Wednesday, April 14, 2010

Why Obamacare Wasn't A Socialist Revolution

Cross-posted from Critical Condition on National Review Online.

When Obamacare passed on March 20, much was written about how, on that day, America abandoned its classical liberal pretensions and finally assimilated into the social-democratic consensus of Europe. At long last, we Americans would let the state take responsibility for funding our health-care system.

Except for one thing: In large part, we already had. Based on data compiled by the OECD, per-capita public-health expenditures of the United States were the third-highest in the world in 2007, back when Obamacare was merely the figment of an Illinois senator’s imagination. That year, U.S. government health expenditures were $3,307 per capita, far higher than those of single-payer stalwarts like France ($2,844), Germany ($2,758), Canada ($2,726), Sweden ($2,716), and Britain ($2,446). Only the governments of Norway and Luxembourg spent more on health care than ours did (click to enlarge):

The good-old, freedom-loving U.S. of A. took bronze in the State Health Spending Olympics despite the fact that the percentage of overall health spending undertaken by our government was second-lowest in the OECD, at 45.4 percent. In other words, we spent more on government care for the elderly and the poor than most normal governments spend on health care for everyone.

Why is this so? It is, as I discussed in the latest issue of National Affairs, because our health-care system is neither socialized nor free, but the worst of both. The government does not yet control enough of the overall system to ration health care as the Left would desire, and does nothing about widespread fraud and abuse under its auspices. By instead underpaying doctors and hospitals for their services, it drives up health-care costs for the private sector. And most employees in the private sector don’t pay directly for their own care, leading them to expect lavish treatment at the expense of others. In a truly free-market system, individuals would be responsible for their own health-spending choices, reducing costs and improving quality.

The Patient Protection and Affordable Care Act, of course, does not solve these problems, but augments them. By 2019, depending on how far up Obamacare drives health inflation, it could add another $500-$700 of per capita state health-care spending to our totals, bringing us within reach of first-place Norway.

Most advocates of “repeal and replace” emphasize the political need to show Americans that Republicans are not merely the “Party of No.” But, even if repeal succeeds, there is a compelling public need to reform the U.S. health-care system before it falls apart. That Obamacare worsens our existing system only adds to the urgency.

Fannie Mae and Freddie Mac caused the Great Recession by socializing risk and privatizing reward. Similarly, our partially socialized health-care system cannot survive indefinitely. It is a ticking time bomb that, if not defused, will either lead to a collapse of the private insurance market, or the U.S. fiscal situation, or both. It was a problem well before Obamacare became law, and it will need to be tackled even if Obamacare is repealed.

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