He prescribed an echo cardiogram.  “It’s probably nothing,” he said, “but we need to make sure you don’t need a valve job.”

The doctor was my new old doctor. That is, he had been my doctor when I was single.  Now my wife and I had moved back into the area and I wanted a physician closer by.  I had always liked this doctor.

About $1600 later, after the echo cardiogram, I was given a clean bill of health. I say “given” but in fact they gave me nothing except a bill.   They did not even call.  I had to phone the doctor’s office, where someone casually informed me that I was fine.

A few weeks later my wife went to this same doctor.  And guess what?  She was diagnosed with a heart murmur too.  Quite a coincidence, no?  Knowing my story, she refused to schedule the echo cardiogram even though the doctor said it was “urgent. ” Instead my wife consulted a second doctor who found no heart murmur.

Clearly our doctor either 1) has a hearing problem,  2) is part of practice that profits from piling on extra charges, 3)  practices an extreme form of defensive medicine or 4) responds to some combination of these three.  Thinking back,  I also remembered an unnecessary x-ray years ago.

This anecdote is relevant to our recent healthcare reform debate in the United States because my wife and I have a high-deductible plan.  The $1600 came out of our own pockets.    We are going to fire our doctor.  In so doing, my family strikes a small blow for healthcare efficiency.

But if we had a more luxurious plan, one with no or just a small deductible, we might have shrugged the whole episode off.   To paraphrase George Will, folks who pay at the door at the Great American Heatlhcare Banquet  consume all they can.

The lesson for healthcare reform is obvious.  Universal high-deductible plans could substantially drive down healthcare costs.  Doctors who over-prescribe medical services will be put out of business.

High-deductible plans are not just for the young,healthy and wealthy.  And they could be made progressive by a voucher system that helps fill the medical-savings accounts of low-income workers.

For a still more paternalistic approach, citizens or their employers could be required not only to buy high-deductible plans, but also to make contributions to their own health-savings accounts (as you can read here, Whole Foods already does this for its employees).  Those most struggling to make ends meet could be given vouchers both for the plan and  to help fill their own health-savings accounts.    Arguments about helping the working poor pay for healthcare should not get in the way of getting the structure right.

Unfortunately the Democratic legislation that passed in the House Sunday does not encompass this kind of cost-saving reform.  At the healthcare summit with Republicans, President Obama showed his disdain for high-deductible plans .  He argued that such plans would keep people from going bankrupt, but that consumers would not seek out preventive care.  He implied that he had failed to fully consider some creative alternatives or that consumers just are not smart enough to look after their own health.

So often it seems that left-leaning politicians seek control from the top without considering the myriad effects below.  Some effects are hard to predict, but many are not.

Consider the rational course of action for me and my family now that the President has signed the healthcare legislation into law.  Instead of  being a small force for healthcare efficiency, my family and I will probably become a drain on the system.   We will be tempted to drop our children’s insurance coverage, since under the new law we can always insure them later if they get very sick.   Insurance companies will not be allowed to turn us down.  With our current high- deductible plan we are already accustomed to self-insuring up to $5000 a year anyway.   We might simply take what we had been spending on their insurance and beef up our health-savings account instead.

In 2014 every citizen without health insurance will be forced to pay a penalty of  up to $2085 (though I am not sure if my family will qualify for this maximum) and no one, including adults, can be denied insurance due to pre-existing conditions.  The $2085 sum is more than $5000 less per year than my family’s current high-deductible policy.   Our family will have no incentive to buy insurance.  I may pay the penalty, drop insurance for the whole family, self -insure for the smaller bills, and buy insurance only if we experience a medical crisis.

At some point — maybe after the insurance companies are wiped out and the government starts paying all of the bills — fines will have to rise to the level where paying them instead of carrying insurance makes no financial sense.  The insurance I will be required to buy will have  a very low deductible or none at all,  so it will be more expensive than my former policy.  But tax payers will subsidize  me and my family so long as our income is under $88,000.

Maybe we will pay less than we do now.  Maybe we will pay more.  Who knows?  But our low- or no-deductible plan mandated in the future and subsidized by other taxpayers will pay our way into the Great American All-You-Can-Consume Healthcare Banquet.    We will automatically  say yes to any expensive test our doctor prescribes.  Why wouldn’t we?  Doctors, with incentives based on profit or fear of law suits, will continue to pile on helpings of tests and treatments.

Cost controls are already necessary and will increasingly become more so, but they will not include cost controls managed by healthcare consumers like me and my family or driven by market forces.   The structure of the healthcare bill clearly indicates that a bureau or panel in Washinginton will decide what treatment is necessary and what is not.  Insurance companies will either disappear of become completely regulated.  Progressives who favor a single payers healthcare system should have faith.  It is coming, and taking us all along for the ride.

