You are invited to read this commentary from the Free Enterprise Foundation. It will make you think!

Obama Lies?

Let’s be clear about this. Obama lied about health care reform! My wife and I listened to his speech, heard the shout, and looked at each other, and thought, “His lips moved, didn’t they?” My only surprise was that Congressman Wilson, a Charleston native, would be so impolite to say it to the President’s face, rather than discuss it behind his back.

Politicians specialize in what at The Citadel we call a quibble—a half-truth intended to deceive. In our lexicon, that is a lie. With politicians, there are grave doubts regarding intention. Sadly, they are masters in the art of self-deception and have a comparative advantage in politics. Voting is such a challenge. What is the lesser evil, a politician who is a cynical liar or simply deluded?

President Obama’s proposal for insurance reform begins with the “bait and switch” fraud. He points out that long run trends show that government payment for the healthcare of the elderly and poor, Medicare and Medicaid, cannot be sustained. That is the bait. Something must be done. The switch is the left liberal goal of having government pay for healthcare of ever more people. The notion that having the government pay for the healthcare of more people will somehow reduce the already unsustainable burdens created by government payment for health care is absurd.

Some of Obama’s “quibbles” involve possible avenues where paying for additional health care can reduce costs, such as preventive care. For example, a disease is discovered early. A cheap treatment is provided. The individual is cured. If the disease had festered until symptoms were unbearable, then various expensive treatments would be attempted, and perhaps rather than cure, the end would painful death. Preventive care saves costs. Perhaps for a lawyer, painting such a picture for the jury is normal. Someone else is supposed to mention that the preventive tests usually find that nothing is wrong. With perfect hindsight, the expense was a waste. And what of the sad case where the disease is discovered early, various treatments are tried, the disease worsens, heroic efforts are made anyway, and death sadly follows? That doesn’t mean that preventive care isn’t desirable. It just doesn’t save money.

The fundamental problem with health care, like all goods and services, is that producing it requires resources—land, labor and capital. More resources devoted to health care results in fewer resources devoted to other goods and services. Better healthcare for more people implies that someone is going to end up with less of something else—smaller homes rather than larger homes, eating at home more often rather than eating out. Sadly, self-deception isn’t limited to politicians?. How many Americans believe that someone else will pay for improved health care?

Most Americans pay only a tiny fraction of their health care expenses directly. Most of the payments are directly made by insurance companies. To add to the misdirection, most payments to insurance companies are made by employers. Most Americans pay for their health care by receiving less pay and other benefits. With health care indirectly pre-purchased, complaints are inevitable. When it is actually purchased, the typical household must choose between jobs thinking about all the goods and services they want, as well as the sort of healthcare the insurance paid by the employer will provide.

A more generous health insurance plan implies lower pay and a sacrifice of other goods and services. After that choice is made, and the patient and doctor want to try some expensive test or treatment that isn’t covered, the typical health care consumer will regret the decision to enjoy higher pay and other benefits. Given the highly indirect nature of this decision, as well as the myriad of problems in the labor market, many health consumers will only begin thinking carefully about the situation when proposed treatments are rejected.

Those who buy insurance directly are in much the same situation. When they choose a plan, they must make a decision between a more expensive plan with better coverage and the other goods and services that must be sacrificed. Once the patient and doctor want to try some uncovered test or treatment, the health consumer will regret the decision to go with a cheaper plan and all the other goods and services that were enjoyed instead.

The complaints of patients with regrets, aided by lobbying from firms selling innovative drugs and medical equipment, results in politicians at the state level mandating coverage. State governments require that insurance companies cover ever more services, and insurance companies raise rates on firms and individuals. While politicians have appeased those who become ill and believe they might benefit from these covered services, the costs still exist. Individuals and small business complain that health insurance is unaffordable. Most Americans complain about stagnating real incomes.

Unskilled workers, whose low productivity results in employers being willing to offer less compensation in total, often feel that they cannot afford to give up the pay. Their employers are motivated to pay money rather than provide “free” insurance. Those very same people are unlikely to buy insurance directly for the same reason. While President Obama lambasted Senator Clinton for proposing that everyone be required to make that sacrifice and pay for the health care during the campaign, anyone who took that to mean he wouldn’t actually impose the mandate just didn’t understand the peculiar conception of honesty typical of politicians.

Sadly, there are no easy answers. As long as government pays for the health care of the elderly, it must choose what to cover. As for employer-paid insurance, one modest reform would be to require that tax deductable insurance appear as an explicit deduction on each employee’s check. Allowing the purchase of plans across state lines, bypassing state level coverage mandates would allow more choice and presumably lower cost. Unfortunately, President Obama proposes federal mandates for “improved coverage making it hard to do a before an after comparison. Did he mention the resulting higher insurance costs? But then, telling only half the story and leaving the listener with the misperception they will get something for nothing…well, he is a politician.

Copyright © 2009 by William Woolsey and The Free Enterprise Foundation. All rights reserved

About the author: Professor William Woolsey is a member of The Free Enterprise Foundation's editorial staff and senior writer on national economy reporting. Dr. Woolsey is a distinguished Professor of Economics in the Citadel’s School of Business Administration and a former Libertarian candidate for Congress.