board proposal, it's not exactly a new idea. Mr. Daschle himself proposed it as part of the failed American Health Security Act of 1993. He admits that the board is loosely based on the National Institute for Clinical Excellence in Britain and the Federal Joint Committee in Germany. Both are charged with managing the public's access to higher-cost drugs, medical devices and procedures. But both are growing increasingly unpopular in their home countries--precisely because they've become a triumph of cost-containment over patient access and choice.

As for America's own Federal Reserve serving as a model for Mr. Daschle's health board: The comparison seems misjudged. The Fed has a single price-setting role--determining, through interest rates, the price of money itself. By contrast, a health board would manage the pricing, and use, of tens of thousands of medical products and procedures. How can a single board (instead of, say, the market) make so many decisions, and wisely? Mr. Daschle proposes a dozen or so "experts" who would be "chosen based on their stature, knowledge, and experience, ensuring that the decisions they make have credibility across the health-care spectrum."

Surely this is not the best way to go about reforming the U.S. health-care system. That it needs reforming, though, is beyond dispute. The next occupant of the White House, whatever his party affiliation, will undoubtedly try to broaden insurance coverage. One alternative to empowering government agencies would be simply to help individuals buy affordable private insurance. That effort might start by leveling the playing field between big purchasers, who get better rates for their employees, and individuals, who make up the bulk of the uninsured. People buying into an expanded version of the federal employees' health plan, for instance, would get the same tax advantages, deducting the cost of their health insurance as if they had received it through an employer.

In the end, someone will also have to put the brakes on the unbridled demand for health care. Ideally patients themselves will do it, in response to market forces that expose them to the expense of their more costly decisions. Then again, we could always just leave the work to a board of "experts." And we may--if a Democrat wins in November and Mr. Daschle gets his way.

Scott Gottlieb, M.D., is a resident fellow at AEI.

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