That Barack Obama’s real goal has always been a single-payer healthcare system seems obvious when his history on the issue is tracked before and during his campaign for President.  Here is a video the Hillary Clinton campaign dug up during the election in which Obama clearly indicates he favors a single-payer system.  He also notes that it might be a long process, saying “we may not get there immediately”.    When confronted with the video during the campaign, Obama claimed that he favored a single-payer system if the United States were “starting from scratch,” but since the country already has an employer-based system, he actually favored building upon it.

However, at a  candidates’ forum Obama admitted that preservation of the employer-based system was only a transition to something else.

But I don’t think we’re going to be able to eliminate employer coverage immediately. There’s going to be potentially some transition process. I can envision a decade out or 15 years out or 20 years out where we’ve got a much more portable system. Employers still have the option of providing coverage, but many people may find that they get better coverage, or at least coverage that gives them more for health care dollars than they spend outside of their employer. And I think we’ve got to facilitate that and let individuals make that choice to transition out of employer coverage.

The transition would be to a “public option,” through which the United States would finally adopt a single-payer system.  Obama unconvincingly denied that the public option was a “Trojan horse” for a single-payer system. Even though the President vigorously campaigned behind the scenes for the public option, the US Senate was having no part of it and left the public option out of its final bill.

A few weeks ago, with the public option dead, President Obama finally came out with an outline for his own plan, as distinct from the House and Senate bills.  Interestingly, the one new dimension he added was a measure permitting the government to regulate insurance-premium prices.  Health insurance companies would become like utilities, quasi-public entities.  Or, with new and expensive mandates on one side and price controls on the other, private health insurance could be squeezed out of existence entirely.

Most troubling is President Obama’s less-than-candid approach throughout the debate. The Democratic leadership claims that their aim is to give consumers more choices, but really the goal appears to be only one government-controlled option.

During the campaign candidate Obama hammered Hillary Clinton for her insistence that there must be a universal mandate that everyone buy insurance who can afford it.  He made Hillary’s plan sound coercive.  But since becoming President, Obama has adopted Clinton’s position.  He knows now, as he must have known then, that everyone must be compelled to carry insurance in order to make it illegal for insurance companies to deny coverage for pre-existing conditions.  Otherwise, many people would simply wait until they got sick before buying insurance.

Today the President insists that his healthcare bill pays for itself, when clearly it does not.  It robs Medicare of $500 billion dollars and collects taxes and makes cuts for ten years while paying out for only six years in the new program. Controlling healthcare costs is what most voters mean when they say they want healthcare reform, but the Democrats are offering healthcare expansion without much if any cost control.

Ideologically pushing unpopular policies is politically foolish.  Pushing them in an obviously dishonest way heightens the political consequences even more. It did not have to be like this.  And we can insist that our government do better in the future.

Progressives have long held that every American should be guaranteed health insurance.  It is a noble and worthy goal.  Policies of insurance companies denying coverage or boosting premiums to unaffordable levels due to pre-existing conditions strike almost every American as inherently unfair. This practice must end.  The problem with the Democrats’ approach is not the ends, but the means.

From a policy point of view, they have shunned the market approaches to comprehensive healthcare in favor of their single-payer dream.  Only market-based reform realistically holds out the promise of maintaining the quality of American medicine while cutting costs.

From a political point of view, the Democratic Leadership has made no meaningful compromises at all.  The most important compromise is to abandon the state-centered approach to healthcare reform in exchange for demanding universal medical-insurance coverage.   Here is the grand bargain:  Republicans and moderate Democrats get market-based reforms while Progressives get universal coverage.

Progressives are pretending that such a bargain was not possible.  They are wrong.  Most of the Republican bills claim to aim at universal coverage.  They may not all realistically get there, but in conceding the goal, they signal a readiness to make a deal.  A number of Senate Republicans jumped on board the bipartisan Wyden-Bennett bill, which embodies many of the necessary compromises and reforms.  If progressives could accept market means to progressive ends, a large coalition could be assembled ranging from the left wing of the Democratic Party all the way over into the center of the Republican Party.

Here is a list of the sort of actions that might comprise a market-based approach to healthcare reform without sacrificing universality:

· Eliminate the tax-free status of the most expensive “Cadillac” employee healthcare plans. It’s regressive and drives up healthcare costs.

· Eliminate the tax-free status of all employee healthcare plans in order to pay for universal healthcare insurance and move away from the employer-based system.

· Require employers to offer their employees the cash equivalent of what the employers spend for them on healthcare so that the employees can purchase their own insurance in an open market.

· Make insurance companies subject to the anti-trust laws.

· Allow people to purchase insurance across state lines.

