After more than a year of $862 billion dollar deficit stimulus bills, national-debt-doubling federal budgets, and government takeovers of the auto industry, it is difficult to remember that President Barack Obama actually ran as a moderate in many ways. On his way to a 53% – 46% win over Sen. John McCain (R-AZ), then-Sen. Obama promised to “cut taxes for 95% of workers and their families,” expand the Army by 65,000 and the Marines by 27,000, and enact “a net spending cut” for the federal government.
Obama promised lower taxes, a strong defense and shrinking the size of government. No wonder independents in nine states that went for President George Bush in 2000 and 2004 switched their vote to Obama in 2008 (CO, FL, IN, IA, NV, NM, NC, OH and VA). But now those independents are beginning to reassess. Public Policy Polling (a liberal polling firm) notes that Obama now has a negative approval rating in every state that he flipped from the Bush column to his in 2008.
And now President Obama has lost one of his biggest and earliest supporters on his signature issue: health care. Yesterday, when pressed on CNBC if he would be in favor of scrapping the Senate health care bill, Warren Buffett responded: “I would be.” Specifically, Buffett believes that the Senate bill will not contain health care costs: “We have a health system that, in terms of cost, is really out of control, and if you take this line and you project what has been happening into the future, we will get less and less competitive.
So, we need something else. Unfortunately, we came up with a bill that really doesn’t attack the cost situation that much and we have to have a fundamental change.” Buffett is correct on both fronts: 1) the President’s own Centers for Medicare and Medicaid Services (CMS) has reported that the Senate health care bill would raise national health expenditures $234 billion by 2019; and 2) our current system is completely unable to control exploding health care costs.
So why is our current system completely unable to control costs? For the same reason most Americans over-eat at buffets: when you don’t have to pay for each plate of food, you usually eat more. In recent decades, the percentage of health care spending paid “out of pocket” by patients has fallen substantially, from 52% in 1965 to only 15% in 2005. Instead of patients paying for the care they receive, our system is built around a third-party payment system where the government and insurance companies are the ones who actually pay for individual medical expenses. When prices are determined through administrative procedures rather than market processes, both patients and producers are anesthetized from normal market incentives to reduce prices and spending. That is why our health care costs are rising so rapidly.
And every major pillar of Obamacare makes the third-party-payer problem worse: mandates that limit out-of-pocket spending by patients, mandates that extend the minimum benefits insurance must cover, a massive expansion of Medicaid, and lower limits on the tax deductibility of out-of-pocket spending. And the one measure that the left once pointed to as its key cost-reducing measure – the taxing of expensive health insurance plans – has been gutted and pushed back until 2018, when any honest observer knows it will never be implemented. Commenting on the state of health care reform, Buffet told CNBC yesterday:
‘If it was a choice today between plan A, which is what we’ve got, or plan B, what is in front of