Thursday, September 17, 2009

Larry Summers Admits: Obama Plan IS a Government Takeover of Health Care

Senior Advisor “Calls Out” President’s Own Agenda


“Now my proposal has been attacked by some who oppose reform as a ‘government takeover’ of the entire health care system….If you misrepresent what’s in this plan, we will call you out.”

— President Obama, address to Joint Session of Congress


Even as he derides opponents who criticize his health “reform” proposals, President Obama may do well to listen to the words of his own National Economic Council Director, Larry Summers, who in an earlier article admitted that mandates on employers and individuals to provide and purchase health coverage amount to a government takeover of health care:

  • The main thesis of the paper—which analyzes government mandates on employers to provide various benefits—finds that “essentially, mandated benefits are like public programs financed by benefit taxes. This makes them more efficient but less equitable than standard public programs.”
  • The article admits that “economists have generally devoted little attention to mandated benefits—regarding them as simply disguised tax and expenditure measures.”
  • To justify government-mandated benefits, Summers argues in favor of “paternalism” by government and employers—because individuals “may irrationally underestimate the probability of catastrophic health expenses,” or may be “especially inept at making inter-temporal decisions.”
  • The Summers analysis further includes the impact of government-mandated benefits: “Requiring employers to pay for employee leaves [or health care benefits] shifts their demand curve downwards…A new equilibrium level of employment and wages is reached, with lower wages and employment, but in general employment will be reduced by less” than under a system of government-provided benefits.
  • Finally, the article discusses potential downsides to mandated benefits—if the cost of health care is higher for older or sicker workers, “there will be efficiency consequences as employers seek to hire workers with lower benefit costs.”

In sum therefore, Summers makes the following points, all of which relate to the current debate:

  • Mandates on employers to offer—and individuals to purchase—health coverage amount to new federal programs, and thus a government takeover of health care for all Americans;
  • Employer-provided benefits are “more efficient” than “standard public programs”—so an inefficient government-run health plan should not be needed;
  • Mandates to purchase coverage are taxes—so the President’s individual mandate breaks his “firm pledge” that “no family making less than $250,000 a year will see any form of tax increase;”
  • Government should mandate the purchase of health coverage due to the “irrational” and “inept” behavior of individuals who do not wish to purchase it;
  • Mandated benefits will lead to lower wages and employment—even as unemployment nears 10 percent; and
  • Because they discourage the hiring of sicker workers, “mandated benefit programs can work against the interests of those who most require the benefit being offered.”

Given these characterizations by one of his senior advisors, will President Obama now call out the Democrat plan for what it is—a government takeover of health care?