· Reform tort law by capping award damages for pain and suffering and creating specialized courts where expert judges rule on medical-malpractice cases.

·  Encourage the use of high-deductible plans with health-savings accounts so that healthcare consumers will have incentives to demand reasonable healthcare costs.

·  Provide tax credits to help the middle class pay for healthcare insurance.

·  Provide vouchers for healthcare insurance to the working poor.

The great healthcare bargain is out there waiting to be made if voters insist upon it:  universal coverage in exchange for the kind of market-based and legal reforms listed above.  It won’t happen in the near term.  President Obama and the Democratic Congressional Leadership have their jihad in full throttle.  Republicans smell blood in the water and are now in no mood to compromise.

Perhaps the greatest myth being peddled as truth is that it is now or never for healthcare reform.

If the Democratic state-centered healthcare bill somehow passes, the political system will be doomed to three more years of intense partisan warfare as Republicans campaign to repeal it. It won’t be pretty.  Republicans will be especially furious and unyielding if they get rolled in the “Reconciliation Process.” On the other hand, if the Democratic bill fails there may again be a chance for compromise and consensus on healthcare. Republicans will have more power in Congress.  President Obama will still be in the White House. The great bargain will still be possible. Citizens of goodwill should insist upon it.

In his speech President Obama declared, “But when I ran for President I promised I wouldn’t just do what was popular –I would do what was necessary.”  Two kinds of people stand against the tide of popular will.  The first is the courageous person of principle who follows his or her conscience against an errant majority.  The second is the zealot who will use unscrupulous means to achieve a self-righteous vision.   Which one is Barack Obama?

“We have to recognize,” said Obama,” that we face more than a deficit of dollars.  We face a deficit of trust.”  Indeed, the President’s got that right. “To close that credibility gap,” he continued, “we have to take action on both ends of Pennsylvania Avenue — to end the outsized influence of lobbyists; to do our work openly; to give our people the government they deserve.”

Unfortunately the “credibility gap” widened during Obama’s speech.  Rather than expressing any regret for cutting a special deal with the pharmaceutical industry (see Robert Reich’s honest assessment here) or special deals for unions, Obama pretended to be against backroom bargains with special interests.  Instead he boasted that — hold the presses — “for the first time in history” his administration posts White House visitors online.  He added that the White House didn’t hire any lobbyists either.   But while lobbyist middlemen may have cooled their heels in the lobby, representatives of corporations like Goldman Sachs walked through the revolving door (see Adele Wick’s piece at CenterMovemet.org, Is Goldman Sachs the New Haliburton).

As for the Massachusetts special election, the President referenced it indirectly:

Washington may think that saying anything about the other side, no matter how false, no matter how malicious, is just part of the game.  But it’s precisely such politics that has stopped either party from helping the American people.  Worse yet, it’s sowing further division among our citizens, further distrust in our government.

So, no, I will not give up on trying to change the tone of politics.  I know it’s an election year.  And after last week, it’s clear that campaign fever has come even earlier than usual.  But we still need to govern.

It is worth noting that Massachusetts Senator-elect Scott Brown never ran a negative advertisement during his campaign.  Brown also favors term limits and clean election laws.  By contrast, the President’s candidate in the contest, Martha Coakley, tried to pound the daylights out of Brown in a vicious barrage of negative advertising in the days just before voters went to the polls.

Polling data show that Brown’s opposition to the Democratic healthcare bills was the single most important issue leading to his surprising victory.  While some Democrats in Congress seem to have received the message from Massachusetts, the President pressed on with his healthcare jihad.

So as temperatures cool, I want everyone to take another look at the plan we’ve proposed.  There’s a reason why many doctors, nurses and health care experts who know our system best consider this approach a vast improvement over the status quo.  But if anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses, let me know.  Let me know.  Let me know.  I am eager to see it.

Here is the President at his most disingenuous.  When he uttered these words, steam must have come pouring out Democratic Senator Ron Wyden’s ears.  Wyden had produced a bipartisan market- and consumer-based healthcare bill that came closer to achieving the President’s stated objectives than any other piece of legislation.  But it was shunned by a White House that apparently insists on state-centered solutions.  For more on Wyden’s bill, see this nice piece at the Huffington Post by Democrat Lanny Davis.

President Obama likes to pretend that no one has offered any reforms except for the ones he supports.  It’s always his bills versus “the status quo.”  He accuses the Republicans of “just saying no to everything.”  In fact the Republicans have several healthcare bills of their own, including one written by a Senator / doctor, Tom Colburn, that also aims at universal coverage.  Here is a summary of Colburn’s bill.   Republican bills sensibly include tort (lawsuit) reform, but Democrats invariably refuse to anger trial lawyers, a constituency that fills their campaign coffers.

