Lawrence Hunter, a contributor on Forbes.com, took on President Obama the other day, listing a number of White House initiatives that he apparently doesn’t like. The post is predictable, given Hunter’s pedigree—he once worked for conservative former New York congressman Jack Kemp, was an advisor in the Reagan administration, and is a former vice president and chief economist for the U.S. Chamber of Commerce. So it’s not surprising he came out swinging against Social Security, which he said would become “the world’s biggest welfare program,” and argued that Obama jammed through Congress a national version of the Massachusetts health law, which Hunter labeled “the Republican proto-type for a state-run health care system (including an individual health-insurance mandate and centralized medical planning.”
I took a second look. Centralized medical planning? Was this a new epithet du jour for health reform? Was Hunter offering reform foes a brand new way to attack the Massachusetts law—and, by extension, the federal law? Central planning conjures up images of the old Soviet Union, when we were taught about the evils of centralized planning in agriculture or industrial production. The country needs so many acres of corn or wheat or X number of automobiles produced to satisfy consumer demand. But that kind of planning in the Massachusetts health law? No way. And not in the federal law either. Once again, a bit of explanation is in order.
In both the Massachusetts and the federal law, the means of production—in this case, designing and selling health insurance policies—is in the hands of private insurance companies—you know, the Aetnas, the CIGNAs, the Blue Cross’s of the world. In fact, requiring people to buy insurance via the individual mandate delivers more customers to those same insurance companies.
Under the federal law, carriers will receive periodic checks from the government, which will pay the subsidized premiums on behalf of people buying policies in insurance exchanges overseen by the states. If anybody benefits from planning, it’s the insurance companies that will have new revenue streams from which to plan their cash flows and investments. Those wanting subsidized coverage will choose their policies from several offered by private carriers in the state insurance exchanges. Remember, the public option that would have provided government competition disappeared long before the law passed. While the states will supervise the operation of the exchanges, they will hardly decree how many policies can be offered or what the premiums will be. The carriers will determine that, depending on their marketing strategy, their potential customer base, and the health of the policyholders who are insured. That all sounds like free market stuff to me.
But there will be regulation—the kind that has gone on with insurance for decades. Regulation is not centralized planning. The policies offered in the exchanges must offer a minimum benefit package to ensure that taxpayers are not subsidizing junk insurance that covers very little. This is already the case for Medicare supplement insurance. Congress authorized standardized benefit packages in the early 1990s, and no one talked about centralized medical planning back then. The standardized benefits put an end to the unscrupulous marketing practices that drained the pocketbooks of older people.
When the exchanges are operating in 2014, four main kinds of policies will be offered—platinum, gold, silver, and bronze, all offering different levels of coverage. Consumers will choose which ones they want. States are unlikely to push their residents into one plan or another. The exchanges will operate under other rules, too, the way the New York Stock Exchange operates under rules. That’s hardly centralized planning, either.
Spooky terms have a way of becoming part of campaign discourse—the vocabulary that the pols use to rile up people for political advantage. As the campaign moves toward 2012, we will be on the lookout for these terms. Journalists should do the same.