President Obama: "Preaching to the persuaded"

One appealing element of speechmaking is the long interval between the applause and the analysis. The unchallenged argument is so much less painful than the debated one. It's not surprising that politicians prefer giving speeches to press conferences or television interviews. Sarah Palin and Al Gore shine brightly when preaching in the protected environs of the true believers.

President Obama's delivered a quality speech at Strongsville, Ohio on Monday, but further scrutiny is warranted. Yesterday's speech, while compelling, raises more questions than it answers.

The president said his reform will change three things about the current system. He said "thousands of Americans with pre-existing conditions will be able to purchase insurance for the first time in their lives." If that is true, it will be because the ensuing mandate will fix the price charged to the insured, not because it will control the cost of producing the care. I suspect that insurance is not as unavailable as it is portrayed to be. Insurance companies find it very difficult to market some policies at a price commensurate with their financial risk.

How expensive would your homeowners insurance be if your garage was already on fire? But, the unfortunate woman that President Obama spoke so eloquently about, did not have an access problem, she had a money problem. We can certainly address her problem by assigning the purchase of her coverage in whole or in part to the taxpayers; at the same time, it is disingenous to suggest that you have somehow reduced the cost of providing her medical care.

Mr. Obama cited a second change, free diagnostic care that will catch preventable illnesses on the front end; coupled with the termination of lifetime or annual limits that apply to current policies and allowing uninsured adults to remain on their parent's policy until age 26.

Has government now discovered a way to produce free care? Unlikely. If free checkups prevent illness and thus reduce expenses for the insurance companies, would they not offer these 'free' services of their own volition? The unlimited risk provision will have one predictable result. Fewer companies will offer the coverage.

Permitting adults to remain on their parent's coverage until age 26 is a further example of cost shifting represented as cost control. The beneficiaries will be partially exempted from the requirement to purchase their own coverage as coverage will cost less as an additional insured than as an individual purchaser. On group insurance policies, the number of those covered will expand. Does the president think this mandate will not provoke a corresponding increase in premiums?

The final promised change is that premiums will fall 14 to 20 percent. This claim would be difficult to swallow even in the absence of the changes noted above. In addition, we will 1) add millions to the pool of insured persons 2) enact prohibitions against rescissions of coverage (these are almost always rescissions of the opportunity to renew, not the termination of existing coverage. Those terminations, when they occur, are usually triggered by missed or late premiums. We can debate the morality of canceling coverage during the policy period, but both the insurer and the insured have mutually binding contractual obligations) 3) The Medicaid eligibility limits will be raised from 100 to 133 percent of the poverty level with taxpayer subsidies available to families up to 300 percent of the new eligibility threshold.

The speech concluded with assurances that the bill would guarantee the future solvency of Medicare. To suggest that anything, so far proposed, will help secure the solvency of Medicare is disingenuous, if not dishonest.

Studies have consistently revealed that these rapacious insurance companies operate at fairly modest profit margins (2.5 to 6.0 percent), considering the potential downside.

The president focused his outrage on the unfairness of Natoma's outcome. Last year, she paid over $6000 in insurance premiums and $4000 in out-of-pocket expense. The insurer's obligation was limited to $900. Her premium was subsequently raised to over $8000. You get the feeling that the audience felt that if the insurer's outlay had been, say $300,000, it would have been a more equitable outcome.

Consider what actually did happen. Natoma is now in the hospital requiring a month long course of chemotherapy in addition to her inpatient and emergency room care. Her insurance for 2010 would have been a bargain at over $8000 and it is only March. Natoma's problem is more a money problem than a systemic one.

One way to deal with this would be to allow her to deduct all her out-of-pocket medical expenditures directly from her gross income, reducing her tax burden even if she takes the standard deduction. This would return tax dollars to her that could be applied toward the purchase of insurance. If she were in the 25 percent bracket, it would offset her total premium increase. I would also extend the right to deduct medical expenses to include those paid on anyone's behalf, whether or not, the recipient was a dependent. This would encourage private charity and ease the burden on family members who financially assist their loved ones.

This current reform is well-intentioned but poorly conceived. I wouldn't want to take questions either.