President Obama, in a gimmicky effort to address popular rage over the nation’s alarming debt, proposed a discretionary spending freeze after significantly raising discretionary spending for two years.  Meanwhile, the great bulbous mass of federal spending, in entitlements and defense, will continue to grow.  Americans yearn for entitlement reform in order to protect their children from the oncoming train wreck that is the national debt, but the Administration and the Democrat Congress are proposing to exacerbate the problem by paying for their new healthcare bill by robbing Medicare.  This confiscation process they cynically describe as unspecified “cost savings.”

In his State of the Union address President Obama was more reassuring on foreign policy.  He powerfully reaffirmed American values.  He promised to hold Iran accountable for its drive to build nuclear weapons.  He reported that there were many more strikes against Al Qaeda in 2009 than there were in 2008.

Obama is an idealist come of age in the Chicago Obama is an idealist come of age in the Chicago style of politics, which may serve him well internationally.  Against the enemies of the United States, an unyielding ruthlessness in service of ideals is often appropriate.  In foreign policy, a silky-smooth presentation that unflinchingly serves self-interests is commendable.  This approach, however, does not befit the politics of a democracy, in which the journey is as important as the destination.

It became apparent, shortly after President Obama’s inauguration, what change the administration had in mind. Unending bail-outs, huge increases in government spending, soaring budget deficits, closing Gitmo, cap and trade, card-check, non-“shovel ready” stimulus spending. And a health-care plan that continued to lose public support and was only approved by the Senate after cutting special deals to many members to garner their support (the Louisiana purchase – $300 million to Mary Landrieu; The Cornhusker deal -$45 million to Senator Ben Nelson in Medicare cut exemptions, which his Nebraska constituents disapprove of by a margin of 63% to 35%; a $60 billion tax exemption from the “Cadillac” health-plan tax for Obama’s union friends; special deals for Big Pharma and Big Insurance, to name just a few). Most of this legislation was done behind closed doors and in many cases where Congress had no time to read the bills. So much for the change and transparency in the way Washington does business, promised by candidate Obama.

Since April 15, 2009, segments of the American electorate have been trying to get both President Obama’s and Congress’ attention. The message? Slow down, concentrate on the economy, don’t grow government, have more fiscal discipline. Tea Party rallies, town hall meetings, volumes of e-mails, letters and phone calls by constituents to their representatives and senators have been ignored by the majority and their concerns have been marginalized. President Obama, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid have been absolutely tone-deaf to these concerns and their arrogance about knowing what is best for the American people has both frustrated and angered voters.

President Obama may not have expected the kind of first anniversary gift he received from Massachusetts voters on Tuesday. The Democrats discounted victories by Governor Chris Christie (in the very Democratic state of New Jersey) and by Governor Bob McDonnell (in swing state Virginia) as anomalies and the result of local concerns. But how do they explain the election of Republican Scott Brown in the bluest of blue states, Massachusetts? Early indications are that they blame the Democrat candidate Martha Coakley for not working hard enough and for being a weak candidate. Probably right. If they are honest, however, Democrats will also admit that as they move forward on Obama’s large domestic agenda, they have not focused sufficiently on job creation and spent too much time on so-called health-care reform that Americans have increasingly rejected. Most Americans’ intuition tells them that big growth in government spending and big deficits crowd out the private sector where permanent jobs are created. Americans have seen unemployment rise from approximately 7.9 % when Obama was inaugurated to 10.2 % in the fall. Americans know that “Obamacare” will not increase access and lower medical costs, in spite of what the Democrats say. The math just doesn’t work.

Republicans may be tempted to say that Brown’s election is a repudiation of Obama’s health-care plan. Partly true. There is no question that Scott Brown won, maybe in large measure, because he told voters he was the 41st vote against “Obamacare”. But Scott Brown also won because independent-thinking Massachusetts citizens (like Independents across the country), a demographic responsible for bringing Obama to power, are angry at Washington. In his “acceptance” speech, Senator-elect Brown focused on an independent agenda, not on the Republican Party. Brown knows that Independents see problems with one-party rule. Independents, like all Americans, want jobs and lower deficits. They have as much disdain for Washington as Washington has shown them in the past year. They want their representatives to listen to their concerns and not tell them what they think is best for them. They are concerned about national security. They are anxious about their economic future and the fact that they may hand over to their children a weaker country than they were given.

