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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

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, 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.

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