Critics blast Oregon’s
HillaryCare proposal

By Jon Dougherty

Opponents are lining up against an Oregon ballot initiative that would establish a tax-supported single-payer statewide health-care system they say could eventually spread across the country and wreck the U.S. health-care industry.

The Oregon initiative, called “Health Care for All Oregonians” and embodied in a ballot proposition called Measure 23, promises “access to affordable quality health care for all Oregon residents through a comprehensive plan providing payment for medically necessary health services,” according to a summary of information posted online by ballot organizers.

But critics are warning state residents not to be fooled by ambiguous language and broad promises. And, they say, claims that the initiative would save taxpayers and state government money are erroneous.

“If you really want to know how single-payer health care will affect Americans, just look at the Medicare system,” said Sue Blevins, founder and president of the Institute for Health Freedom.

“That’s the only time a single payer health-care system has been tried in this country,” and, she said, it’s been a dismal failure.

During a forum on Measure 23 hosted by the Portland, Ore.-based Cascade Policy Institute Sept. 18, Blevins said Oregonians “will be promised a lot of things” regarding the proposal, but data show it’s likely doomed to failure.

In terms of cost alone, she said, when Medicare was debated in 1965, business and tax-reform groups predicted costs would spiral out of control, a claim disputed by single-payer advocates.

At the time, government budget planners predicted that in 25 years, by 1990, Part A of Medicare – the in-hospital portion – would grow to $9 billion. In actuality, Blevins said, the figure was $66 billion.

However, Mark Lindgren, the project’s chairman, defended the plan’s cost-containment measures, saying they could be held in check by negotiating down the costs of medications and curbing paperwork.

“Basically, a lot of the sources of inflation have been seen in the cost of prescription drugs in the past,” he told WorldNetDaily. “It’s our belief that by aggressively bargaining with prescription drug makers, we can control a lot of those efforts.”

He also said in-hospital costs could be contained by reducing administrative overhead – paperwork, in other words.

“Administrative costs – largely paperwork – are cut roughly in half, from about 20 percent to 10 percent” under provisions outlined in the plan, he said. “That represents a huge savings.”

How it works

Supporters say the measure will provide health security because “coverage can never be denied if you or your family change jobs, retire or have a pre-existing condition.” And, they say, the measure will save residents money because it eliminates “deductibles, co-payments, and insurance premiums.” Plus, it’s optional – if residents don’t want to join, they don’t have to.

Also, the plan gives participants their choice of health providers. “You pick your doctor, your HMO doesn’t,” the summary says.

Benefits of the plan include, but are not limited to, “prescription drugs, dental, vision, inpatient and outpatient care, mental health, and in-home, emergency and long-term care,” said the summary.

The devil may be in the details, however. A third of the financing will come from taxes that support “federal, state and local governments.” The rest will come from a “progressive” tax on employers that replaces the current amounts they are spending to insure employees. This is coupled with “a progressive personal income tax” that will “replace most personal health-care spending – premiums, co-pays, deductibles and out-of-pocket expenses for such items as prescription drugs, glasses, mental health and alternative care.”

The employer tax rate will range from 3 to 11.5 percent, with “the largest corporations” paying the highest percentage. Meanwhile, personal income tax rates will range from 0 to 8 percent of taxable income.

“Families at or below 150 percent of the federal poverty level are exempt,” says the summary.

It was unclear whether the plan would cover cosmetic and other elective surgeries, such as sex-change operations. Chiropractic, naturopathy and acupuncture services would be covered under the plan, as would mental health services.

Officials did not have total cost figures available. If passed in November, the plan would be implemented in 2005.

Hillary redux

Critics say they’ve heard all this before.

They say a similar proposal offered by former first lady Hillary Rodham Clinton, now a Democratic senator from New York, in 1993 would have swallowed one-seventh of the U.S. economy.

Specifically, critics point to the federal government’s Medicare and Medicaid programs. The Department of Health and Human Services sets the reimbursement rates paid to health-care providers at levels that are far below market value. That leads many hospitals, physicians and health-care professionals to operate at losses or charge non-Medicare and non-Medicaid patients more.

The Oregon plan also calls for the creation of a similar, albeit quasi-government body, to “negotiate” the price of pharmaceuticals and medical services with state health-care providers.

“The [Health Care Finance] Board will negotiate compensation with health-care practitioners and facilities, and will establish quality control and cost containment programs,” said a plan summary.

Lindgren said the board would pursue reimbursement negotiations “aggressively,” hinting that members would seek to extract the lowest possible price from providers.

That’s not necessarily a bad deal for consumers, but upon approval, Oregon’s single-payer plan will be the only game in town, and that means the board could easily force health-care providers to take far less in fees than is customary. Ultimately, free-market defenders say, that means providers will eventually pull their practices out of the state, especially if recent trends in states with high malpractice insurance rates are an indication.