What happened in Massachusetts should be a wake-up call to all of Washington, Democrats and Republicans alike. This country is still a center-right country. Voters don’t want too much interference by government. They want strong national security and low taxes. Americans are generous and willing to help those who cannot help themselves, but reject huge entitlements programs. Americans reject one-party rule and the arrogance of politicians who don’t remember that they work for their constituents and serve at their pleasure. Republicans got their wake-up call in 2006 when they were rejected because of their spending appetites and growth of government. The outcomes of the gubernatorial contests in New Jersey and Virginia and the Senate race in Massachusetts delivered similar message to Democrats. America faces some serious problems. Straightforward and bipartisan solutions are required. Common sense must be returned to ‘Washington; ideology must be abandoned. Most Americans are independent thinking and live in the center.

In an interview with ABC’s Jonathan Karl, Senator Evan Bayh, (D-IN) said that Democrats must not ignore the lessons of these recent elections. “There’s going to be a tendency on the part of our people to be in denial about all this [but] if you lose Massachusetts and that’s not a wake-up call, there’s no hope of waking up…The only way we are able to govern successfully in this country is by liberals and progressives making common cause with independents and moderates. Whenever you have just the furthest left elements of the Dem party attempting to impose their will on the rest of the country — that’s not going to work too well.” President Obama delivers his State of the Union address next week. He should give an indication at that time whether or not he has received the wake-up call and if the administration will hit the reset button and focus on the issues Americans really care about.

Economic doldrums, of course, helped make it possible for a newcomer to become President against the odds and the insiders. Now they make it harder for him to govern, even though they also contributed to creating strong Democrat majorities in both House and Senate. Immediate concerns over rising unemployment and vanishing nest eggs in recession trump longer-term interests in getting expensive healthcare and environmental reforms right.

Nonetheless, Obama has pressed forward on several fronts. What grades has he earned, this first year in the White House? And how does President Obama compare to Candidate Obama?

Candidate Obama sounded and acted like a natural leader. When he promised us Change, followed by Change We Can Believe In and then Change We Need. Many of us believed him and agreed that we needed a new way of governing. Business under his administration, Candidate Obama said, would not be business as usual. Vested interests would lose their vesting, anti-trust regulation would be better enforced, and any bill with earmarks would be vetoed. Candidate Obama also promised us transparency. Not just the results but the process would improve.

Candidate Obama’s promises and pledges provide a standard for grading his programs. The grades do not suffer from inflation, but they do cut the President a little slack. When programs address recession rather than long-term needs, it’s hard to know what would have happened in their absence. Further, most of the programs are still works in progress. The healthcare bills that passed the House and Senate have yet even to be reconciled and implemented, but given the prominence they hold in Obama’s agenda and as 1/6 of the economy, they must too be evaluated.

However carefully caveated, the grades below remain bold. All readers are encouraged to voice their agreement or disagreement by submitting comments to CenterMovement.org. Please visit the archives, too, for columns providing more details about the programs as they are and as they could be.

Stimulus Package: C-, so far. Nobody knows what “the multiplier” is — macroeconomists haven’t really studied Keynesian economics empirically for years, and surely there are several multipliers depending up the kinds of spending. “Shovel ready” is a stupid concept. Very few projects can be implemented quickly to increase overall demand and employment, and even fewer are valuable for society as a whole. Lags plague all stimulus efforts – lags in predicting, or even recognizing, recession, lags in deciding what to fund, lags in getting the programs up and working. Tax cuts are quicker, and arguably fairer, if the designs are right. Maybe even better is just letting the economy right itself.

These, though, are generalities. What’s particularly disappointing about President Obama’s package is that he let the House’s Nancy Pelosi and the Senate’s Harry Reid determine so much of it. As easily predicted, it’s more about pork and parochialism than national in vision. And vested interests are likely to gather quickly around the “temporary” spending and make it permanent. Would that Obama had taken leadership of this program. He certainly put together the team to address and ameliorate the situation. Instead, business has continued as usual. And while the stock market has soared almost 60% since its March nadir, unemployment remains at miserably high levels. [See “The Road Untraveled: Obama and the Middle Road” for a visionary alternative.]

TARP: C, so far. Part of the stimulus package and inherited from Bush 43, this program has aided Wall Street more than Main Street and appears particularly attentive to Goldman [a.k.a. Government] Sachs. It’s not clear that TARP unfroze lending by its recipients, but maybe matters would have been even worse without it. At least it was fast. Billed as a sort of taxpayer investment that would actually generate a positive return for us, it keeps re-investing any returns in new or repeat losers. With the third round of aid to GMAC, it’s now more involved with the auto industry than with the banks. The bill was passed in haste and without restraining detail by Bush 43, and Obama didn’t insist on making it transparent when he took office. [See “Is Goldman Sachs the New Halliburton” for more on the problem of vested interests and conflicts of interest.]

