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Larry Kudlow: We Don’t Need Big-Bang Health-Care Reform

The long-term uninsured need help and should get it, but not with mandatory universal coverage or government-backed plans

By Larry Kudlow |

Why do we need President Obama’s big-bang health-care reform at all? What’s the real agenda here? If it’s really to cover the truly uninsured, a much cheaper, targeted, small-ball approach would do the trick. On the other hand, maybe the real goal is a larger, ultra-liberal plan aimed at a government takeover of the U.S. health system.

Larry Kudlow
Larry Kudlow

In a recent column, Larry Elder points to an ABC News/USA Today/Kaiser Family Foundation survey that shows 89 percent of Americans are satisfied with their health care. That means up to 250 million people could be happy with their plans. So why is it that we need Obama’s big-bang health-care overhaul in the first place?

In a new Pew Research Center poll, only 41 percent of those surveyed believe that the U.S. health-care system needs to be completely rebuilt. In early 1993, when Bill and Hillary Clinton started on health-care reform, 55 percent said the system needs a complete overhaul. So something has changed.

In a new CBS/New York Times poll, 38 percent say the economy is the most important problem facing the country, 19 percent say jobs and only 7 percent say health care. In an NBC/Wall Street Journal poll on the same question, 24 percent say the budget deficit is today’s most worrisome problem, while only 11 percent say health care.

There’s more. According to the U.S. Census Bureau, we don’t have 47 million folks who are truly uninsured. When you take out college students plus those earning $75,000 or more who choose not to sign up for a health-care plan, about 20 million people are removed from the list of uninsured. After that, you can remove the 10 million who are not U.S. citizens and the 11 million who are eligible for SCHIP and Medicaid but for some reason have not signed up for those programs.

So that leaves only 10 million to 15 million people among the long-term uninsured.

Yes, they need help. Yes, they should get it. But not with mandatory universal coverage, or new government-backed insurance plans, or massive tax increases. And certainly not with the Canadian-European-style nationalization that has always been the true goal of the Obama administration and congressional Democrats.

Instead, we can give the truly uninsured vouchers or debit cards that will allow for choice and coverage, and even health savings accounts for retirement wealth. According to expert Betsy McCaughey, rather than several trillion dollars and socialized medicine, this voucher approach would cost only $25 billion a year — with no socialized medicine.

Columnist Peter Robinson, writing for Forbes.com, relates an interview with the late free-market Nobelist Milton Friedman about the inefficiencies of health care. Friedman stated simply and clearly that the cost problems in our system can be traced to the fact that most payments for medical care are made not by the patients who receive the care, but by third parties — typically employers or government.

“Nobody spends somebody else’s money as wisely as he spends his own,” Friedman said. He also fingered the tax code, which allows for an exemption from the income tax only if health care is employer-provided. This is a free-lunch syndrome, one that removes incentives for competition and cost-control because we’re all playing with somebody else’s money. And in the case of Medicare and Medicaid, caregivers have become employees of insurance companies and the government.

A new government-backed insurance system would intensify this free-lunch syndrome. It also would surely lead to a government takeover of what’s left of our private-enterprise system.

But the Democratic agenda has never really been just about the uninsured, has it? And according to the Congressional Budget Office, with a price tag of $1.6 trillion in new spending, it certainly hasn’t been about real cost-cutting or budget restraint. Nor has it been even remotely about true market choice and competition. Nor has it been about tort/trial-lawyer reform, which itself would be a major cost cap.

And let’s not forget a spate of new tax-hike proposals that would sink economic recovery: employer benefit taxes, higher payroll taxes, taxes on soft drinks and alcohol, a VAT tax or another income-tax hike for successful earners. And remember, existing health-care entitlements are estimated to be about $80 trillion in the hole over the decades to come. Wouldn’t it make sense to solve these bankrupt entitlements before we layer on new ones?

