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Larry Kudlow: The Government-Insurance Option Is Dead
The day after President Barack Obama’s impassioned speech for big-government health care, Wall Street bet heavily that the so-called government-insurance option he supports is dead.
In a strong stock market on Thursday — the market’s fifth-straight daily rise (so much for the September swoon) — health-insurer shares advanced significantly. Cigna increased 5 percent, Health Net nearly 5 percent, Humana 3.5 percent and UnitedHealth Group 1.5 percent. Hospital shares such as Community Health Systems and Tenet Healthcare also rallied smartly, climbing about 5 percent each. Drug company Pfizer rose more than 1 percent.
The stocks would not have rallied if the public option looked alive. Corroborating this, the Intrade pay-to-play online betting parlor shows only a 24 percent probability of the government option passing by the end of this year. Also, of 17,308 respondents in a Politico poll, 38 percent registered thumbs-up for the president’s address, while 58 percent said thumbs-down.
Obama’s speech was not a game-changer. Good delivery, bad product. And at the top of the list, the new government-insurance option, which surely is a gate-opener for the government takeover of the entire health-care sector, is a clunker. The public doesn’t like it. Moderate and conservative Democrats don’t like it. Republicans can’t stand it. And Wall Street doesn’t want it. Hence, the Dow’s 80-point rally the day after the speech.
But the free-market option is still nowhere to be found. Right now, Sen. Max Baucus, D-Mont., is working to save Obama’s face, with a kind-of Obama Lite plan coming out of his Senate Finance Committee. But Baucus’ framework has individual and business mandates, and it surely will give the government an even stronger whip hand on health care.
There are taxes galore for this $900 billion baby. It includes a 35 percent excise tax on high-end insurance policies, plus billions more in taxes on insurers, drug companies and medical-device makers. Government boards will determine value, quality and quantity for doctors, hospitals and clinical laboratories. Folks who opt out could face a $3,800 tax (based on a family of four).
At the end of the day, thoroughgoing free-market choice and deregulation is just as missing in action under Baucus as it is under Obama. There’s a bipartisan deal to be had, one that would deregulate health insurance across state lines. It could pass the Senate. But Democratic leaders aren’t going there. For some reason, they won’t put the market to work.
In other words, there’s no real market and no real choice in Democratic health reform.
Under the Democratic plan, seniors are even going to lose Medicare choice. A $500 billion reimbursement cutback of Medicare to health-care providers would wreck private health-care profitability. And other casualties could include the 11 million people in the Medicare Advantage program (which allows insurance choice) and the 8 million in health savings accounts. These will be scrapped under Obama-Baucus.
So we’ll be left with the same health-care insurance system that is dominated by big government, big business and big insurance companies. Government and the insurance lobby love their oligopolistic powers. But it’s exactly these third-party payers who create the supposed free lunch that unnecessarily bloats the expenses of the health-care system.
Only the free market will solve our cost problems, doing it in a way that no other government program can.
And speaking of free-market consumer choice and competition, wouldn’t it be nice if the 12 million low-income and chronically uninsured folks in America today got vouchers or refundable tax credits so they could shop around for the best plan available?
In fact, to promote real free-market choice, the entire insured population should get a tax break so that everyone can purchase plans on a pre-tax basis, just the way businesses do. And the free-market cost control of government expenses can coexist beautifully with the continued rapid growth of the private health-care sector — which is fast becoming America’s No. 1 industry.
In an article for the American Enterprise Institute, Noble Prize winner Robert Fogel argues skillfully for a fast-growing private health sector to accommodate baby-boomer retirements and take advantage of the breathtaking technological gains in health care. He’s right. We don’t need Malthusian growth-limits on health care. It’s an economic-recovery sector. It even created 400,000 new jobs during this deep recession. It now employs 13.7 million people, more than the whole manufacturing sector.
But what we do need is effective consumer choice and market-oriented policies that will control the government’s health-care sector and prevent it from spending, borrowing, regulating and taxing us to death.
— 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.
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» on 09.11.09 @ 02:54 PM
Kudlow offers the ususal Wall Street opinion stuff from the Fox News side of the ideological aisle.
Does Kudlow himself have insurance? How much does he pay? How much is given as a perk of his job? How big are his deductibles, co-pays, exclusions? What percent of
his annual income goes to his family’s health coverage?
With all his writing about “health care reform” this year, why does he never talk about that?
Has Kudlow or a family member ever gone through a serious illness or accident? If so, how well did his current insurance work? Could it have been better? He is silent there too.
Right now, his beloved “private sector” runs the whole show.
Therefore, America now has the highest “overhead” (read, profit taking) for basic health insurance of any of the world’s advanced societies.
Yet, as Kudlow knows, tens of millions of Americans have no coverage at all, and for
all the money we spend on “health” - where we lead the world - our longevity, birth
defect rates, and other important performance indicators, generally place us down
somewhere between 15th and 20th among advanced nations public health.
Someone into price-cost-quality-profit as Kudlow, should recognize that most
Americans do NOT get very good value from the current system, even as a few private insurance corporations are getting unbelievably wealthy.
Most of our allies and trading partners have a very high quality of life, remain truly democratic, and operate primarily through free market systems.
So, Mr. Kudlow, why are their per capita health care costs so much lower than ours,
and their longevity as high or higher?
The next time you write about health, please try to address these issues.
» on 09.12.09 @ 05:33 PM
San Roque Resident nails it on the head about the dilemma we’re in. The private sector’s *health-care-as-a-commodity* approach has led to squelched competition, price gouging, putting the bottom line above human life, and obscene profiteering by a chosen few who control the lion’s share. Those things hardly ever seem to bother conservatives.
I’ll only add that Larry rarely gets it right, and Wall Street is *never* as simple as it seems. He’s wrong about how many people want a public option, he’s wrong about its effect on the free market. As usual, he merely parrots the corporate line.
» on 09.12.09 @ 11:17 PM
The Welfare disaster, DMV, Parks and rec, Social services,—ACORN support-9 Billion going to socialist crooks—-Our Money???
» on 09.13.09 @ 04:46 PM
“govt. does nothing well” implies that all the things s/he mentions are evidence of govt incompetence, therefore a public option for health care will also be a disaster. At least that’s what I *think* s/he means because s/he is speaking in code instead of coherent thought. In fact, none of the things in his/her list are examples of what s/he thinks they are.
-What exactly is the “welfare disaster”? Do you simply object to the idea of a social safety net? That would explain a lot, but since you don’t really say anything I guess I’m putting words in your mouth. Don’t like it? They try speaking in sentences.
-The DMV is not federal, and is actually run quite efficiently.
-The National Parks System is something that everyone benefits from, and they do an amazing job with hardly any money. Besides, how can you complain about being able to spend a night out in a beautiful place for 20-30 bucks? Or are you just pissed off because you can’t shoot your assault rifle in Yosemite?
-ACORN helped a lot of people and is still helping people in need. Do some research.
-You apparently don’t know what socialism is, so you shouldn’t use big words like that if you don’t know what they mean.
-Even if all the things you mention were examples of government’s incompetence, and if you’d tried you surely could have come up with some real ones, they have nothing to do with health care reform! Try looking at Medicare, Medicaid, and yes even the Veteran’s Admin for good examples of health care systems. They’re not perfect but they work, and most people are satisfied with them.
I may disagree with you about health care reform ideas, but it’s hard to even know what you’re saying if all you do is spit out fractions of sound bites. Your approach is typical of people who don’t try to learn about reality and are complacent to just listen to conservative opiniotainment, thinking it makes them informed. It’s rather sad.
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