GM and Chrysler Bailouts: D-. They went bankrupt anyway. Bankruptcy, by the way, doesn’t destroy “real assets” – it destroys financial assets – all stockholder equity and some unpaid bills of suppliers. Why not an F? Because it’s possible that delaying bankruptcy prevented or reduced investor and consumer panic. The gain was a short grace period during which some of us felt the government was in charge and taking paternal care of us. How do we measure this gain, and the cost immediately thereafter of considerable loss of faith in that government and enhanced worries about deficits and future tax increases? And then there’s the $30 billion for which taxpayers are ultimately responsible. Hm. The program was further off the mark because lots of foreign companies make their cars in the United States, employing American workers. The distinction between “American” and “foreign” production is porous indeed. Just how valuable are the GM and Chrysler labor unions to the Democrats? Enough to justify more than $30 billion? Plus more than $16 billion, so far, to GMAC ? Plus $3 billion for Cash for Clunkers?

Cash for Clunkers: F. This program itself is a clunker. For $3 billion, it hurt the environment and clumped sales rather than increasing them. It contained no provisions for buying “American” and trading in “foreign”. Only two of the top ten models purchased under the program were manufactured by the corporations once known as the “Big Three”, while none of the top ten models traded in was “foreign”. Increasing miles per gallon didn’t even help the environment on net. New Guzzlers could still be purchased – they just had to guzzle less than the old ones. More importantly, destroying functioning engines is environmentally unsound. Surely the savings in foreign oil, gasoline and carbon imprints pale in comparison to the waste of resources in replacing and discarding cars before their time was really due.

Cap and Trade: Incomplete – so far, a C. Using market forces to trade carbon emission permits is a good idea: it encourages competition and efficiency. But who sets the cap, and how? Is it based on those now seriously questionable climate-warming data? Why are only 15% of the permits sold at auction, while the other 85% have apparently been gifted to utility companies, petroleum interests, refineries, and other businesses that must have political presence in Washington? It looks like business as usual within the Beltway. What about the implications for international trade and relations? Was it wise to raise costs during a recession? President Obama has a window of opportunity to answer some of these questions and right some of these wrongs. If he closes the window without doing so, his grade is D.

Financial Reform: C-, so far. Barney Frank, Chair of the HSFC, is working on tightening up bank regulations so that there’s more risk retention and less playing with subprime loans. This looks good, at least on the surface. After all, if some banks are too big to fail, they must not be allowed to embrace too much risk. The result would otherwise be to socialize the risks while keeping the returns private. At the same time, inspite of this insight, as part of the stimulus package, the FHA has already raised the ceiling for the amount of mortgages it will insure, and it’s still accepting minimal down payments of a measly 3.5%. It appears that DC insiders don’t understand that Main Street got in trouble largely because of feckless federal policies for mortgages. With Main Street, down went Wall Street, and the private sector as a whole. The private sector’s still down. Growth in jobs has been in the government sector and the semi-government sector of healthcare. Another problem is that we cannot understand the effects of regulations simply by reading them. Who’s going to enforce the complicated new strictures? More Goldman Sach exes? Who’s going to regulate the regulators? [See “Rolling the Dice with Congressman Barney Frank” for more on this topic.]

Healthcare Reform: D, so far, and likely to decline. It looks as if a healthcare bill will be passed this year. Both the House and the Senate managed to pass bills, and they’re likely to be reconciled. Access to care will be increased – in good measure by overturning Campaigner Obama’s pledge not to force Americans to buy health insurance. Obama didn’t squawk about this development. It doesn’t seem to bother him that additional coverage is being accomplished by following a goal that was Clinton’s, not his, when they campaigned against each others. He has said he wants to improve quality and access to care while controlling costs, and will veto any bill that’s not “deficit neutral”. The alleged neutrality of the Senate version of this bill is fake: it’s an artifact of projecting out only 10 years, before many of the expenses kick in. This is not reform, it is program expansion and cost explosion. Wyden-Bennett should have been given wide publicity and deep consideration. [See “RX for Healthcare Reform” for real change and real benefits.]

Not just the results so far but the process by which they were obtained keep the grade low. As with the stimulus package, President Obama gave too much power to Pelosi and Reid rather than leading from the White House. Transparency was negligible. The bills were so lengthy and voting followed their dissemination so quickly that it’s hard to believe that many of our reps read, much less understood, what they were voting for — or against. Doors were closed and people, corporations and other organizations with opposing views were denigrated and threatened rather than heard. Obama cut deals with Big Pharma and Big Insurance, although the latter’s cooperation appears to have faltered. Our second Louisiana Purchase and the buying of Nebraska’s Ben Nelson should be included in the costs along the perks awarded to other political holdouts. What were the rewards for early support and loyalty? What are the details? Where are the devils?