So there is a strong suspicion that the Democratic agenda has always been a class-warfare, anti-business attack on private-sector doctors, hospitals, insurance firms and drug companies. In the name of cost-cutting, what’s really going on is a major knockdown of profits. Liberals have always railed against the “excess profits” of insurance firms, drug companies and physicians.

Knocking down profits and telling people what to do because government planners know best, right? Wrong. Absolutely wrong.

Larry Kudlow is the founder and CEO of Kudlow & Co. LLC, an economic research and consulting firm in New York City, and host of CNBC’s Kudlow & Company. Click here for more information, or click here to contact him.




comments powered by Disqus

» on 06.25.09 @ 02:34 PM

We don’t need Larry Kudlow and his obfuscations and disinformation.

» on 06.25.09 @ 05:06 PM

Like we need your useless negative additions with NO information Marcy? Offer something useful to the discussion or go change your panties.

» on 06.25.09 @ 06:17 PM

Kudlow can’t help it——-he is a master of the buzzword, and it is irrelevant whether it fits.I surely hope that his services are more rationally based and those that think he knows something are not taken in by his loud and overbearing manner.
On the other hand, he speaks only to persons who think he knows something, so maybe he has found a niche service, selling his services to people of similar but equally inadequate thinking.

» on 06.25.09 @ 06:27 PM

This is so much twaddle. The health care system in this country is a complete joke, held in a death grip by the insurance companies and HMOs, which exist largely to DENY coverage. This country needs a single-payer health plan now, and to hell with the rapacious insurance companies.

» on 06.25.09 @ 10:09 PM

I agree with normal guy. The insurance companies are extracting 30% out of the system and denying coverage to those that need it the most. For those of use that purchase their own healthcare and are seeing 20 to 30% annual increases it is time to have single-payer or a public option. Larry is clearing a very loud talking head. He is on CNBC and never shuts up and refuses to listen to any other opinions without interupting.

» on 06.26.09 @ 02:14 PM

Well, Larry Kudlow is WRONG WRONG WRONG!  The ONLY way to truly reform our health care system is to pass a Universal
Single Payer Health Care plan that is privately delivered and PUBLICLY financed.  A New York time pole just out shows that the majority of Americans want this!  As long as these cherry picking “for Profit” private insurance companies are allowed to control who gets to see a medical professional and who doesn’t, there will be millions of people in this country with NO EQUAL ACCESS TO HEALTH CARE.  Only with Single Payer will EVERYBODY be on a level playing field, with QUALITY AND EQUAL HEALTH CARE ACCESS FOR ALL AMERICANS.  The private, “for profit”, mega-huge insurance industry needs to be removed from the equation if this country is ever to achieve true reform.  The Universal Single Payer Plan IS SECURE, SENSIBLE & SUSTAINABLE.

» on 06.26.09 @ 04:39 PM

What health insurance package does Kudlow have? Equally important, how much does
it cost? And who pays for it?

Imagine that - like members of Congress - Kudlow has a Platinum level coverage, and that his employer pays for most of it.

Were Kudlow - and Congress - subject to the forces of the real world, he would notice medical costs going through the roof. He’d see them rising many times faster than the overall inflation rate. He’d see kazillions of dollars that Big Pharma uses to mass market new drugs added on to consumer costs at drug stores.

Were Kudlow not in some Manhattan ivory tower, he’d realize that over 40% of
individual bankruptcies each year are related to a family member’s catastrophic
health bills, where the choice is poor treatment, good treat tied to insolvency, or
death.

Were Kudlow in the real world, he’d read about incentives paid by health insurers
in his beloved private sector, to disqualify and cancel long-time subscribers in good
standing if they dare to get sick and try to file a claim.

Most of all, were Kudlow open-minded, he would note that while Americans spend
MORE on “health care” under the present mostly-private system than any advanced
economy in the world, Americans’ life expectancy from that unequal availability of
health care rates us only 19th in the world. Not a very good “market” return on all
our investments, huh?

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