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Capitol Comment

    Capitol Comment 241 - Kennedy Strikes Back: The Return of Nationalized Health Care

    07/13/1999

    In 1994, President Clinton tried to nationalize the health care industry in an ill-advised attempt to help the millions of Americans without insurance. Now, Senator Ted Kennedy (D-MA) and the president are at it again – only this time, they want to take control of private health plans and leave uninsured Americans out in the cold. What’s worse, under the guise of their "Patients’ Bill of Rights," millions more would lose the health insurance they currently enjoy.

    The premise underlying this bill (S. 6) is that Congress, the president, and the Washington bureaucracy should determine how health care plans are run – regardless of how much their requirements and mandates cost patients. Sen. Kennedy has taken the lead on promoting S. 6, perhaps because he knows it would serve as a step toward establishing complete government control over health care. Consider what his spokesman said about the last batch of regulations Sen. Kennedy pushed through Congress:

    "It may be that ultimately the effect of our bill is to lead the government to take further steps to increase coverage and control costs of health care. My boss still wants universal coverage with cost containment, so from his point of view, the foot in the door is a good thing."1

    Making health care more expensive. Far from controlling costs, however, the inaptly named "Patients’ Bill of Rights" will cause health care premiums to rise dramatically. According to the Congressional Budget Office, this legislation would cause premiums for employer-sponsored health insurance to rise by 6.1 percent.2 This increase would be on top of the predicted inflation in health care spending for next year. Businesses who provide health coverage for their workers can respond to these newly mandated costs by:

    cutting back on existing coverage (perversely, the coverage eliminated may be more valuable to employees than the mandated coverage),
    eliminating health benefits entirely,
    cutting employees’ wages or withholding raises, or
    eliminating existing jobs or cutting back on new hires.
    Senator Kennedy, Esq. What "rights" will patients receive in exchange for higher premiums? The cornerstone of S. 6 is expanding the ability of patients to sue their health plans and employers in state court. While individuals can already sue health plans in either state or federal court, this bill would allow trial lawyers to take advantage of state tort laws – raising the specter of huge awards for punitive damages.3 Not only will other patients and employees pay for the costs associated with any successful lawsuits, but health plans may adjust to expanded liability by expanding their coverage to include any possible course of treatment a patient might desire, regardless of whether these treatments are medically appropriate or cost-effective. To defend against lawsuits, plans would also have to spend more on reviewing treatment decisions.

    Senator Kennedy, M.D.? While most press coverage of S. 6 has focused on the ability to sue HMOs in state court, the bill includes many other purported rights – such as the right to have the government determine how many physicians each health plan should include. Mandates in S. 6 require that each health plan or issuer of health insurance have a "sufficient" number, distribution, and variety of doctors (including specialists) so that individuals have "timely" access to care. It is not clear why patients’ needs would be better served by giving government bureaucrats the right to dictate how many doctors they must pay through their health plans.

    What about uninsured Americans? The "Patients’ Bill of Rights" does nothing to help the 43 million Americans without health insurance. The right to have direct access to a specialist is purely theoretical to the millions who are not able to afford insurance at all. Yet S. 6 merely entails a litany of mandates and requirements, with no relief to the uninsured population.

    Although these health care mandates are meant to expand health coverage, they would actually lead to less coverage overall. Higher premiums mean fewer consumers are able to afford coverage. The nonpartisan Congressional Budget Office estimates that every 1 percent increase in premiums due to mandated health benefits causes over 100,000 Americans to lose their employer-based health coverage.4 And mandated benefits prevent as many as one-fifth of all small businesses that do not offer health coverage from doing so.5

    Conclusion. Instead of giving Washington’s bureaucrats more control over health care spending, that power should be returned to patients. Real reform doesn’t mean more mandates, but rather giving patients more freedom of choice. The best way to accomplish this goal is to make saving money for health expenses tax-free. We should also make it easier – not harder – for small businesses and Americans as individuals to afford health insurance. Americans don’t need Senator Kennedy’s bill of goods – Congress should reject his latest proposal to nationalize healthcare.

    1David S. Broder, "Small Steps," The Times-Picayune, April 28, 1996, p. B7.

    2U. S. Congressional Budget Office, Cost Estimate of S. 6, Patients’ Bill of Rights Act of 1999 (as introduced), April 23, 1999, p. 3.

    3For example, juries returned verdicts of $89.3 million and $120.2 million, respectively, in Fox v. Health Net in 1994 and this year in Goodrich v. Aetna U.S. Healthcare of California, Inc., which were lawsuits in state court against plans regulated by the state of California.

    4U.S. Congressional Budget Office, CBO’s Estimates of the Impact on Employers of the Mental Health Parity Amendment in H.R. 3103, May 13, 1996, p. 2,4. This estimate understates this effect, for it does not include the individual market, where consumers face higher premiums and are more sensitive to price increases.

    5See Jon R. Gabel and Gail A. Jensen, "The Price of State-Mandated Benefits," Inquiry, Vol. 26 (1989), p. 426-428; and Gabel and Jensen, "State Mandated Benefits and the Small Firm’s Decision to Offer Insurance," Journal of Regulatory Economics, 4:4 (December 1992), p. 396.