These are not the kind of grades one would expect for a former Editor of the Harvard Law Review. Most of them are modified by “so far”’s, some of which are modestly hopeful. Perhaps the tincture of time will reveal underlying wisdom and what now looks like cowardice will be seen as practical compromise. What’s already clear, however, is that President Obama has not been the leader Campaigner Obama seemed with such ease to promise. What’s also clear is that special interests aren’t being silenced and restrained, they’re being thrown juicy chunks of that other white meat commonly known as pork.

Not just Big Banks but Big Interests appear too big to fail, perhaps more for political than economic reasons. Until we change the system, no President is going to get good grades unless he or she leads instead of just coordinating and cooperating with elements within it. Mr. President, you can lead; please do lead. The House and Senate, the car industry, financial industries and other sectors of political and economic life see only their parts of the picture. You’re the one elected to represent the nation.

Twelve Steps to a Cure

Action is often its own reward in this country, and Americans are being sold a bill of goods by both Congress and Senate in a rush to pass something – anything? – to “reform” healthcare.  Fortunately, critics outside of the Beltway are increasingly outspoken about the follies in both bills.  Equally fortunately, the critics come from all walks of life.  The quotations below come from a columnist for a top paper and with a specialty in economics, a dean from a prestigious medical school, and the head of one of the world’s best hospitals.

For The Washington Post, op-ed columnist Robert J. Samuelson entitles today’s piece “A  savings mirage on health care” and observes: “Unfortunately, the word ‘savings’ is used misleadingly. It doesn’t mean (as is usual) actual reductions; it signifies smaller future increases. There’s a big difference.”

Samuelson also links his piece to comments Jeffrey S. Flier made almost a month ago for The Wall Street Journal.  “As the dean of Harvard Medical School,” Flier says in his editorial, “I am frequently asked to comment on the health-reform debate. I’d give it a failing grade… Those of us for whom the central issue is health—not politics—have been left in the lurch. And as controversy heads toward a conclusion in Washington, it appears that the people who favor the legislation are engaged in collective denial.”  “Denial”!  Now that’s a word scientists who have faith in the realities of global warming use to denigrate their opponents.  Flier also fails both bills, most notably for their negative effect on innovation.

Also mentioned by Samuelson is Dr. Delos M. Cosgrove’s November 27 piece for Newsweek.  “They set out to improve quality, access to health care, and cost control,” Cosgrove said after the House bill passed. “I give them an A so far on access, a C on quality, but I’m not sure they’re going to get a passing grade on costs.”  Head of the Cleveland Clinic, which gets A’s on all three subjects, Cosgrove has aggressively taken on the task of reforming American health itself by attacking smoking and obesity.

The American people are fatigued and worried about government deficits.  Especially in the midst of recession, they don’t want to pay more taxes.  Here’s a twelve-step proposal to start the reform process by harnessing the powers of supply and demand.  Competitive markets have proved their mettle in innovation and cost control.  Coupled with legislation that mandates universal insurance coverage, these steps can also reduce costs by substituting annual physicals and screenings for expensive visits to emergency rooms.

1. We must start medical reform with medical insurance reform. Medical insurance, and the unintended consequences of its regulation, are at the heart of most of our problems.  We’re not denied medical care, at least at the emergency level of sick care.  Rather, we’re denied health insurance — if we can’t afford to pay for it or have pre-existing conditions.  Some, but not all, of us are in this situation because we’ve chosen to bet the bank on our health, willfully choosing to forego the expense of those pesky premiums.  Then we get sick, and with pre-existing conditions are now uninsurable.

2. We must make our goals realistic.  Some problems can’t be “solved”, they can just be “ameliorated”. We must have insurance to pool and therefore reduce risk.  But as long as we have insurance that separates the service from its direct payment, as individuals we’ll make – or agree to – decisions that sum to serious social cost overload.  Mr. Smith’s decision to go for a $3000 test with a 0.5% probability of yielding useful information doesn’t raise Smith’s premiums very much at all, but many Smiths making similar decisions raise everyone’s premiums in upward creep.

3. We must take on tort reform.  The practice of “defensive medicine” makes matters even worse.  Pain and suffering are real, but getting money for others’ mistakes ironically denies emotional depth and reinforces the excessive materialism of our society.  As with #2, it may help the individual, but the broader social result may be grossly inappropriate.  Compensation for medical expenses and lost earnings is another matter altogether.

Tort reform can also raise doctors’ take-home pay by reducing their malpractice- insurance premiums.  Only in this way can we get more doctors and more care without raising their salaries and our costs.

4. We must realize that today we have more of a “sick-care system” than a “health-care system.”  We need to improve the underlying well-being of our population.  Too many of us are fat, smoke, don’t exercise, or live with too much stress. We need better education and incentive structures to start us eating and exercising healthy and stop us seeking quick solutions through pill popping and surgery.  In addition to reducing sick-costs, a healthier population would be a happier population.  Ultimately, it’s quality of life we’re after.