Another problem is the manner in which the board will be formed. Virtually assuring it will become politicized at some point, the proposal calls for the board to be comprised of two members elected from each congressional district, with the governor appointing five others, to include “one person from a union” and “one consumer advocate.”

Taken to the extreme, critics say Oregon-type single-payer plans spread across the country will decimate whatever is left of the competitive element in health care. The result will be a poor system that survives on mediocrity and harms patients.

“When an HMO, an insurance company or the government is paying the bill, there is little incentive for consumers to exercise prudence and demand efficiency in the delivery of medical services,” said an analysis by Free Market Medicine. “The predictable result has been the failure of a distorted marketplace to deliver high-quality, reasonably-priced health care.”

Lindgren offered no assurances that the Oregon plan would not have a similar cause-and-effect result.

Instead, he pointed to a half-dozen studies that favored single-payer plans over traditional forms of health insurance coverage, such as HMOs and PPOs. “They all showed pretty stable operations of the program,” he told WND.

No sale, say critics.

“This plan is going to cost much, much more than its advocates are claiming,” Blevins told WND.

And like Medicare “basically killed the free market for insurance coverage for seniors,” she said, the Oregon plan could have a similar effect statewide.

A similar state-supported plan in Tennessee, dubbed “TennCare” and aimed at providing coverage for low-income and poor residents, is rife with waste, fraud and abuse, according to state auditors.

A separate October 2000 report claimed the program had grown in costs some 59 percent since its inception in 1994 – more than twice the 23 percent rate of increase for Medicaid.

Other analysts agree the free-market approach is best.

“When health care appears to be free or very cheap, people buy more than they would if they were paying the full cost,” says a CATO Insitute policy brief. “The resulting casual attitude toward shopping for health care drives up prices, drives up insurance premiums, and creates hardship for business and those without insurance.”

The solution, says CATO – a libertarian think tank – is not more regulation. It is “to restore power and responsibility to individuals” by, among other things, allowing consumers to be “free to set up tax-free medical savings accounts to cover routine medical expenses.”

Some lawmakers agree.

“Generally speaking, about 30 years ago, there wasn’t a third-party payer for most people,” says Jeff Deist, a spokesman for Rep. Ron Paul, R-Texas. “Once that was lost – once Medicare or a third-party biller becomes involved – then all of the deficiencies arose and the incentives between the doctor and patient to keep costs down disappeared.”

“We should abolish Medicare and repeal the HMO Act of 1973,” Deist said. “Most people don’t realize that HMOs didn’t arise because there was a market for such a thing. They mostly have arisen by virtue of the tax treatment of them versus the tax treatment when individuals pay for their own treatment.”

Blevins said Oregon’s proposal mimicked health-care systems in some of the world’s repressive regimes.

“A physician from Quebec told me that the only countries that have a restriction like we have on private contracts – such as with Medicare – are Canada, our Medicare program, Cuba and North Korea,” said Blevins. “Even the socialist countries don’t do this.”

Blevins said she believes backers of Measure 23 have “noble intentions,” but – citing economic and demographic data from the past 60 years – added: “We have proof that what they want to do will destroy medicine for everyone.”

Even on the federal level, the trend may be toward a free-market approach.

According to a June 26 Internal Revenue Service memo, the agency issued an opinion “that clarifies the tax treatment of health reimbursement arrangements (HRAs) in which the employee’s health benefit arrangement provides for employee-controlled reimbursement of medical costs.”

That means, according to Conrad Meier, a writer for Health Care News, employers nationwide may be encouraged “to adopt a type of consumer-driven health insurance that gives consumers greater control over medical expenditures.”

“Plans affected by the ruling are generally known as Health Reimbursement Arrangements (HRAs) or Flexible Spending Accounts (FSAs). Such plans allow employees to choose their health-care services and pay for them out of tax-favored individual savings accounts funded by their employers,” Meier said.

“In a consumer-friendly ruling, the IRS makes clear employees are permitted to carry balances in their employer-funded accounts from one year to the next, without negative tax consequences,” he said. “‘Use it or lose it’ no longer applies.”

Common ground?

Both sides do agree on one point, however – that the managed care concept, which was supposed to be the savior of American health care, isn’t.

“Managed care can take credit for restraining the explosive growth in health-care costs which resulted from a largely unconstrained market. However, the huge administrative costs required to manage consumption cannot be ignored,” said Free Market Medicine.

“Managed care was going to be the answer – now it’s the problem,” says Health Care for All Oregonians.

Oregon’s proposal mimics similar initiatives in other states, such as California, where organizers – with the help of dozens of statewide organizations, including the State Labor Federation/AFL-CIO – plan a full legislative assault next year.

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