5. We must move from what’s really “sick insurance” to real “health insurance”.  We must make people more responsible for their own health and the medical decisions and costs that follow from its failure. Higher deductibles and Health Savings Accounts are a good step in this direction, especially when taken together.  Because they make us bear more of the cost of our choices, we have the incentive to become more informed of our options and shop around for more cost-effective drugs and other treatment plans.  We become attentive to value, not just quality.  Insurance policies with no extra charges for screenings and other preventative (health maintenance) care help prevent illness or catch it early.  These would be particularly important to people of modest means.

6. We must consider the possibility that getting rid of government policies may help more than adding to them.  Another reason health insurance costs so much is that government regulations at both the state and the federal level insulate the insurance companies from competition.  They do so in the name of “consumer safety”, but those who cannot afford the [only arguably] “better” insurance are decidedly not safer.  Instead of busting budgets with a public option to make insurance companies behave more competitively, we should eliminate exemptions from anti-trust laws inter-state competition and see how prices fall.

7. Our government also raises medical insurance costs by exempting employer-provided insurance from taxes.  Instead of seeking to reduce costs by the competition a public option allegedly provides, we should eliminate this subsidy to insurance companies, the companies most everyone not employed by them loves to hate.  The subsidy is both direct and indirect.  It’s pretty easy to see that people end up with more expensive policies than they’d choose if all forms of remuneration were taxed equally. It’s harder to see how prices may be higher because employer provision shields the insurance companies from the consumer scrutiny they would face if the insured were actually writing the checks and directly confronted with the off-setting reduction in money wages this tax policy supports.

Candidates for President err by taking pledges to raise taxes only on the rich or never to raise them at all.  The tax-exemption of employer-provided “health” insurance must be eliminated, and here’s the language to get the job done: it’s a “regressive subsidy”.  Not only does it subsidize insurance companies already fat with profits due to the government-ensured absence of strong competition in the industry.  Due to the way pooling risk reduces premiums, it also subsidizes big companies over small companies and small companies over sole proprietorships.  Due to the progressive income-tax code, it also subsidizes the well paid and otherwise wealthy over people with more modest means.

8. We must realize that the real moral outrage in our current system is that some people cannot afford insurance and really, really cannot afford to get sick. We are too wealthy as a nation to allow this situation to continue. Everyone should have access to affordable insurance.

Some had insurance, but lost it (after a brief COPRA interval) when they lost their jobs due to illness and don’t qualify for new programs because of pre-existing conditions.  Insurance must be portable to prevent this situation.  Others could have gotten affordable medical insurance, but chose to avoid those pesky monthly premiums by going without insurance, bet the bank on their health and lost both.

9. Our ninth necessity is accordingly that everyone be required to carry health insurance.  The choice to go without insurance is too expensive for society. Only by eliminating it can competition among hospitals take place and lower costs.  As long as emergency medicine incurs losses as doctors must, legally and ethically, take care of sick people who can’t pay, other areas of medicine must make protected profits.  Barriers to entry are necessary to sustain cross-subsidization.  Barriers to entry are the enemy of competition and cost control.  Enforcing this universal mandate should involve hefty fees for delinquents. Proof of insurance should be part of filing taxes and getting or renewing driver’s and other licenses.

10. As with many other issues, poverty brings its special problems, and they should be dealt with directly.   Poor people should be given vouchers that can be exchanged only for health insurance.  If that 7.5% figure that triggers deductibility of medical expenses on 1040’s Schedule A has any value, it should be used to determine the value of subsidies for people who can afford some but not all of their insurance premiums.

11. People with pre-existing conditions must have access to affordable medical insurance.  That’s another reason everyone must be required to carry it – why bother paying for something until you really need it?  If the long-term strategy to keep medical costs manageable is to make insurance companies and hospitals competitive, then there is a short-term need for a public option.  Uninsured and ill people should pay for the insurance they can afford, and the government should pay for all the rest.  This “public option” is necessary and appropriate only during the transition to portability and requirements for universal private insurance.

12. We should study the consequences of letting markets make the insurance and hospital industries more competitive before rushing into more change. Haste is waste. Not just our population, but also our government is too fat.  The government bills purport to be deficit-neutral because they project revenues and costs only ten years out, and the benefits are so slow in coming that the costs don’t accelerate for years.  They also borrow from fantastical unspecified cuts in Medicare.  Properly harnessed, the forces of supply and demand can yield benefits much faster, and much cheaper.

In sum, we need radical reform, reform that goes to the root. “These ideas are utopian,” you may say, “and ‘utopia’ means ‘no place’.” But they’re necessary.  And surely the necessary is possible.